Saturday, December 11, 2010

OpenTable: The Company Resaurants Love to Hate?

I wrote a couple of days ago about OpenTable (ticker: OPEN) after hearing about it from Mark Mahaney at Citigroup.

Here's an article that appeared today in the New York Times about the company. It does a pretty good job of laying out why some restaurant owners don't like the service, even though it might seem to some (including me) that it's a pretty inexpensive way to build traffic.

Here's an excerpt, with the full link below:

{OpenTable's} stellar success has drawn some grumbling in the restaurant industry. Why does OpenTable deserve to prosper while some of its restaurant clients struggle merely to survive?

“Have the ascent of OpenTable and its astronomical market value resulted from delivering $1.5 billion in value to its paying clients, or by cunningly diverting that value from them?” Mark Pastore, the owner of Incanto, a San Francisco restaurant, recently asked in his restaurant’s blog. (With Friday’s close at nearly $72, OpenTable’s market valuation is now over $1.6 billion.)

...What perhaps most rankles restaurateurs is the reservation fee: $1 per patron. All in, OpenTable receives an average of $635 a month from each of its client restaurants, the company says.

OpenTable is in about one-third of restaurants in the United States that accept reservations.

When I spoke with Mr. Pastore last month, he said he was concerned that OpenTable was “becoming a Ticketmaster, a tollbooth to the nation’s restaurant tables.”

OpenTable’s Success, and Fees, Rankle Restaurants -