Food Network eats into OpenTable's business

OpenTable seated 89 million people in North America last year. The Food Network’s owner plans to compete with lower fees for restaurants.

Sarah Gardner: Things are heating up in the online restaurant reservation game. OpenTable has been the big cheese in that business for years. It's connected to 17,000 restaurants across North America, and it's been dishing up steadily growing profits since going public several years ago.

But now OpenTable's got some competition. As Marketplace's Stacey Vanek Smith reports, the Food Network is angling for a place at the online reservation table as well.

Stacey Vanek Smith: The network that helps you cook your own food now wants to help you eat food that other people cook.  Scripps Networks Interactive, which owns the Food Network, is rolling out CityEats, an online reservation system meant to rival OpenTable. OpenTable seated 89 million people in North America last year -- and earned $21 million.

 Gary Stibel: They’ve got their work cut out for them.

Gary Stibel is a consumer analyst with the New England Consulting Group. He says OpenTable has a big head start and a solid business model. 

Stibel: They do it the way the credit card companies do. 

OpenTable charges up to $700 to restaurants just to join. The restaurants pay$ 200 a month after that, plus $1 for every person who reserves on the site.

 James Chin: That’s way too expensive.

James Chin is head chef at Chin Chin restaurant in Midtown Manhattan. He doesn’t use OpenTable. CityEats is targeting chefs like him by offering lower prices.

Jonathan Young: Everything starts off with lower prices.

Jonathan Young is general manager of the Oyster Bar in New York’s Grand Central Station. He says about half of his reservations come from OpenTable and it’s worth the price.

Young: You really would have to keep someone almost totally dedicated as a reservationist and we don’t really want to do that.

Scripps faces an uphill battle, says analyst Gary Stibel, though the Food Network’s strong brand will help. CityEats is up and running in Washington D.C. and Philadelphia and expects to roll out in New York and San Francisco this year.

In New York, I’m Stacey Vanek Smith for Marketplace.

About the author

Stacey Vanek Smith is a senior reporter for Marketplace, where she covers banking, consumer finance, housing and advertising.
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The City Eats model reminds of Urban Spoon's model, but with a smaller community behind them. While the Food Network brings some weight to the plan, their site isn't as popular as Urban Spoon. These models that drive traffic from their website only bring the incremental value their traffic represents to the table above and beyond the tools of managing reservations from the restaurants website. It's usually worth it for the restaurant to sign up for a free trial, but it will be hard to get them to pay monthly fees. I know as we manage reservations too.

I work for www.reservationgenie.com and we have a different platform that rewards customer loyalty. We never charge cover fees for reservations booked from the restaurant's website or customers who return to book again directly through our site. Our loyalty program lets restaurants market to patrons by giving them something for coming back often. They can offer a complimentary appetizer per 2 entrees, 20% off the check, or a complimentary bottle of presecco...it's up to them. Since they give that directly to the customer, there's no middle man fees involved. You can see that loyalty program in action here on Corazon's listing. Their invoices are only $49 per month. http://www.reservationgenie.com/113-corazon-at-castle-hill-austin

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