New York City startup VillageVines launched its private sales for restaurants service this week.
Startups offering discounts at restaurants are popping up every day, so a new company in this space will inevitably draw comparisons to Groupon-like services. VillageVines actually works on a fairly different model, having more in common with two other well-known startups: Gilt Groupe and OpenTable.
VillageVines lets its members make reservations at select restaurants online, like OpenTable. However, it charges $10 per reservation, in exchange for across-the-board discounts (generally 25%-30%), which are automatically deducted from the check. Participating restaurants offer up a fixed number of tables per night, making VillageVines a tool for them to move unused inventory without lowering prices across the board, as Gilt does with designer clothing companies.
This model obviously only works for somewhat higher-end restaurants; at launch, partners include well-known spots like Ouest and Delmonico’s.
The tricky thing about this model is that by its nature, it’s a lot harder to scale than a Groupon, which has ballooned in to a billion dollar company with dizzying speed. The Groupon-companies can generate an unlimited amount of revenue from each deal they offer by signing up more users. VillageVines, by contrast, will only get so many tables from each partner, and needs to keep striking new deals to expand.
On the other hand, Gilt and its many imitators face similar constraints, and it has worked out fairly well for them.