OpenTable: A Story of Romance… and Finding the Right Business Model

OpenTable

For better or worse, celebrating Valentine’s Day has long been synonymous with pink-hued cards, gifts of candy, flowers, and champagne, and romantic dinners out with your valentine. While finding just the right cards and gifts can still be nerve-wracking, those romantic dinners are increasingly a no-brainer. Why? Well, technology, of course… specifically, mobile apps and websites that make it easy to find and secure a table at just the right restaurant to impress the heck out of your valentine.

Today’s Valentine’s Day-themed blog features OpenTable, the pioneering reservation-finding technology that’s forever changed the way we get a table, on Valentine’s Day or any other day of the year.

No-hassle Reservations for a No-stress Valentine’s Day

First, for those who don’t know or may have forgotten, let’s cover how Valentine’s Day dinner reservations used to work: It involved hoping, pleading, and persistence, and a positive result wasn’t guaranteed. Twenty years ago, if you wanted a reservation at a restaurant for your Valentine’s Day dinner, you had to (GASP) pick up a phone, hold a conversation with an actual human, haggle about your preferences, and wait patiently on the phone for a potentially uncaring host or hostess to let you know your fate. You might get lucky and get the time you want at the very restaurant you want. But you might end up denied, with no reservation to show for your time. In fact, you might end up getting turned down by restaurant after restaurant before finding any open time slot that works for you. End result: Did you even get a table?

How it works today: Your digital concierge cleanly takes care of everything. With your smartphone or computer, you can use OpenTable to quickly search for your preferred time slot at either a specific restaurant or a range of restaurants (i.e., by location or cuisine). If the time you want is unavailable at a preferred restaurant, OpenTable kindly offers to “find next availability” at that restaurant or help you book at restaurants with availability at your preferred time. After you make and confirm your selection, it sends you a magnificently reassuring confirmation email letting you know that you’re good to go. OpenTable even offers to put it on your calendar and forward the info to your date. End result: You are impressive, organized, and invincible! And perhaps… even more lovable? 😉

How it works today: Your digital concierge cleanly takes care of everything. With your smartphone or computer, you can use OpenTable to quickly search for your preferred time slot at either a specific restaurant or a range of restaurants (i.e., by location or cuisine). If the time you want is unavailable at a preferred restaurant, OpenTable kindly offers to “find next availability” at that restaurant or help you book at restaurants with availability at your preferred time. After you make and confirm your selection, it sends you a magnificently reassuring confirmation email letting you know that you’re good to go. OpenTable even offers to put it on your calendar and forward the info to your date. End result: You are impressive, organized, and invincible! And perhaps… even more lovable? 😉

Romance Is on the Table

OpenTable is aware of the important role their service can play in helping to set the right stage for a couple’s romantic dinner date. In addition to regularly publishing lists detailing the “best date night restaurants” in any given city, every year, in the weeks leading up to Valentine’s Day, OpenTable publishes their ranking of the “100 Most Romantic Restaurants in America” and the “25 Most Romantic Cities in America.” Those lists and rankings are based on some serious data. According to OpenTable’s website, more than 40,000 restaurants worldwide use their reservation system, and they help more than 21M diners find tables every month.

The Origins of OpenTable: A Love Story

At its root, OpenTable’s 1998 origin story is itself a love story, insofar as it includes a man experiencing tremendous sympathy for his woebegone wife and deciding to take action to remove the reason for her woe. Chuck Templeton had just watched his wife spend three and a half hours trying to secure a dinner reservation for an upcoming visit from her parents. (Granted, the pressure was on to make sure they were set for a great meal at a great restaurant: Her father had co-founded a Chicago-based group of restaurants, Lettuce Entertain You Enterprises.) Witnessing his wife’s incredible frustration — and time commitment — Templeton knew that there had to be a better way forward. He would use the newly expanding internet to connect patrons with restaurants’ reservation systems.


Happy Valentines Day

Choosing the Right Love Affair: Consumers or Restaurants?

As the story goes, however, Templeton had underestimated how far behind technologically the restaurant industry was. He quickly learned that many restaurants’ reservation systems weren’t at all technology-based, with pen-and-paper booking still highly predominant. In other words, he realized that if he wanted to hook into their technology, he’d have to build it for them.

Templeton founded OpenTable in 1998. Like so many other growing companies formed during the dotcom boom, however, the company had difficulty settling on the right strategy to enable sustainable growth. Around 2001, its venture capital backers reportedly considered closing its doors.

At that point, OpenTable made the crucial choice to switch their focus from trying to grow their enterprise as a consumer dotcom to developing strong, ongoing relationships with the restaurants themselves. OpenTable made their restaurant management software, GuestCenter, easier to use, and went door to door to convince restaurants of OpenTable’s potential value for operations, sales, and marketing. The plan worked, and — based largely on the software-as-a-service (SaaS) business model — OpenTable’s brand and market footprint steadily grew. In 2006, OpenTable had 4,500 participating restaurants; by 2009, they’d more than doubled that figure.

(Sidenote: Though founder Templeton left OpenTable in 2004, his love affair with bringing good food to the masses has continued. He was the founding chairman of GrubHub in 2007, serving as a director for the company until 2013. Since 2008, he’s been an advisor to Menuism, the web’s largest aggregator of restaurant menus. He’s currently the managing director of Seed 2 Growth [S2G] Ventures, a venture capital firm that invests in U.S. food and agriculture innovations focused on “meet[ing] consumer demands for healthy, sustainable and local food.”)

A Two-sided Business Model for a Healthy Three-way Relationship

Once OpenTable had established strong relationships with its restaurant customers, it was time to invest more energy in wooing consumers. OpenTable launched its iOS mobile app in 2008 and its Android mobile app in 2009, making it easier than ever for restaurant patrons to take advantage of its reservation-finding technology. (Free for consumers, the current version of the GPS-enabled app makes it a cinch to find and book available tables, post reviews for restaurants you’ve visited, access restaurant lists from Eater and OpenTable, and earn points by visiting specific restaurants.)

OpenTable went public in 2009 with a $60M IPO, a highly impressive figure given that the IPO occurred during the economic downturn that followed the burst of the dotcom bubble. By 2011, they’d reached the 20,000-restaurant mile marker, and by 2013, they reached 30,000. In 2013, OpenTable made several strategic acquisitions: they acquired Foodspotting (aka the “food porn” web and mobile apps) as well as UrbanSpoon and Quickcue, both of which were competitor reservation systems. That same year, OpenTable launched a partnership with Facebook that enabled consumers to book tables directly from restaurants’ Facebook pages. (In 2017, that capability has evolved to booking via OpenTable’s bot for Messenger.) In 2014, OpenTable added the Ness app’s “personalized reservation recommendations” capabilities to their catalog via another acquisition.

All in all, the moves showcased OpenTable as a smartly managed enterprise focused on the future. Travel reservations behemoth The Priceline Group (NASDAQ: PCLN) took heed, acquiring OpenTable for $2.6B in cash in 2014. Under the terms of the acquisition, OpenTable continued operating as an independent brand and retained its existing management team.

Since the acquisition, OpenTable has not been content to simply rest on its laurels. The company has made major updates to GuestCenter (available on iPad and desktop) geared toward providing restaurant enterprises with greater flexibility and control, as well as the ability to optimize their service based on data-driven insights and the ability to share guest preferences. Already in 2018, OpenTable has announced a new partnership with Ctrip, China’s largest online travel agent.



Mobile apps

Hey Competitors, Don’t Steal My Valentine

Of course, OpenTable’s impressive success has spawned a healthy slate of competitors. While some competitors have folded or failed due to lack of capital or foresight (e.g., 2014’s scandal magnet ReservationHop, which was basically thinly disguised reservation scalping), a handful have managed to secure a solid foothold. While OpenTable’s 40,000-restaurant footprint is clearly going to be hard to beat, here are the leading companies that are trying:

  • Yelp Reservations — The service, available for desktop and iPad, bills itself on the App Store as the “most affordable front-of-house management system available to restaurant, lounge, and bar owners today.” According to Yelp, more than 4,000 restaurants are now accepting reservations via their service. For consumers, it’s available via the Yelp app or website, which (according to Nielsen) is the review site most frequently used by US consumers for finding restaurants.

  • Resy — Launched in 2014, the iOS and Android app’s marquee value prop for consumers is that it can notify you when tables become available at spots that are notoriously hard to book. Co-founded by founders of Eater.com and CrowdTwist, Resy provides operations software for more than 1,000 restaurant partners in 80 markets. A planned integration with Airbnb will let travelers book dining along with accommodations.

  • Reserve — Also launched in 2014 and currently active in seven cities (LA, NYC, Boston, Chicago, SF, Philadelphia, and DC), the iOS app calls itself a “digital concierge service,” in that it not only lets you book your table, but also manage plans and pay for your meal. It too offers restaurants a table management system. To expand its capabilities, the company has completed several strategic acquisitions, including Zurvu and SoonSpoon, two reservation-finding competitors; Hail, a mobile payment and check-splitting app; restaurant CRM solution Set for Service; and Dash, a technology that enables direct integration with POS systems.

A couple of services build on OpenTable’s capabilities or carve out entirely new niches, including:

  • Rezhound — The free-to-use website, a “weekend project” by developer Reed Kavner, searches OpenTable to find reservations that have opened up and send real-time availability alerts to interested users.
  • Nowait — Founded in 2016, the iOS or Android mobile app lets you get in line (in a virtual sense) at restaurants that don’t take reservations. It also helps restaurants manage that virtual line to seat their tables. (Nowait was acquired by Yelp in 2017.)

Making a Plan for Romance

Have a valentine this year? If you do, it’s time to get cracking on making those Valentine’s Day dinner reservations — at least if historical data serves as any indicator. According to the National Retail Federation, in 2017, nearly 54% of consumers surveyed planned to celebrate Valentine’s Day, and of that population, 37% planned to celebrate with an evening out. OpenTable isn’t the only one with some competition!

So what are you waiting for? OpenTable is ready to help you make your plan for romance. Don’t get stuck with Taco Bell as your only option for dining out! (No offense to Taco Bell. In fact, last year, OpenTable made it possible to make a romantic dinner reservation at the Taco Bell Test Kitchen. To each his or her own, right?)

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