Online table reservation and menu-Order service BUAD 307
Online Restaurant Table Reservation and pre-order meal service:
Secondary Market Research
The online restaurant table reservation and pre-order meal service would allow users to reserve tables at upscale restaurants and also pre-order from the menu at the same time.
Online use of restaurant table reservations
For restaurant enthusiasts, busy administrative assistants, and other people who need to make table reservations, online restaurant table reservation services such as opentable.com are a valuable service as it allows the consumer to make reservations at select, upscale restaurants online without having to look up phone numbers or make calls. While such a service lacks the romance of taking a leisurely stroll downtown to gaze at posted menus and sniff the aromas seeping out onto the street, it is convenient and saves time and hassles for a variety of other people who frequent upscale restaurants. For example, online restaurant table reservation services enable a customer to make multiple reservations in multiple cities. This comes in handy for traveling businessmen and the people responsible for making reservations for them. It also helps if one wants to reserve a table at a popular restaurant at a popular time or on a popular day, such as Valentine’s Day.
Opentable.com has enjoyed great success from its inception in 1999. As of 2000 over 350 restaurants in eight cities used Open Table’s services (Andrews, 2000). According to a 2010 article in the New York Times, it has become so successful that many of the restaurants that use its service have become a bit resentful (Stross, 2010). OpenTable, valued at over $1.6 billion, charges the restaurants that use it an $650 fee to set up and then a monthly charge of about $270 for the terminals and table-management software (Stross, 2010). In addition, there is a reservation fee of $1 per customer, so opentable.com averages about $635 a month from each of the restaurants that use its service, the company told the New York Times in 2010 (Stross, 2010).
In the 12 years since it started, OpenTable has grown from being in over 350 restaurants to being used in 13,000 restaurants in the United States that accept reservations (Stross, 2010). In addition, several other businesses offer similar services, like RezBook and Urbanspoon.com.
Online food ordering
Unlike online table reservations, used primarily by upscale restaurants, mostly fast food and casual dining restaurants use online food ordering services. Some chain fast food restaurants like Dominos and Pizza Hut have their own online ordering service. Other services such as Delivery.com and CampusFood.com provide online ordering services for local take out restaurants for people to order food that will either be delivered or picked up, depending on the customer’s preference and the restaurant’s offering of delivery services. While many fast food restaurants were already set up to take orders remotely, by phone, the transition to online ordering has not been as popular. According to Mary Ellen Guffey in her book Business Communication: Process and Product a representative from a pizza franchise said that out of the 145 orders he received, only five were made online and the rest by phone (Guffey, 2010). Also in her book Guffey pointed out that another pizza franchise estimated that it only 10-12% of its business came from online orders (Guffey. 2010). Concerns about sending private information over the Internet and the general quickness and ease of phone orders have also made online food ordering less popular (Guffey. 2010).
Use of technology
According to a 2009 study of generational Internet usage by the Pew Research Center, people between the ages of 18 and 44 make up just over 50% of the Internet using population (Fox & Jones, 2009). And the generation of “younger Boomers” ages 45-54 made up another 22%, so that the population from ages 18-54 makes up three-quarters of the entire Internet using population. The study, called Generations Online in 2009 expected that these numbers would only increase, even among older users, as broadband increases and web technology improves.
The fact that 75% of all Internet users are of working age bodes well for a restaurant reservation and pre-order menu service, as it is likely that most customers of Open Table and Campus Food are between the ages of 18-54. The proclivity of younger people is to eat in more casual environments as they are cheaper and geared more for younger customers. Conversely, older people have more disposable income and less tolerance for the fat and cholesterol frequently found in fast food. An online service that caters to upscale restaurants such as Spagos may attract more young customers who are used to ordering food online. Such a service would also appeal to younger diners who are unfamiliar with gourmet cuisine but too intimidated by the snobby waiter’s attitude to ask questions. Additionally, being able to order food online as well as make a reservation would appeal to people who have difficulty with English.
The concern is that despite the high percentage of adults using the Internet, most of an age in which upscale restaurants appeal, few of them use the Internet to order food. According to the Pew Research study, while up to 80% of people ages 18-54 will shop online, far fewer, according to Guffey, will buy meals online (Fox & Jones, 2009)(Guffey, 2010). According to Guffey, only 10-12% of all Internet users will shop for meals online (Guffey, 2010).
The technology for an online table reservation and pre-order menu service would be fairly easy to develop as such devices, either in the form of software or online communication, already exist. In fact, according to the New York Times Open Table and UrbanSpoon have launched iPhone apps for their services, making it even easier for customers to make reservations. In addition, people ordering food online can easily access Campus Food, Pizza Hut and other online food services through the Internet connection on their smart phone (Stross, 2010). And this technology is not new. A 1998 article in Food Technology touted the use of silicon chips creating programs for ordering food online (Hollingsworth, 1998).
Given the robust market for online restaurant reservations and the flabbier online food ordering service, it seems feasible to focus the business on the reservation end. However, several companies already have a firm hold on the majority of this market, Open Table being the largest shareholder to date. Another fact to consider is that most users of restaurant reservation services are already savvy online shoppers that do not have the same fears about leaving their credit card number online as people who would order fast food online.
As this combined reservation pre-order service is already in use in some Asian countries, the most likely customer for this service would be an Asian businessman or woman who travels frequently and holds business meetings at restaurants frequently. However, the pre-order aspect of this business would be awkward. Usually, when a businessperson agrees to meet a client, the two agree upon a specific restaurant and a specific time, but leave decisions on the meal until they are seated at the restaurant. The pre-order option would appeal more to secretaries, administrative assistants or event planners who are charged with making dinner arrangements for a fairly large group of people. In this case, the site would have an option that allowed fellow diners to log in to the reservation and post their orders ahead of time. Such an arrangement may also appeal to wedding planners and other people charged with arranging large events in restaurants and hotels.
As the market for this product will only appeal to a small segment of the restaurant dining population, it is important to target marketing toward specific audiences. One way of marketing would be to do what many online textbook ordering companies do, which is to hire representatives in the form of fellow students to market online textbook ordering companies (Carlson). Rather than spend money mass marketing this service, it would be more effective to hire sales representatives who are familiar with event planning, wedding planning, and planning for conferences, and to have these people meet with professional planners to describe the product and its advantages. In addition, just as the online textbook representatives offered free meal tickets and other incentives to people who ordered books online (Carlson), sales representatives for the online reservation and pre-order menu service could offer discounts or deals at the restaurants (the latter with permission from the restaurant). As more restaurants find themselves attracting larger parties, more would be likely to offer deals to online customers.
Despite the popularity of online restaurant reservation services, a service that provides both online reservation service and pre-menu ordering will not appeal to the majority of people who use online reservation services or who order food online. This is because the service is geared for higher priced, upscale restaurants that provide, for a great price, atmosphere. Part of the atmosphere of dining at a fancy restaurant is the process of ordering food. Many people who choose to eat at upscale restaurants consider themselves gourmets who enjoy showing off their knowledge of fine food by ordering dishes using correct French pronunciation or by knowing the difference between flambe and flame-broiled. To have the meal pre-ordered takes away the excitement of interacting with fellow foodies or people who enjoy such dining experiences. In addition, no online reservation service can routinely offer diners with table selection or other fastidious details that a live hostess or waiter can.
However, this service could appeal to event planners and people who are responsible for organizing and arranging meals for large amounts of people. By allowing people to order online, conference and other large event planners may be able to provide more flexibility in the menu offerings and hasten the ordering process by having drink, appetizer, entree and dessert choices in hand instead of having to collect even pre-ordered orders once again.
Expanding the market
Another option for this kind of service is to use it as an advertising vehicle for tourist sites and chamber of commerce web site. The site could then expand its offerings to less upscale restaurants, but serve more as an online advertising vehicle than as a service vehicle. An online service that is already used in this manner is online service information for families who are visiting different places. Offering a link to this web site on chamber of commerce web sites and tourist advertising web sites. Families visiting in new places can use this service to make reservations at a restaurant and preview the menus and make orders before going to the restaurant. In this way, parents bringing their children to family restaurants could pre-order their dinner so that they do not have to wait a long time for their meal at the restaurant. In this way, families can still enjoy a meal out without having to contend with entertaining their children while waiting for a waitress to arrive to take orders and then wait again for the food to arrive. Such extended waits for families with young children is a significant deterrent for families to eat out.
The idea for this business is feasible for a number of reasons. First of all, the technology to execute such a business has already been developed and with just a little work it can be integrated onto one network. Several web sites already provide table reservations services online and allow the ability to order food to be delivered or picked up. The start up costs are minimal, most efforts should be directed toward finding feasible markets for the product, examining current offerings and exploring ways to tweak the online or ordering aspect of the business to make it competitive in both the online reservation and the online food ordering market. The business would also appeal to restaurants as the advance alerts to the restaurants would allow them to plan for ordering supplies more accurately and plan better for staffing. Knowing that such a service would enable them to save money, plan more efficiently and increase their image by providing advertising in advantageous places.
Such a business at this moment may not seem like a slam-dunk success as there are dominant players in the online restaurant reservation business and the online food ordering business has not taken off in the way that had been hoped. The primary users of such a service, people between the ages of 30-54, are less inclined to use the internet for uses other than shopping and information than younger, more tech-savvy teens and young adults. In addition, the current technology will undergo improvements as users give them input for possible improvements.
Implications of Research
The research indicates that the market for online is doing well with two significant players doing well. The market for online food ordering appears to be less successful as people still prefer to order food online with a phone. There are many factors that would lead to the success of this business. There is technology that is already developed, a maturing population that is increasingly tech savvy. It appears that with tweaks to the technology and improvements that would allow more flexibility for patrons, it would be more popular.
As today’s teens graduate from college and enter the working world, they will bring their tech-savvy sensibilities to every aspect of their lives, including eating out. Younger consumers, already used to turning to the Internet for a variety of purposes, from entertainment to communication and socializing, will feel less squeamish toward using the Internet to reserve a nice table and order a good meal.
Andrews, Whit. (2000). OpenTable.com. Internet World 6.8: 32
Carlson, S. (2000). Internet Booksellers Rely on Low-Tech Legwork of Student Representatives. The Chronicle of Higher Education. 46.26
Fox, Susannah & Jones, Sasha (2009). Generations Online in 2009. Pew Internet & American Life Project.
Fox, Sasha & Vitak, Jenna. (2008). Degrees of Access. Pew Internet & American Life Project.
Guffey, Mary Ellen (2008). Business communication: Process & product, Sixth Ed. Mason, OH: South Western Cengage Learning.
Hollingsworth, P. (1998) “Silicon chips: food trend for the new millennium. Food Technology 52.12
Horrigan, J. (2008). Home Boardband 2008. Pew Internet & American Life Project.
Madden, M. & Jones, S. (2008). Networked Workers. Pew Internet & American Life Project.
Meehan, P. (2005). The Mouse That Ordered in. New York: New York Times.
Pantelidis, I.S. (2010). Electronic Meal Experience: A Content Analysis of Online Restaurant Comments. Cornell Hospitality Quarterly 51.4: 483-491.
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Stross, R (12, 2010, 12) the Online Reservations That Restaurants Love to Hate. New York: The New York Times.
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Wortham, J. (2010). Urbanspoon Squares Off Against OpenTable. New York: The New York Times.
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