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How Does OpenTable Make Money? The OpenTable Business Model In A Nutshell

OpenTable is an American online restaurant reservation system founded by Chuck Templeton. During the late 90s, it provided one of the first automated, real-time reservation systems. The company was acquired by Booking Holding back in 2014, for $2.6 billion. Today OpenTable makes money via subscription plans, referral fees, and in-dining with its first restaurant, as an experiment in Miami, Florida.

Origin Story

OpenTable is an American online reservation service for restaurants. The company was founded in 1998 by Chuck Templeton, with initial operations focused exclusively on restaurants in San Francisco.

Using the original system, restaurants who signed up for the service used OpenTable software to manage dinner reservations. In the late 1990s, the ability for restaurants to take reservations using a real-time system was somewhat revolutionary. The service quickly expanded to approximately 30,000 restaurants across the United States and limited international cities.

In 2014, OpenTable was acquired by Booking Holdings (formerly Priceline Group) for $2.6 billion. The platform now seats over 1 billion diners per year in countries such as Mexico, the UK, Australia, Canada, France, Japan, and Germany. It serves restaurants and eating establishments found in bars, wineries, hotels, casinos, and grocery stores.

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Booking Holdings is the company the controls six main brands that comprise Booking.com, priceline.com, KAYAK, agoda.com, Rentalcars.com, and OpenTable. Over 76% of the company revenues in 2017 came primarily via travel reservations commissions and travel insurance fees. Almost 17% came from merchant fees, and the remaining revenues came from advertising earned via KAYAK. As a distribution strategy, the company spent over $4.5 billion in performance-based and brand advertising. 

OpenTable revenue generation

OpenTable makes money in a few different ways.

Subscription fees

The company offers its management platform across three different plans:

  1. Basic ($29/month) – allowing restaurant owners to reach diners and build a reputation. OpenTable charges Basic plan users 25 cents per reservation plus a flat $49 fee. There is also a charge of $1.50 per network cover. In restaurant parlance, a cover refers to a single meal or customer for whom the meal is served.
  2. Core ($249/month) – for restaurant owners who want a more efficient front-of-house or to maximize patronage. Website reservations are free and there is a $1 charge per network cover.
  3. Pro ($449/month) – the Pro plan allows loyal customers to be recognized and rewarded through relationship management. Pricing for reservations and network covers is the same as the Core plan.

Regardless of the plan chosen, OpenTable also charges a 2% service fee for restaurant experiences and takeout.

Referral fees

OpenTable users can also order from restaurants that offer delivery. Depending on geographic location, supporting delivery partners include Olo, Toast Delivery, Uber Eats, Postmates, Deliveroo, and ChowNow.

OpenTable makes an undisclosed amount by partnering with these services, most likely in the form of an agreed-upon referral fee.

In-dining

OpenTable recently opened its first restaurant in Miami, Florida.

Serving eastern Mediterranean fare, the restaurant is an innovative pilot project for the company. While the quality of food is important, OpenTable hopes to use technology to develop a highly personalized hospitality service. The wait staff at the restaurant use historical customer food and drink preferences to give diners what they want without them having to ask for it.

If the concept proves profitable, there is scope to suggest that OpenTable will open similar restaurants elsewhere.

Key takeaways:

  • OpenTable is an American online restaurant reservation system founded by Chuck Templeton. During the late 90s, it provided one of the first automated, real-time reservation systems.
  • OpenTable makes money by giving restaurant owners access to its platform across three, paid plans. The Core and Pro plans incorporate free reservations and charge $1 per network cover.
  • OpenTable also earns referral fees from the many delivery services it partners with. It has recently opened its first branded restaurant in Miami using customer insights to offer a highly personalized restaurant experience.

Read Next: Booking Business Model, How Does Trivago Make Money, How Does Airbnb Make Money, How Does RedFin Make Money.

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Gennaro Cuofano

Gennaro is the creator of FourWeekMBA which reached over a million business students, executives, and aspiring entrepreneurs in 2020 alone | He is also Head of Business Development for a high-tech startup, which he helped grow at double-digit rate | Gennaro earned an International MBA with emphasis on Corporate Finance and Business Strategy | Visit The FourWeekMBA BizSchool | Or Get The FourWeekMBA Flagship Book "100+ Business Models"