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Is OpenTable Worth it?

incanto.biz

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Re: Is OpenTable Worth it?

#11

Post by noodle »

ben1040 wrote: post #4

Not long ago I placed a reservation through OpenTable, and a couple minutes after we had been seated, I got an email from OpenTable telling me the reservation had been canceled from the restaurant's end. Now I wonder if this was an honest mistake, or a strategic cancelation to try to stiff OpenTable on the per-reservation fees. Obviously they couldn't do that with every diner who walked in the door, but maybe they co…

depends on who is dining, but that might make the type of person who is trying to accumulate opentable points mad.

Re: Is OpenTable Worth it?

#12

Post by sp4rki »

tptacek wrote: post #7
philtoronto wrote: post #5

I want to call shenanigans on the profit margin in the restaurant business being 5%... OK, shenanigans.

Based on the 2004 Restaurant Industry Operations Report published by Deloitte & Touche LLP, average pre-tax profit margins range from 4-7% (4% for Full... Literally in the article summary right there on the first result of the SERP [restaurant profit margin].

I have many restauranteur friends in my country, and their profit ranges between 50% to 60%. I have trouble believing that in the USA their profit margins are so crappy. I bet there's a lot of stuff going on under the table (pun intended).

Re: Is OpenTable Worth it?

#13

Post by ig1 »

philtoronto wrote: post #5

I want to call shenanigans on the profit margin in the restaurant business being 5%... OK, shenanigans.

Seems reasonable. In the UK the break-down is typically:

  60% gross profit  
  30% wages
  10-15% rent
  5-10% overheads (rates, bills, etc.)
  5% advertising
Leaving a profit margin of around 5%.

Most restaurants are lifestyle businesses, simply because they don't make enough money to be anything else.

Re: Is OpenTable Worth it?

#14

Post by netaustin »

You know, Yelp should cut off its relationship with Opentable and just jump into this business itself and charge either no fee or a nominal fee to restaurants (basic vs. pro).

This would solve a big problem for Yelp; if Yelp could save restaurants from the crushing cost of reservations, restaurants would be more inclined to forgive Yelp for allowing us "bored, jobless layabouts" to trash them in a public forum (http://blogs.westword.com/cafesociety/2010/11/people_hate_us...).

Re: Is OpenTable Worth it?

#15

Post by ig1 »

sp4rki wrote: post #12
tptacek wrote: post #7

Earlier quoted context omitted.

Based on the 2004 Restaurant Industry Operations Report published by Deloitte & Touche LLP, average pre-tax profit margins range from 4-7% (4% for Full... Literally in the article summary right there on the first result of the SERP [restaurant profit margin].

I have many restauranteur friends in my country, and their profit ranges between 50% to 60%. I have trouble believing that in the USA their profit margins are so crappy. I bet there's a lot of stuff going on under the table (pun intended).

Gross or Net ? - 50% gross profit is common, I doubt you could find any developed country where 50% net profit was the norm for restaurants.

Re: Is OpenTable Worth it?

#16

Post by dotBen »

The crux of the argument made by the post is that a restaurant makes $10 profit on a $200 4-person cover yet OpenTable takes $10.40 for that booking (I want to call BS on those figures but lets ride with it)

In an earlier part of the piece, the author states that "[his restaurant owner friend] believes that if he stops offering it, his customers will revolt and many would stop coming to his restaurant. So he keeps paying, but carries a grudge and wishes for something better."

What's the problem if the customers stop coming if by servicing their business via OpenTable you either only break-even or even make a slight loss?

If that is the case, it's not worth servicing the customer in the first place.

GroupOn does this too - you loose money by servicing the business obtained via GroupOn, but the idea is that future business from each customer will be at market-price thus off-setting the initial customer acquisition cost (CAC) as future CAC is $0.

The difference here is that OpenTable customers continue to book via OpenTable, thus each booking creates further CAC that doesn't go down.

What I find sad is that for all the long winded post on this subject, the author gives no concrete quantitive specifics of the OpenTable tariff structure so everyone can get a clear understanding of the issue.

Re: Is OpenTable Worth it?

#17

Post by prawn »

aaronbrethorst wrote: post #10
tptacek wrote: post #6

Earlier quoted context omitted.

Something tells me Incanto isn't having too much trouble filling tables, even without Urbanspoon. You can't book Alinea in Chicago on OpenTable either.

I don't doubt that for a second. In fact, I would've guessed that most top tier restaurants would shy away from using such systems. But, as it works out, though, there are a bunch of Michelin-starred restaurants in the Bay Area that are on OpenTable: http://www.michelinguide.com/us/sf_stars_2011.html

In August, I used OpenTable to get a reservation at a Michelin-starred restaurant in CA (is Sonoma considered Bay Area? I'm not from the US so not sure) about 15 minutes beforehand. Process worked perfectly.

At 8pm, we arrived at a hotel in the area and looked online for a place to eat. By 8:10 we'd booked. By 8:16, we'd ironed clothes, showered, driven and arrived for a great meal. Ringing around looking for a table would've taken too long.

Re: Is OpenTable Worth it?

#18

Post by dotBen »

dotBen wrote: post #16

The crux of the argument made by the post is that a restaurant makes $10 profit on a $200 4-person cover yet OpenTable takes $10.40 for that booking (I want to call BS on those figures but lets ride with it) In an earlier part of the piece, the author states that "[his restaurant owner friend] believes that if he stops offering it, his customers will revolt and many would stop coming to his restaurant. So he keeps pa…

As a side point, it goes without saying that if you love your local restaurant book directly with them as it is obvious they reduce their profit margin on an OpenTable booking.

Ditto for delivery - don't use GrubHub who will take a %age if you can order directly with your local neighborhood restaurant.

Re: Is OpenTable Worth it?

#19

Post by d2viant »

This is an interesting opportunity to profit from. This company has massive expectations baked into it's stock price (NASDAQ: OPEN), trading at over a hundred times earnings. It's being massively shorted by the hedge funds. Combine the fact that there's relatively no barrier to entry with the rumors that their customer base isn't very satisfied makes for a huge opportunity to profit in the short/medium term.

Re: Is OpenTable Worth it?

#20

Post by waterlesscloud »

From OpenTable's own data, their revenue averages $600 a month from a given restaurant. Not a negligible cost, but doesn't seem outrageous.

Probably room for someone to undercut that, but it doesn't seem that the cost of restaurants controlling their own electronic reservations systems would be tremendously lower.

But maybe if restaurants did it on a cooperative basis. Hmm.

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