Tock Intro restaurant reservations system debuts – Consumer News

on Sep23

23 September 2017 | 8:00 am

Three years after the launch of their restaurant-booking system, Tock, Alinea co-founder Nick Kokonas and former Google engineer Brian Fitzpatrick face a central issue: Will Tock remain a nice niche business that caters to a couple hundred super-high-end restaurants, or will it break out and steal real market share from OpenTable, the aging industry standard that works with 43,000 establishments?

Tock’s co-founders are making clear they’re thinking big. This month, the startup debuts a cheaper plan geared toward a wider array of restaurants. Called Tock Intro, the new system offers the prepaid ticketing option Tock first introduced for its elite clients, including New York’s​ Eleven Madison Park and the French​ Laundry in Napa Valley. The idea is that midtier restaurants that still want to rely on free OpenTable reservations for general seating can use Tock Intro to draw attention (and prepaid booking) to a higher-end chef’s table or omakase menu. There’s no monthly fee, but Tock takes 3 percent of the prepaid revenue.

This option joins two other Tock subscription models. A middle-of-the-road service lets restaurants continue to combine prepaid and ordinary reservations for $199 a month plus 2 percent of prepaid revenue. And on the upper end, high-volume restaurants can pay a $699 flat fee for total reservations management. Kokonas says that Tock, which is not profitable, has 213 restaurant clients and that revenue is up 110 percent year-over-year.

By carving out a way for restaurants to use it for just a fraction of their business, Tock is gaining access to a much larger swath of the roughly 336,000 nonchain establishments in the country. And by looking to expand beyond a fine-dining niche, it’s beginning to do battle not just with OpenTable, but with a raft of other reservations startups vying for the same customers.

It’s also acknowledging that its prepaid system, which resembles theater ticket booking, doesn’t have a huge market. While affluent diners will happily pony up hundreds of dollars months in advance to snag a table at Alinea—the heralded Lincoln Park restaurant Kokonas opened with chef Grant Achatz in 2005—no one’s going to do that for their neighborhood sushi joint. EsterEv, a tasting-menu restaurant in Milwaukee, switched from Tock to OpenTable earlier this year because it says customers didn’t embrace the prepay model.

“We know that for Tock to be successful, the product needs to be successful in middle-market restaurants,” says Jason Heltzer, a partner at Origin Ventures, which led Tock’s $7.5 million Series A round of funding. At the same time, “it’s a gigantic market, so there can be lots of winners,” he says. “We don’t need 100,000 restaurants to be successful.” To date, Tock has executed about 2 million reservations, or about what OpenTable does in a month.

Indeed, to see the kind of money that can be made with merely tens of thousands of restaurant clients, one need only look to OpenTable, which invented online reservations when it launched in Chicago in 1998. The company, which moved its headquarters to San Francisco and went public in 2009, was purchased by Priceline for $2.6 billion in 2014. The hotel booking giant wrote down OpenTable’s value by a whopping $941 million late last year as the site’s international expansion efforts foundered, but it says revenue is once again growing.

Nonetheless, as it approaches its 20th birthday, OpenTable is showing its age. Sensing the market leader’s vulnerability, several other booking startups are offering similar promises of sleeker technology and lower fees. Today, two New York-based systems, Resy and Reserve, are reeling in customers and millions of dollars in venture capital. Review site Yelp has also debuted its own reservations system.

These online reservations services face another challenge: Two-thirds of reservations are still booked by phone.

Kokonas doesn’t shy away from the fight. “Resy, Reserve, Yelp and OpenTable’s back ends are copies of each other,” he says. “They’re all affiliate marketers who are competing on price. I’m not interested in that.”

Kokonas and co-founder Fitzpatrick say they take issue with the often-murky world of affiliate marketing, in which restaurants pay a commission to OpenTable for reservations generated from its site. They say OpenTable is bad for both its restaurant clients and the 23 million-plus diners who make a reservation through it each month.

Here’s why: If you have a hankering for Mexican in Logan Square and do a Google search for, say, “Quiote reservation,” the first link to pop up is OpenTable, because the company has paid for a ton of search advertising to optimize its results. If you book the reservation through that link, OpenTable earns a buck per person. If you make the reservation on Quiote’s own site, using the embedded OpenTable widget, OpenTable gets only a quarter per head.

Because of OpenTable’s SEO domination, restaurateurs say, they pay crazy-high fees. That would be fine if the system was unearthing tons of first-timers—paying for customer acquisition, of course, is an accepted cost of doing business. But because most people don’t save a restaurant’s number in their phone, regulars wind up Googling time and time again and reserving through OpenTable’s link instead of the restaurant’s. Proprietors, then, are constantly paying a 300 percent markup—which sometimes translates to tens of thousands of dollars a month—to lure in customers they’ve already won.

Customers, meanwhile, must put up with clunky technology and higher prices as restaurants pass along OpenTable’s fees. They also may encounter the frustration of having a reservation but still being forced to wait at the bar for an hour or more, because restaurants overbook by as much as 30 percent to offset no-shows, a problem that Tock’s prepaid option virtually eliminates.

“I didn’t leave (Google) because I was sick of it,” says Fitzpatrick. “I left because finding a (reservation) solution that’s good for the restaurant and good for the guest is hard and it’s important.”

He and Kokonas say Tock offers a more honest way to make a reservation that’s cheaper for restaurants, while giving users a chance to discover interesting new restaurants or pop-ups via its content-rich site.

Tock charges the same amount of money whether a person reserves through its own site or the restaurant’s. The system makes money in different ways: through a fixed monthly fee, a set percentage of prepaid reservations and a portion of the credit card “swipe fee” when customers enter their information to prepay for a reservation. (Tock’s cut of the fee was negotiated with the card companies and is not passed along to restaurants or customers.)

“The restaurant business is exceptionally hard with exceptionally slim margins and managers who can be exceptionally particular,” says Brett Goldstein, a Chicago tech veteran who ran OpenTable’s IT department until 2006. “That said, the team at Tock has enormous technical talent and great restaurant knowledge. I’m very curious to see where the next couple of years take it.”



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