If you live in New York City, the longer you’re here, the more and more the most popular thing to do is to go out and eat. Sure, New York City offers great theater, tons of sporting events and a myriad of conventions, performances and attractions.
But at the end of the day, almost everyone precedes going to the theater with a pre-show meal. You wouldn’t dare go to a Yankees game and not buy a hot dog. And just about every other attraction in New York City will bring food directly to your mouth if you’ll pay for it.
And I have no problem with that. Heck, I love to eat myself.
However, the next time you decide to go out for a nice meal at a trendy restaurant or a new place a friend told you about, do not make reservations through Open Table, it does you nor anyone else but Open Table any substantial good.
For those of you not familiar with Open Table, thank your lucky stars. Open Table is nothing more than another way for us lazy Americans to do something without personally talking to somebody anymore. Open Table avoids you the “inconvenience” of picking up the phone and calling somebody, and allows you to make reservations for breakfast, lunch and dinner with the click of a mouse.
However, what isn’t so apparent when you make your reservations through Open Table is the bloodletting the restaurant occurs by using Open Table.
According to some research on Jwegener.com, every time you make a reservation through Open Table’s website, the restaurant you dine at has to pay $1 for every diner in your reservation. Of course, it goes much further than that. Just for the use of Open Table alone, restaurants pay a $1,240 installation fee and a $281 monthly subscription fee. To add insult to injury, even if you make a reservation with the restaurant through the restaurant’s website, Open Table still charges the restaurant a 25-cent fee, essentially taking money for a reservation you made with out any marketing efforts by Open Table.
Of course, I’m not going to make this one-sided. There are reasons why restaurants use Open Table. For one, Open Table is one of the premiere technologies for making reservations, especially via the internet. Open Table’s reservation software makes it easy for restaurants to organize, prioritize and manager their reservations. Secondly, Open Table has a great note system, which makes serving regular patrons a lot easier. Lastly, Open Table is a great marketing tool. Through Open Table’s affiliate marketing system, blogs, websites and online menu directories from across the world act as de-facto cost-per-action marketing tool for restaurants. Not to mention, Open Table’s own website and blog do a great job of bringing attention to its stable of restaurants, especially here in New York City.
Still, all of this comes with a cost, one that the average restaurant pays dearly.
According to Jwegener.com, the average restaurant spends $515/month with Open Table and gets 345 diners each month. If the number of reservations a restaurant gets via Open Table coincides with the nation-wide averages, only 57% (or 197 diners on average) of the average restaurant’s reservations are a result of Open Table’s ability to bring in customers on the web. No including the installation, that would amount to a real cost of $2.61 per customer.
Granted, that $2.61 is for an average restaurant, and maybe a good deal of those 197 new acquisitions becomes repeat business, which would lessen the per diner cost over time. Still, that leaves us with a huge chunk of restaurants paying closer to $2 per Open-Table-acquired diner than to the $1 per diner charge.
However, even if it was $1 per diner, that $1 dollar can set the average restaurant way back. Keep in mind, that the average restaurant profit margin is generally around 5%. So if the average customer only spends $15 at a restaurant, than that $1 equates for 6% of the bill. If the restaurant’s average per diner revenue is $30, that $1 amounts to 2.5% of the bill. And even if the average per diner revenue of a restaurant is $50, that $1 dollar Open Table charge amounts to 2% of the bill.
Any sound business person can understand the pain of giving 40% of their profit margin to some other entity. That’s like making $2.50 off a sale, but having to give $1 dollar of it to someone else, when you’re used to having that entire $2.50 for yourself. Well, that pain is felt by the litany of New York City restaurants that use Open Table.
I know what you’re saying; why would restaurants use this service?
Like I said, Open Table, has its benefits. No business can afford not to get the same marketing that all of its competitors are getting by being listed on OpenTable.com and having thousands of websites with incentive to drive diners to their tables. So while giving up a chunk of their profit margin may hurt, Open Table has created a platform that leaves the restaurants that don’t use it at a disadvantage. Good business model for Open Table, sucky proposition for restaurateurs.
So what can you do? What can you the consumer do to help restaurants out?
It’s simple, and you don’t even have to give up whatever advantages you get from using Open Table if you don’t want to.
To help the restaurants out the most, make your reservations over the phone. Yes, this means you can’t make reservations at 2am in the morning, but you’re helping your favorite restaurant out, and you may even help keep the prices at your favorite restaurant down.
Of course, as I said, if you want to keep the advantages of using Open Table, you can still bring the cost of Open Table down at your favorite restaurant by making your online reservation directly on the company’s website. This cost the restaurant 75% less than what an OpenTable.com reservation would cost, and you get the majority of the benefits that come with using Open Table.
So I hope you will help the restaurants in New York City with this. I know it hardly affects you or me (and it certainly doesn’t affect me), but this “don’t pay me at your own peril” business model, while completely legal and All-American, just irks me the wrong way, and I thought I would tell you why.