Today’s News: Is OpenTable hurting restaurants?

25 Oct

Since it was founded in 1998, OpenTable has become the dominant player for restaurants that want to offer online reservation services.  Over 14,000 eateries have received a combined 160 million diners using the Web site, and they bill themselves as a reservation solution that helps match diners with restaurants, benefiting both.  But the truth may be darker – is OpenTable bad for business?   Anthony Todd writes in Chicagoist:

Opentable remains free to you, and offers all those neat features, by charging restaurants high fees. They quoted one owner as saying that, “OpenTable is out for itself, the worst business partner I have ever worked with in all my years in restaurants.”These days, being on OpenTable can be a big part of a restaurant’s success. The company is valued at 1.5 billion dollars, and the convenience of their system has led many restaurants to feel that OpenTable is indispensable. But, consider the cost.

Many restaurants (assuming they are profitable at all) operate on a 5% profit margin. Last night I went out to a lovely dinner in River North. I spent around $60, and had made a reservation on OpenTable. My dinner made the restaurant approximately $3 in profit, and it may have cost them significantly more than that to honor my online reservation. But restaurants are scared to pull out, because diners will have a harder time finding them online. Let’s not even consider the fact that I also used a groupon – It’s kind of amazing they didn’t attack me. It’s even worse if you had planned on visiting the restaurant anyway without a reservation. In exchange for your 100 bonus points, you just handed OpenTable the restaurant’s entire profit from your meal.

As Todd says, OpenTable offers a great service for restaurants, increasing their visibility on the Web and helping diners find a place to eat that is convenient, interesting, and within their budget rather than having to browse around a bunch of different pages.  Their computerized guest book system simplifies the reservation process, but is it really worth it in  the low-margin restaurant business?  And with the rise of sites like Yahoo’s Yelp! and AOL’s Patch, which offer restaurants and small businesses the ability to create their own pages free of charge, is OpenTable’s one-sided business model really sustainable?

The music business is very similar (a $10 fee for a $60 meal is a Ticketmaster-sized cut of the money), but with one big difference: whereas OpenTable takes its fee from the restaurant, ticketing agencies take their cut directly from the fans.  We think that’s ridiculous – without the support and enthusiasm of the fans, there’s no show at all.  That’s where FanFueled comes in – our ticketing solutions are powered by sharing, decreasing marketing costs for artists and venues and passing those savings on to the fans.  Setting up an event on FanFueled is free, and our service fees, among the lowest in the industry, are used to reward fans for spreading the word about your event.  Find out how FanFueled can help fuel your event’s success at

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