OpenTable is a business that sells online tools and services for restaurant reservations. It has been on the market since 2009 and offers an online reservation service through affiliates and their own site and apps for customers to reserve a table at their favorite restaurant. The OpenTable business model is a commission-based service as restaurants will pay a fee for reservations that go through the company. Subscriptions are also available for certain products.
With more than 7 million people making reservations on the OpenTable app since its launch. More than 6.5 million diners are seated every month using the service, showing how repetitive customers are through this service. For diners who want to make a reservation, the added benefit is that all of the reservation services they need to make are free of charge.
Customers even accumulate points that can be used for future discounts. By providing the complete experience for everyone, the supply and demand need of every community can be met pretty effectively. That’s why OpenTable has been able to experience long-term success within their market niche.
How Does OpenTable Make Any Money?
Most of the profits that the OpenTable business model are able to generate come not from reservation commissions, but through the direct sale of reservation tools to restaurants. Their primary service is the electronic reservation book, which is a computer terminal that allows online reservations. It is also designed to help the front of the house arrange seating and assignments while keeping track of the preferences of a restaurant’s most frequent customers.
This terminal has a one-time fee of up to $700 and then a monthly subscription fee that is a minimum of $199 per month.
For restaurants that don’t want the hardware and high fees, OpenTable also provides a web-based system that accepts online reservations online. It is marketed towards the segment that supports primarily walk-in customers. Each diner is charged a fee when the reservation is made, which is $2.50 when made directly from OpenTable or $0.25 when made through a restaurant’s website using OpenTable software.
Advertising is also a source of revenue for OpenTable. For an extra fee, restaurants can have their businesses featured in email marketing programs and other front-page opportunities. There are also higher commissions for certain programs that this business may use to feature specific restaurants.
OpenTable Has Also Expanded Their Online Presence
The OpenTable business model also proves that there is value in networking. You will find OpenTable reservation buttons on a number of similar industry sites, such as Yelp, Menupages, and even Google. If someone is looking up a restaurant on Yelp and reading reviews, they’ll have the option to reserve a table at that restaurant through OpenTable directly from Yelp itself. The number of diners and the time for the reservation can all be customized off of the primary OpenTable site.
This means the business model is rather simple. It’s goal is to match up someone who is hungry with a place where they’ll want to eat.
Not every restaurant is buying into the concept. Sometimes a restaurant may feel like it needs to opt into the program just to be competitive. Because the subscription fees are fixed, it doesn’t matter how many diners actually use the OpenTable software to book a table. OpenTable also owns all of the customer data that is given, so if a reservation is canceled, the restaurant does not receive that information any longer.
What Can Be Learned From the OpenTable Business Model?
There are a couple of lessons to be learned from this company’s business model. The first is that flexibility matters. Although a product may be helpful to many restaurants, it still needs enough flexibility to be adaptable to meet greater levels of market demand. A franchising style of royalties instead of the fixed subscription model could open up new doors.
The second lesson here is that OpenTable has managed to solve a common problem for people in an easy-to-use way. Trying to call a restaurant and secure a table can be problematic, especially for popular restaurants. The software from OpenTable lets people see from the comfort of their home or their mobile app what tables are available on any given day so that with just a couple of clicks, they can make their needed reservation.
OpenTable may have some competition in the market today, but their commission and subscription business model looks to keep their revenues strong. With diversification, more success can be achieved.