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.
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!
'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.
Just like using a group on voucher. It feels a bit weird, just leaving at the end of a meal, without having to go to the register.
or walking out of an apple store with an iPad and no bag and no receipt. I enjoy the convenience and green nature of it but feel like a thief sometimes. especially since there is no "checkout register" as everyone can ring you up for the device.
A pretty neat solution would be to put rfid tags on the boxes, and rfid readers (powerful enough to read them) at the doors. When you exit it could check and make sure the given item number was actually purchased by a user.
But yes, I know the feeling.
Can't speak for everyone, but I much prefer it.
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".
I think this was just before or right after they had launched Next. Their description of the reservation ticketing system and the variable pricing model seemed awesome then. Glad to see it worked out so well.
But what really made an impression on me was Grant's discussion of the similarity of software user experience design and his own dining experience design. He talked about how he's not just making food but controlling an entire experience for the diner. That includes the interesting centerpieces on the table that are used in the meal, the narrow entrance hall to the restaurant, the use of smoke and smell to evoke memories. I'm completely sure the user experience of the reservation system is a piece he considers a part of the overall dining experience. Whether or not actual conversion numbers are there to justify investing in it, I bet these guys consider it one of the intangibles that make their restaurants the best fine dining experiences in the country.
One of the stories that sticks out for me was Grant's explanation of the trickiness involved in not having tablecloths. At the time, he said, fine dining meant white tablecloths. But he didn't want there to be tablecloths at Alinea. So he got rid of them. But the problem was water rings. When cold water was placed on the stone tables, rings of condensation formed. He said they solved the problem by finding the precise temperature at which the water was chilled but not cold enough to form condensation rings on the table and they keep it at exactly that temperature in the kitchen.
Something about that story says to me that he understands that the quality of the experience lies in the substance and not the decoration. I haven't actually used the reservation system. I went to Alinea before it was used there and I haven't been to Next. So I don't know if it's ugly but I doubt it sucks. Because these guys understand and care about user experience of all forms to a surprising degree.
I do admire the utility of the interface; it looks like it gets the job done.
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.
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.
I had a great meal at Schwa, and my reservation wasn't that hard to get, except that they cancelled it on me 3 times in a row.
• From a user's perspective, it's not as if some aesthetic improvements are mutually exclusive with the overall goals stated in the article. In fact, it's quite the opposite. It'd be nice if the website had the same premium feel and attention to detail that the actual food and front of house do. It's a bit jarring to spend $3k+ on season tickets on a website with a minimum viable design.
• While I admittedly lack the insight of a restaurant operator, it seems he's stagnated frontend-wise on simply "anything but IE." While that makes the geek in me chuckle, it seems to dismiss the benefits that come from having an actual strategy focusing on the way that mobile devices could be integrated. Just because the ticket biz model is better than those focused on leasing hardware doesn't mean that a FOH person couldn't be armed with a tablet to access the webapp or that a native app for customers and restaurants doesn't make sense.
Anyways, very interesting, and while I didn't think it was possible to be more excited for Modern China, I'm now looking forward to potentially keeping an eye out for how the restaurant interacts with the software during service.
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!
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.
There is a common misconception as to what lean is. Lean has nothing to do with the size of the team, but rather has to do about keeping churn low. The true version of lean would have done a ticketing system using an Excel spreadsheet and a phone number - but kept the ticketing system exactly identical. This ultimately would allow you to prove your ticketing model without wasting time and money on a programmer.
Either way, kudos...love your ambition and your willingness to share. This point Bottom line EBITDA profits are up 38% from previous average years. is a management consultant's wet dream. Nice one.
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.
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.
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...)?
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!
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...
As seen last year: Bot wars - The arms race of restaurant reservations in SF https://news.ycombinator.com/item?id=6101161
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.
Ticketing will work mostly for heavily booked and popular places.
I imagine this would be a nice feature, but might open up a lot of complications
Is there an opportunity for that, or does a secondary market exist? Imagine traditional market economics applied to the same model - eBay for restaurants?
We also put in URL blockers, bot protection, and a captcha to avoid people locking up tables quickly.
Consider also: the overwhelmingly dominant global standard for allocating fine dining tables --- the reservation system --- doesn't have any notion of floating prices. The owners of a restaurant design a menu and put a price on it. You could look the prices on up a site like Zagat and know that's what you'd be paying. (IIRC, Charlie Trotter's used to have a listing where the "price" was "VE", for "Very Expensive").
Can I give my ticket away or sell it?
Yes. The ticket is completely transferable. However, selling tickets for greater than face value may be illegal in your area. Anyone who purchases a ticket from another patron should take care to be sure that the ticket and times are as claimed by requesting both an email confirmation from us as well as a printed ticket from the seller. Any tickets purchased on the secondary market are at the purchaser's risk. We will not be held responsible for forgeries or misrepresentations.
Can I just give my ticket away instead of transferring it on this site?
Because we are calling all ticket holders before they dine with us we request that the tickets are formally transferred through our site. Log in and navigate to Manage Account ---> Transfer a Ticket.
I don't know exactly what laws govern (i.e. where you purchase or always Chicago) but at least on the face of it I don't see why there couldn't be a secondary market. The terms of service seems to reserve the right to shut down an abusive operation, but there's nothing clearly stating they would.
P.S. nkokonas: on http://website.alinearestaurant.com/site/reservations-contac... the FAQ link on the bottom right points to the wrong place, it 404s. And thanks for the write up, it's fantastic, I hope one day to eat there.
Since the tickets can be resold, they end up on Craiglist etc and people pay $2000
Sure Next tickets may be underpriced at times. I imagine the Trio menu will be a very hot ticket when it first comes out, but pricing so customers get a good value for the duration of the menu is a better long-term play. The guy who scores "underpriced" tickets will feel great about the experience, brag to his friends, and likely return.
Are people who paid $800 for a PS4 happy about their decision today?
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.
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.
I imagine the event wants to fill as many seats as they can. In addition to ticket prices, they also have food, drinks, merchandise, parking, etc. to sell.
If a scalper buys five face value tickets at $50, they would only need to sell two at $150 (3x prices are common) to profit. Even if they don't sell the other three, they've made money.
So the way I see it:
Venue: Loses food/merch sales for 3 people
Fans: 3 people weren't able to attend (tickets gone, can't/won't afford/buy inflated price)
Scalper: Made $50
Because in this scenario, a program has purchased all the tickets ahead of time, making it basically impossible for a real customer to buy the product for what the seller has determined is a fair price.
From the author's (OP) perspective, this is the exact opposite of what he wants to happen. A great fine dining experience is just that--all about the experience, and that's part of what the author is trying to improve. Creation of a secondary market degrades the experience for both seller (who wants to personalize and develop a relationship with a true customer), and the buyer (who now has to deal with a scalper, or worse, a scalper robot site).
>>The reason is that they want to unload the ticket quickly and with less hassle...
There's a real degree of integrity that the author focuses on, and that's part of this as well. That's why the author is against turning his product into an auction based system, which makes me want to eat at Alinea / Next more. It's not about hassle, it's about what the seller determines to be a fair and reasonable price for his service. Maybe I'm a minority thinking that adjusting that for a price due to a specific advantage (program that buys all the reservations) is wrong, but I certainly can't see how that's making anything better, or offering any 'value' that either buyer or seller (in this scenario) would want.
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.
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.
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.
Normally, for events that are "underpriced" people with more time than money can attend events that people with more money than time can't.
You are making a value judgement that people with time should be allowed to go to events, but people with money should not.
That's fine for you to do, but I don't think you can make a
global statement that people who enable this opportunity for people with more money than time are making the world a "worse place".
He is not enabling, he is disabling and profiteering, it's incredibly antisocial.
My life has been enriched, and I personally really appreciate that people and services like this exist - I certainly get a great deal of value from them. I'm not sure what's upsetting you so much.
And, honestly, there is a big difference (at least to me) between someone making concert, sport, or event tickets available at a markup, (which, btw, is a pretty common Broadway system these days for plays, done by the theater themselves no third party required) - and buying up all the water after a disaster and selling it at a markup - I would consider that behavior to be anti-social and profiteering.
Leisure activities are entirely optional. Making them available to people who want to see them, and can pay for them, seems to be a positive thing to me.
Oh? Wanted to go see that band you like did you? Waiting online when the tickets went on sale were we? Too bad, I got them first. I don't even want to go but now you're going to have to pay me twice the face value or you're SOL.
That's what's antisocial and wrong about it. And that's why there are now so many situations where event promoters are actively fighting against it.
What's pissing you off, is that prior to ticket brokers, you were able to buy tickets at a lower price than you thought the concert was worth - and now the brokers are making at market at the accurate price, depriving you of the discount.
Event Promoters are pissed off, because they aren't getting their cut of the $$$. You are pissed off because you are paying more $$$ than you would have.
I understand why both of you are pissed off - but don't making global statements like, "Ticket brokers are making the world a worse place" without recognizing that they are also making it a better place at the same time.
I'm sorry for you that you can't see how incredibly antisocial this is.
Ticket Brokers exist because the tickets are being sold for less than what people believe they are worth. That's an economic activity, not a social one. We aren't talking about food, water, or gas in a disaster here - we're talking about luxury items.
If the tickets were sold at the clearing price, then ticket brokers would not exist.
I'm honestly curious - do you find Broadway's latest trend towards "variable pricing" anti-social? From the perspective of the customer, they are doing exactly what the broker's are doing - marking up the tickets to the highest possible price they can get on a per-seat basis - sometimes marking tickets up 2x to 3x what they used to be.
Obviously the producer's are happy with this - because they are now collecting the $$$ themselves. But, from the perspective of a customer - prices are now jacked up to what the market will bear.
I'm interested in your perspective - is the broker "anti-social" because they are depriving the producer of money, or because they are jacking up the prices of tickets to a level that the lower-income fan can't afford?
I think that others who may not have as much money to afford the 3x markup deserve to have their lives enriched too.
There are legitimate reasons for secondary markets, especially given that the tickets are available for resale by the producer, but we won't go into this now.
You should know that I had the same questions about arbitrage as you, and walked away from millions of dollars as a result. (https://news.ycombinator.com/item?id=6736330). I gave up everything, lived in a car for three months, and still have absolutely no idea if I'll ever be able to make that back or how I'll provide for my family long-term.
That is why you don't make an argument personal on the Internet (and specifically HackerNews). Because you know absolutely nothing about the person you're calling out.
To think about the problem differently- occasionally you will come to certain places and see two Starbucks sitting across the street from each other. If you ever wondered why that is, the reason is that in certain locations, demand is so high at peak times that the lines will get so long that large numbers of customers will actually not buy coffee because they aren't willing to wait. Rather than raise prices during these times, Starbucks figured out that it was profitable to open a second adjacent location to service this demand overflow.
I don't mean to sound condescending, but there are two sides to this coin and I think that looking at it from only the customer side is a mistake. The restaurant is losing out on potential profits that the customers are capturing. Traders would simply be capturing the surplus that the restaurant can't or won't. It isn't necessarily being greedy, it's just being smart.
Talk about a waterfall, you mean. Complete with the "OH FUCK WE'RE ALL GONNA DIE" crisis at the end when things have slipped...
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