10 Things Investors Need To Know Before OpenTable's IPO


Online reservations-taker OpenTable IPOs tonight. Dan Frommer reported the topline numbers earlier today:

Back when it first filed for its IPO back in February, Brooklyn-based tech analyst Jonathan Wegener took a more in-depth look at the startup.

From that post, “OpenTable and Restaurant Marketing” we learned 10 things every investor needs to know about OpenTable.

In Jonathan’s words, they are:

  • OpenTable makes their money from restaurants that pay a one-time installation fee for reservation software/hardware, a monthly subscription fee, and a fee for each restaurant guest seated through the service.
  • OpenTable charges $0.25/diner booked via the restaurant’s website and $1/diner booked directly through opentable.com
  • 57% of diners book via opentable.com, and the remaining 43% book via the restaurant website. This tells us about the value of OpenTable as a marketing tool: being part of the OpenTable network yields roughly twice as many online reservations as a stand-alone solution.
  • Across 8,090 member restaurants, the average restaurant pays OpenTable $515 each month.
  • This $515 consists of $281 in monthly subscriptions charges and $234 in monthly reservation booking fees.
  • For the average restaurant, OpenTable fills 345 seats monthly or 14 daily.
  • OpenTable has mainly concentrated their international efforts in Germany, Japan and the United Kingdom. International business represents a mere 5% of total revenues.
  • The average international restaurant spends less with OpenTable per month ($315 versus $515) and pays substantially more for each customer ($5.29 versus $1.49).
  • OpenTable operates very profitably within the US — $6.7M profit on $39M revenue, a 17% margin.
  • The average restaurant spends $515 with OpenTable and gets 345 diners each month, so the true cost of the service is closer to $1.50/diner.  But 43% of OpenTable bookings come through the website of the restaurant. These customers exist regardless of whether the restaurant is subscribed to OpenTable.  The real value that OpenTable delivers, therefore, is the 197 NEW customers generated due to the marketing exposure on opentable.com.  Restaurants are really paying $515 to gain 197 new customers, which comes to $2.61 per customer.

Go read “OpenTable and Restaurant Marketing” for a more in-depth explanation >

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