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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
by dotBen 16y ago
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.
- dotBen 16y agoAs 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.
- waterlesscloud 16y agoFrom OpenTable's info, the booking per diner is $1.00 if done via OpenTable's site, but only 25 cents per diner if done via the restaurant's site. This suggests certain approaches....
- dotBen 16y agoYes, but that doesn't match what the post author says based on his figures. It could be opentable cost = booking fee per diner + setup costs + monthly fees. I'd like to know more.
- waterlesscloud 16y agoHis $10.40 is the cost for an "incremental" 4-top, ie a group that wouldn't have booked without coming in via opentable since they were new to the place. Given that even OpenTable's info estimates only 50% of the bookings would be incremental, and that that's likely an overestimate in OT's favor, I can imagine $10.40 may be about right. 4-top via OT = $4 1/2 4-tops from OT "incremental", cost is now $8 per incremental. If it's really 2/5 4-tops from OT are incremental, we're at $10 per incremental.