3 Lessons from OpenTable Founder – Chuck Templeton

OpenTable’s success is a hallmark of food and technology. This week I came across a video of Chuck Templeton, Opentable’s Founder, describing the company’s early success. I’ve highlighted three key lessons from the videos. You can check out the entire talk here.

#1: Target The Influencers

OpenTable knew that if it got the hottest, best restaurants on its platform, others would follow. The company was able to land some of the best restaurants in the country, partly because Templeton’s father-in-law was a partner at acclaimed restaurant group Lettuce Entertain You. 

The core value for restaurants, then and now, is the Electronic Reservation Book. But installing the system was not always easy. In one case, they had to pay $4,000 to install a DSL line at the host station at one of the hottest restaurants in San Francisco. But once installed, OpenTable provided great value to the restaurants. The ERB served three primary functions: table management, reservation management and guest management. 

Once he had the best restaurants locked in, the second tier of restaurants wanted to be on the system. The key lesson: get the influencers and others will follow.

#2: Change The Model

OpenTable’s competitors were mostly point-of-sale systems that offered reservation management as an upfront fee. Companies like Micros would charge close to $18,000. OpenTable flipped the mode from an upfront capital cost to a SaaS and hardware model. Here’s how it worked: monthly fee (product upgrades, customer service) + one time installation fee ($1200) + $1 / reservation / diner.

#3: Hybrid Models Allow for Sustainability

It took a number of years for OpenTable to catch on with diners. In the beginning, the revenues from restaurants sustained the business. As Templeton notes, two sided networks are extremely hard. At scale it works, but getting to scale is very difficult.

For example, if OpenTable returned a handful of restaurant search results there was very low conversion. However, with 78 results, there was very high conversion. The hybrid model, monthly revenue from restaurants for the ERB plus the variable cost per reservation made on the system, created an enduring model for the company.