
Tickets for Restaurants - BryantD
http://website.alinearestaurant.com/site/2014/06/tickets-for-restaurants/
======
patio11
This is a _fantastic_ writeup.

I wonder if a part of the attraction isn't de-commercializing the experience
for the diners? Paying up front, presumably via credit cards, means that the
service experience is Uber-smooth. You never have to ask for the check, fumble
with cards, or do the who-has-this-one dance with other people at the table.
You simply show up, get treated like royalty, and leave when you're ready to.

I feel professionally obligated to quibble at one point:

 _Most reservation and ticketing systems charge by the number of customer
transactions, the number of restaurant admin users, for equipment, or a
combination of all three. The more business a restaurant does, the more they
end up paying. As a business owner I hate such models. Adding an incremental
user on my end costs a software company nothing – especially one that has a
cloud based system._

You may discover, in running a software company, that it is really valuable to
have the prices which you can charge scale with the success of your users.
It's how software companies can bid down their lower-end entry points, since
we can't conveniently sell our users alcohol at 80% margins.

~~~
nkokonas
well aware of that fact... but the scalability and margins are such that it's
still a great business. If I charge flat $ 495 per month for a restaurant but
save them $ 100k plus per year then I win all restaurants... incremental costs
minimal on the dev side. Hosting is a pass through.

Our booze does not run 80% margins... more like 70% .... and labor crushes it
beyond that. Restaurants are lucky to get 10% margins if you are smart. We do
better, but we do tickets!

~~~
netcan
I'm taking a bit of a stab but flat pricing probably works well for you
because the profile of a customer/restaurant doesn't vary that much. If a
restaurant can't afford or justify $495 per month, they probably aren't a good
fit for your product.

'3 full time employees answering phones' was your starting point. I assume
that a restaurant with more than 5 is rare and a restaurant with less than 1
full time person on the phone is a bad fit.

You are not losing many potential customers under that size and you are not
leaving too much on the table with huge customers.

If you were trying to sell a hotel booking software and wanted to target
customers from BnB scale to resort scale, you would need some way of charging
bigger customers more, even if the marginal cost to you was the same.

I think the point that Patrick is making with the margin on booze is that
similarly to restaurant prices, software pricing (like restaurant pricing) is
more "made up" than the price of manufactured goods where a 'rational' pricing
model like cost plus can be employed. Most costs are fixed rather than
marginal so pointing to the marginal cost is almost like saying software
shouldn't cost money.

I think you demonstrate that by selling tickets. Instead of charging patrons
by what they order, you charge them by when they come. The 'what' pricing was
made up and you made up a different pricing that worked better.

------
tptacek
For one thing, it's pretty amazing to see Nick Kokonas writing about Alinea
and Next as if they were "Lean Startups".

But another thing that sticks out to me: look how pretty and refined these
ticketing apps _aren 't_, even though they drive hundreds of thousands of
dollars _per month_ of revenue. And after you notice that, read how Kokonas
talks about how easy and simple the system is for them to use? There's a
lesson in there somewhere about the kinds of UX that matter to customers
versus the kind of UX people believe should matter for customers.

As a restaurant customer, I think the ticketing system is great; I've gone
through the process of getting an Alinea reso (if you want a real fun time in
Chicago, try getting one for Schwa) and it was an opaque nightmare. The
alternative to tickets for these places isn't a fair reservation system; it is
basically "you don't get to eat there ever".

~~~
bradly
I also think the ticketing system is great, but it looks like Next is adopting
service charges from the traditional ticketing industry. It's a bummer to see
such a non-customer friendly practice like that tacked on to an innovative
idea.

~~~
nkokonas
Service charge is literally the charge for restaurant service -- instead of a
'tip'. It's not a charge for the tickets.

We do that because of Fair Labor Standards Act (FLSA) makes tipping difficult
if you charge ahead... or if you want to share revenue with cooks.

~~~
bradly
Yeah, that's understandable, but personally I'd prefer the 20% just included
in the total price of the ticket. The French Laundry does this; they just
charge a flat $260 and there is no tipping. The tip is already priced into the
$260.

~~~
pndmnm
Yes, but at Keller's restaurant it's not charged in advance -- it's just a
"gratuity included" situation. The specific definition in the FLSA states that
tips for an employee are "actually received by the employee", which is the
main issue in counting prior ticket purchase as gratuity.

Also, Nick, if you're still reading -- do you think that the prepurchase model
materially affects people's spending on e.g. upgrades and drinks? My wife and
I did Alinea & Aviary on November, and I was definitely happier to spend a
little more given that the original "purchase" was so many paychecks in the
past.

~~~
nkokonas
inclusive pricing is what I'd like to do but people compare pricing without
gratuity for most places... TFL can do that. Next cannot.

------
nkokonas
the lean start up was the software itself, not the restaurants. The
restaurants were hardly lean... but the software was one programmer and me.

\-- nick

~~~
tptacek
On the off chance we can cadge more of your time:

It seems like in retrospect that tickets were a really smart idea that panned
out nicely for your group. Why do you think nobody had done it on your scale
before?

How well do you think a ticket scheme would work out for a "non-destination"
restaurant? For, say, Lula or Nightwood, instead of Alinea or Elizabeth?

In the process of getting this stuff working, was there ever a point late in
the game where you were worried that it just wasn't going to come together in
time to get tickets working for the launch of Next?

Thanks for taking the time to comment!

~~~
nkokonas
I think it would work for almost any restaurant -- or for that matter any
business or service that has time slots... think dentist, hair cutter, spa,
etc. If a restaurant is less in demand then they can use pricing as an
incentive, never charging a premium but going under baseline for quiet times.

Aviary is the example that I use because we _never_ go all night to full
capacity. We've done 350+ covers, but we could do more. Most Wednesdays we do
125-150. So take a non destination place, add in a deposit for prime slots or
other perks, and I believe the psychology is that you can move patrons to
those times.

I think the entire industry was afraid to take the risk that patrons would
hate tickets -- you spend $ 2 million building a restaurant and you want to
minimize risk. I felt Next had so many people interested in the concept that I
could afford to take that risk... indeed in some ways it was concepted FOR the
tickets because I was so nutty about them for a year or two before.

And yes, I was very very worried. Up for several days in a row beforehand.
Didn't shower or shave... ate pizza, drank cheap wine. Usual stuff.

~~~
infinitone
Funnily enough, we're working on scheduling for detailers and cleaning
businesses ([http://carwashy.com](http://carwashy.com)). We haven't look into
ticketing because well, to be frank, most of our customers never really
mention the problems you guys face. And looking at the data, no-shows account
for less than 2% of bookings.

------
lominming
Wow. I am a huge foodie and a big fan of Alinea. I am surprised they actually
blog about data and thought process behind the ticketing system. I completely
understand the reasoning behind this. High demand for a table at Alinea allows
them to do this. I think this will work for very limited number of restaurants
like Per Se, TFL, Saison, etc., but will not apply to majority of other
restaurants. The big difference between Open Table vs Alinea is for Alinea,
you actually need to pay upfront. The demand and the quality of the restaurant
allows Alinea to do that, but again, does not work majority of restaurants
when there is no single fixed menu.

~~~
nkokonas
Sure... but the thing is this: you could just take small deposit against the
final check. And vary the scale or application of that deposit. For example,
putting in a $10 deposit could give you a $ 15 credit. That's just one example
on how a 'normal' demand restaurant could use ticketing and dynamic, variable
pricing.

------
joshu
I'm hugely interested in the restaurant business from afar so I was really,
really impressed with this writeup. It's too bad that folks in the actual tech
industry don't get this deep.

~~~
wil421
>I'm hugely interested in the restaurant business from afar

Stay afar, the restaurant industry is a different animal altogether. Dont ever
try and start a restaurant unless you will be doing it with an industry
veteran. I spent/wasted 6 years in the industry.

~~~
joshu
I have a small investment in a restaurant and they are remarkably tolerant of
my annoying questions. But yeah, I figure it's probably more efficient to just
light money on fire.

------
jonstewart
One thing I don't see mentioned in the blogpost or in the comments is the
discussion that ticketing gets you deferred revenue, i.e., float. They get to
pay for most of their COGS with cash instead of credit, and earn interest in
the process. This seems like the most fundamental improvement to the
restaurant business, but maybe not something they want to highlight on their
blog.

------
mlchild
First off, wanted to say thanks to Nick and Grant for the most amazing meal of
my life at Alinea, as well as several killer nights at Next and the Aviary (I
was an instant convert and had to get season tickets).

Secondly, this write up is incredibly rich and I really appreciated the chance
to get so much insight into the success of the system so far. That said, I'm
particularly interested in the next moves.

You note that the network effects of OpenTable for discovery are waning,
thanks to Google, but I'm not sure that's the case on desktop, and even less
so on mobile. The cases I experience are:

1\. I know exactly where I want to eat. In this case it's almost always easier
to go to OpenTable anyway, since restaurant website design is clunky and
unpredictable.

2\. I have a general idea, say "mid-range Cal-Ital on Thursday." Google may be
superior to OpenTable on recommendations (slightly, and I think that's
debatable), and it doesn't really matter if they do a better job pulling up,
say, Nopa and Rich Table, since I'm not getting in anyway. OpenTable shortens
the loop between idea and execution.

3\. I have no idea where I want to eat, other than, "right here, right now,
and good." In this case superior mobile recommendation apps carry the day,
many of which I can book through, usually via OpenTable's platform. With
extensions/deeplinks/etc. picking up on Android and iOS, it seems likely that
this will be further entrenched.

I like the idea of more flexible and innovative reservations systems taking
hold, but I'm not sure I'd discount the network effects so soon.

Finally, the kiosks in restaurants that are provided (some might say forced
in) by OpenTable seem like ripe opportunity, given the horrific UI and vendor
lock-in. Are you considering building an iPad/tablet app to manage your
systems in-restaurant? Or is the browser interface sufficiently mobile-
friendly to serve this purpose?

Thanks again for the write-up, really enjoyed the read. Looking forward to
Next Chinese.

------
kmeil
Nick, this is so awesome! I know I'm getting ahead of myself, but I'm really
interested in what a ticketing deployment for a "regular" restaurant that uses
OpenTable now might look like.

Recognizing that, as you mentioned, many restaurants have different OT
strategies (Girl & Goat vs., e.g., SF's Fang, which is great and often full
but has tables avail every 15 mins in perpetuity and seems to manage fine, as
they turn quickly):

1\. Do shoppers used to limited merchandise translating to high quality get
turned off by seeing all the inventory?

2\. How to they get the word out to sell tickets? Will you help customers with
deployment?

3\. How do they restaurants convince an existing customer base not to just
call (if they continue to call, it reduces cost savings) or show up (rendering
system unnecessary/reducing it to a crm) without turning off their phones,
like fab ([http://recode.net/2014/06/04/codered-fab-operators-no-
longer...](http://recode.net/2014/06/04/codered-fab-operators-no-longer-
standing-by/))?

4\. How sophisticated does a manager/hostess need to be to run & record
results of the pricing experiments it would presumably take to optimize, once
they did get adoption up? I don't mean to imply that people in restaurants
aren't smart, just that recording, passing on the info and rerunning tests
seasonally seems like a large organizational difficulty, assuming results
didn't arrive instantly, like they might in a high-demand restaurant (your
superbowl test).

Ok sorry I got excited and hung up on lots of little details!

------
j_s
Edit: author addressed this issue elsewhere in this thread:
[https://news.ycombinator.com/item?id=7856212](https://news.ycombinator.com/item?id=7856212)

The claim in the article regarding people feeling disappointed after winning
an auction for a table doesn't address the fact that people are 'paying for
access alone' by purchasing from scalpers. There are other ways to address
this issue: [http://www.npr.org/blogs/money/2013/06/27/196277836/kid-
rock...](http://www.npr.org/blogs/money/2013/06/27/196277836/kid-rock-takes-
on-the-scalpers)

As seen last year: _Bot wars - The arms race of restaurant reservations in SF_
[https://news.ycombinator.com/item?id=6101161](https://news.ycombinator.com/item?id=6101161)

------
abalone
The essential change is that customers put down a nonrefundable deposit for
their reservation.

It's hard to really assess this based on the experience of Alinea/Next/Aviary
alone. This might work for the most in-demand, popular restaurants / high end
bars like those but I'm skeptical it will work more broadly. Reason being it's
a competitive disadvantage vs. places that don't require a deposit.

Super popular places already have so much demand and competitive advantage
that it may not affect them, but the average (or even above-average)
restaurant may actually risk a decline in bookings by requiring deposits. I
believe OpenTable actually offers cancellation fees as an optional feature;
few places use it. We'll see how it goes, I guess.

~~~
rdslw
This.

Ticketing will work mostly for heavily booked and popular places.

------
jljljl
One question I didn't see covered in the article: Are the restaurant tickets
transferrable? Can I sell my ticket to someone else if I can't make the date
or something comes up?

I imagine this would be a nice feature, but might open up a lot of
complications

------
tantalor
Presumably, scaling the deposit by the seat count solves the short-sat problem
because the client might end up paying more as the deposit than the final
check (and there is no refund) so they are incentivized to not reserve a too-
large table.

------
capex
Ah, my startup [0] carries the same idea but applies it to days of the week.
So far the responsive from the restaurant industry is overwhelming.

[0] [http://opendeals.com.au](http://opendeals.com.au)

~~~
nkokonas
one direction on pricing means it's a 'deals' site and will only attract
struggling restaurants.

------
infecto
Great article! I would love to see this model applied to other industries.
Unfortunately I think the only way to drive this change is internally.

------
smackfu
It's interesting that there are any short-sat no-shows anymore. That is
literally a free meal at an amazing restaurant.

------
joshdance
Really liked it. Just interesting that they use Internet Explorer.

------
dabernathy89
Looks like nobody else is gonna do it, so I'll be the bad guy: this post is
nearly impossible to read: tiny, white (and sometimes black) text on a dark
gray background. Judging by the other comments, it's a great piece, I just
wish it were easier to read :)

~~~
chime
No images but
[https://www.readability.com/articles/rs8nq3xr](https://www.readability.com/articles/rs8nq3xr)
is readable. I use rdd.me all the time just for this purpose.

------
austenallred
As someone who has sold millions of dollars worth of event (mostly broadway)
tickets, the fact that they're moving that quickly says you're not charging
enough. My first instinct when I see something that moves that quickly is to
write a program that reserves them for me and sell them at a 2x-3x profit on
the secondary market.

Is there an opportunity for that, or does a secondary market exist? Imagine
traditional market economics applied to the same model - eBay for restaurants?

~~~
Nursie
You are part of a problem. I can't say this strongly enough.

Some people have tickets to sell, others would like to go to the event. You
would interpose yourself to suck money out of the latter group while providing
no service.

You're making the world a worse place.

~~~
rayiner
This fallacy is in a nutshell why people are irrationally mad about HFT.

He's providing liquidity to the market for the tickets. Think about it: if he
can come along and sell the tickets for a markup, why won't the sellers sell
directly to the buyers and capture that whole amount for themselves? The
reason is that they want to unload the ticket quickly and with less hassle,
and finding that high-bidding buyer takes more time than finding the scalper.
Similarly, why doesn't the buyer seek out a seller himself? Because it takes
more time. Otherwise, both would be irrational to interact with him rather
than directly. By interposing himself in the transaction, he makes the process
easier and quicker for both buyer and seller, and that provided value.

~~~
Nursie
>> why won't the sellers sell directly to the buyers and capture that whole
amount for themselves?

Oh I don't know, because they want ordinary people without huge fat wallets to
get a chance to go along?

>> The reason is that they want to unload the ticket quickly and with less
hassle, and finding that high-bidding buyer takes more time than finding the
scalper.

Not really, you could very easily set up a website that would do this stuff
for the whole industry and cut out the scalpers. The only reason I can think
that this isn't common is because people find it distasteful.

>> Similarly, why doesn't the buyer seek out a seller himself?

He often does, just to find some arsehole has interposed himself and is
holding a serious proportion of total tickets to ransom.

>> By interposing himself in the transaction, he makes the process easier and
quicker for both buyer and seller, and that provided value.

Utter bullshit. Sorry, but it's just nonsense. He inconveniences ticket buyers
by holding back tickets they would have bought until he gets paid off. There
is no value in what he does.

It's unacceptable.

~~~
rayiner
> Oh I don't know, because they want ordinary people without huge fat wallets
> to get a chance to go along?

Oh please. I need to bail on some awesome event because my girlfriend broke up
with me or work dropped some unmanageable project on my lap. I don't care who
gets the ticket, I just want to get rid of it quickly.

> Not really, you could very easily set up a website that would do this stuff
> for the whole industry and cut out the scalpers.

It's called EBay, and they haven't replaced the scalpers. Its because scalpers
take advantage of a temporal lag between supply and demand. The guy canceling
wants his money now. The guy with deep pockets can't be bothered to go looking
until the last minute.

> He often does, just to find some arsehole has interposed himself and is
> holding a serious proportion of total tickets to ransom.

Why did the scalper get there first? Because the seller wanted to unload
quickly and the buyer didn't think about it until later. Again, if the buyers
were there when the sellers were selling, nobody would sell to scalpers. But
the buyers aren't there. Without scalpers, the sellers would have to hold on
to the tickets longer.

~~~
Nursie
>> Oh please. I need to bail on some awesome event because my girlfriend broke
up with me or work dropped some unmanageable project on my lap. I don't care
who gets the ticket, I just want to get rid of it quickly.

This is not the same, you are now being disingenuous.

>> It's called EBay, and they haven't replaced the scalpers. Its because
scalpers take advantage of a temporal lag between supply and demand. The guy
canceling wants his money now. The guy with deep pockets can't be bothered to
go looking until the last minute.

This is not about people cancelling, this is about exactly the behaviour
described in the original post - buying up large chunks of the available
tickets and profiteering off them.

>> Why did the scalper get there first? Because the seller wanted to unload
quickly and the buyer didn't think about it until later. Again, if the buyers
were there when the sellers were selling, nobody would sell to scalpers. But
the buyers aren't there. Without scalpers, the sellers would have to hold on
to the tickets longer.

This is not born out in reality. Observe the process of buying tickets to any
marginally popular event that doesn't protect against this stuff and you'll
find the buyers are there, in droves, but the scalpers _still_ manage to get a
lot of the tickets, which are up on ebay and reseller sites at multiple times
the face value within seconds.

This is not a service, it is antisocial and it makes the world a worse place.

The fact you have to use contrived examples that bear no resemblance to the
original statements tells me you realise this but are arguing for the sake of
it. Bye now.

------
al2o3cr
"About six months before Next was due to open I hired a single programmer and
laid out visually, as a flow chart, what the system needed to do. Talk about a
lean start up model!"

Talk about a waterfall, you mean. Complete with the "OH FUCK WE'RE ALL GONNA
DIE" crisis at the end when things have slipped...

~~~
tptacek
Kokonas isn't a software developer; he was a prop trader and then a restaurant
owner. The fact that they pulled this off at all is impressive; it's actually
even more impressive given that they did it with a less effective project
management methodology.

~~~
nkokonas
well in fairness I had a bit of experience in software design -- ancient but
relevant. We are redoing the entirety of the site now... keeping the good,
improving the rest.

~~~
tptacek
Will trade security assessment for one meal.

~~~
sachinag
I would trade cash money for you two to do a podcast / text interview.

~~~
hft_throwaway
Hear, hear.

