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At Montreal’s Garde Manger, hostess Olivia Lebel works with an app that matches diners looking for a table at the last minute with restaurants with cancellations. (Christinne Muschi for The Globe and mail)
At Montreal’s Garde Manger, hostess Olivia Lebel works with an app that matches diners looking for a table at the last minute with restaurants with cancellations. (Christinne Muschi for The Globe and mail)

Turning tables: How technology is shaking up restaurant reservations, and profits Add to ...

It is not yet seven o’clock on a frigid Friday night, and there is already a lineup at Pizzeria Libretto. All the tables at the hip Neapolitan-style restaurant on Ossington Avenue in downtown Toronto are spoken for. Standing in small clusters, hopeful diners scan the room, eyeing other people’s plates.

“You’re kidding. Wow,” one woman responds when told her wait will be about 45 minutes.

Friendly hostess Meg Walters works the phone, explaining to two callers in a row that they cannot make reservations. I ask her whether people unfamiliar with the policy are ever annoyed with her. “All the time,” she says.

This is the tension that lies at the core of many restaurants: the desire to cater to customers while confronting the basic fact that filling seats through reservations is wildly inefficient. To cope, some restaurateurs have placed time limits on reserved tables, juggled walk-ins, and even overbooked to try to protect themselves against no-shows that sap revenue. The average rate of no-shows for a typical restaurant is around 15 per cent.

Now, many restaurants are scrapping reservations altogether and adopting novel practices to attract customers and keep their tables full. These measures include issuing tickets for tables, charging variable prices depending on the day of the week and using apps and other technology to manage seating. It’s something of a revolution in an industry that was worth $24.9-billion last year in Canada alone.

A short walk away from Libretto, its sister restaurant Enoteca Sociale does a mix of walk-ins and reservations. The average cheque at Libretto is roughly $25; at Enoteca, it’s almost double. But when owner Max Rimaldi evaluates which makes more money, there is no contest. No-reservations comes out on top.

“For us, Enoteca is a labour of love. It’s about wine, it’s about our trips to Rome, it’s about our love of homemade pasta,” Mr. Rimaldi says. “Libretto smokes that out of the water in terms of profitability.”

Libretto takes great care to make the no-reservations system as painless as possible. Hostesses are unfailingly polite to waiting diners, recommending nearby spots to have a drink while they wait, and alerting customers the moment their table is ready. And while the atmosphere is casual, waiters are meticulously trained for high-level service once people sit down.

Still, when one is waiting more than an hour just to be seated for dinner, it can be hard not to wonder: How much is my inconvenience worth to the restaurant?

A lot, actually. Restaurants that take reservations can “turn” their tables an average of 1.5 to two times per night, three if they’re hopping. A place that takes walk-ins only, on a good night, can see as many as four turns. Some restaurateurs estimate that’s a 20- to 25-per-cent difference in revenue, for those popular enough to pull it off.

At Espana in Vancouver, a small tapas restaurant with 39 seats, a busy Friday or Saturday night can yield up to 170 “covers” (industry lingo for customers served), according to owner Ed Perrow. Even if reservations were completely booked for three seatings, that number would still only reach 117. That’s because, with no lag time waiting for the next reservation to show up, the restaurant can fill a table the moment it’s free, and serve more people over all.

Even 117 is an optimistic number: nights when all reservations show up on time are exceedingly rare. No-shows are a drain: Tables that sit empty bleed revenue. That makes a big difference to those operating on thin profits in an industry where 10 per cent is typically considered a good margin.

“A restaurant says, ‘Yeah, we’ll have your table ready,’ and a customer says, ‘Yeah we’ll show up,’” said Nick Kokonas, co-owner of restaurants in Chicago, including the three-Michelin-star rated Alinea. “And there’s a really good chance one of the two people is lying.”

Mr. Kokonas began experimenting with selling tickets for meals in 2011, when he and his business partner, chef Grant Achatz, opened Next in Chicago. The system was so successful, they soon started using it at Alinea. Others in Chicago and L.A. began testing it as well.

Tickets can be the price of the full meal, paid in advance (that’s how it’s done at Alinea), or a deposit that goes toward the customer’s bill (as at the Aviary, a cocktail lounge and restaurant also owned by Mr. Kokonas and Mr. Achatz).

“Putting down a $20 [U.S.] deposit takes no-shows down to almost nothing,” Mr. Kokonas said.

The software he built to manage the tickets has now spun off into its own business, Tock, which launched late last year. It has 16 pilot restaurants, and the renowned Per Se in New York and the French Laundry in California have both signed on to use the full version when it launches soon. Twitter CEO Dick Costolo is among Tock’s investors.

Other recently launched apps, such as Resy and Table8, also offer ticketing systems for restaurants.

Of course, Alinea has lines of customers angling to book tables months in advance – they once had so many phone calls, it took down the entire 312-867 telephone exchange in Chicago. Some doubt that ticketing will work for everyone.

“My only worry – and Nick, I’m sure, has 10 pages of spiel to counter this – is that it’s very hard to do at a lower end or moderate restaurant,” said Hugh Acheson, a Canadian-born and Athens, Ga.-based chef, author and restaurant owner. “[Diners] still have to plan that event as a spectacle. That’s not why, I think, people generally eat out.”

Mr. Kokonas disagrees. The Aviary is not an event the way a meal at Alinea is. But before it used tickets, the no-show rate on reservations was 11.8 per cent. Now, the seating is half tickets and half walk-ins.

The no-show rate has fallen to 1.4 per cent, and revenue is up 22 per cent. EBITDA (earnings before interest, taxes, depreciation and amortization) has doubled. The ticket penalty is lower than at Alinea,which Mr. Kokonas believes could work at a variety of restaurants: The deposit is usually $20, and higher on in-demand nights such as Friday and Saturday.

At Alinea, among 20,050 diners served in 2013 using ticketing, there were just 302 no-shows, and the restaurant still got paid for those tickets. At Next, 23,288 people dined in 2013, with 364 no-shows. Like at Alinea, these were mostly parties who showed up with fewer people than they’d booked. Just five full tables in the entire year did not show up at all.

Mr. Kokonas has also been experimenting with variable pricing. After all, why should dinner at off-peak times, such as on a Tuesday night or 5:30 on a Friday, cost the same as 7:30 on a Saturday – any more than tickets in the nosebleeds at a concert selling for the same as front row centre?

“It’s not just for chef-driven, small places. I actually think it’s more interesting to say, here’s a restaurant that’s not always full: Will shifting their pricing at low-demand times actually drive business?” Mr. Kokonas said. “The experience we’ve seen is a resounding yes.”

Technology has already modernized the reservations process, most notably through the online service OpenTable, which for a $249 monthly subscription, manages reservations on behalf of restaurants on its website.

That’s much cheaper than Mr. Kokonas’s system, which charges participating restaurants $695 a month. However, that system does not charge per ticket sold. OpenTable charges an additional $1 for each reservation booked through its site, and 25 cents for each booking through a restaurant’s website that embeds the OpenTable system its online booking. (In Canada the rates are $1.25 and 30 cents, respectively).

There is an opportunity cost in accepting non-guaranteed reservations: OpenTable, like traditional phone-in bookings, is vulnerable to no-shows. Tickets insulate restaurants from that risk.

Keeping people waiting can also be good marketing.

“Being in a busy restaurant, there’s a feeling that they are in a hot spot, and they feel cool,” said Colin Bowers, co-owner of Foxley in Toronto. “It’s a huge marketing tool.”

Changing consumer attitudes have opened the door: for foodies, dining is seen as entertainment in itself, that some will wait for.

Partly, this depends on the type of diner. At his restaurants Patria and Weslodge, Amin Todai says the slightly more sophisticated crowd wants certainty that they will not have to wait. But at two other Toronto places he owns, which are walk-in based, Home of the Brave and taco restaurant La Carnita, the crowd is younger, and the vibe is more relaxed.

Some people enjoy the civilized languor of having a cocktail at one place before dining at another. And a lack of reservations does not necessarily equate with a lack of service.

No-reservations advocates argue the policy builds trust with customers.

“There’s this intrinsic classism involved in who’s got the wherewithal to make a reservation at the right time – or pull because of who they are or what their name is – and suddenly the 8 o’clock reservation nobody can get opens up because somebody knows so-and-so,” Mr. Acheson said. “Dispelling some of that is, to me, a nice thing.”

Mr. Kokonas believes tickets address this issue, because they are transparent about availability. He is upfront about holding back tables for last-minute requests from VIPs, press, regulars, and friends. If the spares aren’t filled, his restaurants offer the equivalent of rush tickets to the theatre, selling same-day tickets via social media.

For some, walk-ins eliminate the option for people to bump the line at all.

When it opened in Vancouver in 1994, Vij’s was one of the first critically acclaimed restaurants in Canada to take only walk-ins. At the time, owner and chef Vikram Vij thought the average wait time would be 15 to 20 minutes. Now, it can be as long as two hours.

He occasionally takes flak for it, but Mr. Vij argues that it’s a more egalitarian system. “I never made an exception. Never did I say to anybody: ‘Oh you’re a friend of mine, I’ll get you ahead of everyone else.’ People felt I was going to be honest,” he said. “When my father comes, he waits like everybody else.”

Technology has changed the efficiency of walk-ins, as well. At Libretto, Ms. Walters taps an iPad to check on her wait-list with the OpenTable-owned app Rezbook. The screen shows a floor map. Each table displays the time the diners sat down, and is colour coded by current status– blue for occupied, grey for open, and light green for those close to paying their bills.

The app also shows the waiting list, with the number of minutes each party has been waiting, beside the estimated wait they were quoted. The numbers turn red when a party is coming close to exceeding that estimated wait. A few taps and the app sends an automated text telling them the table is ready. Just a few years ago this was all done with pen and paper, and the hostesses had to take their attention away from the door to call each party.

Some restaurateurs are exploring how technology might provide a better way than asking people to wait.

“When you spend enough time in restaurants, you see how much misuse of demand happens,” said Kyle Nares, an owner of Le Bremner and Garde Manger in Montreal. “There is this negative feedback loop, where people are forced to book so far in advance because it’s the only way they can secure a table, and then by default, their plans are going to change way more often, because they had to book so far in advance.”

Mr. Nares’s solution is DINR, a mobile application that has 14 partner restaurants in Montreal, all well-regarded places with a good level of demand. They tend to be smaller places – between 40 and 90 seats – where there is little room for error because of their size. (A no-show on a table is a much bigger percentage of that night’s business than at a large restaurant.) The app offers only same-day reservations (that open up because of cancellations, for example, or because a restaurant has held back some inventory and finds day-of that it is not needed). Diners can use the app to snap up those tables, and agree that if they don’t show, it will charge their credit cards a $30 fee.

If plans change, users can cancel up to one hour before the reservation with no penalty at all. The table would then go back on the app.

This system circumvents some of the criticisms of ticketing – namely, that it makes booking a table too much of a production, by allowing for spontaneity and last-minute planning.

Launched late last year, with some further testing, DINR could expand to other cities.

“We didn’t have the technology to match-make before. Up until a few years ago, it was impossible, what we’re doing,” Mr. Nares said. “The lineup thing is great for the restaurant. I’m not convinced it’s great for the diner.”

Restaurant history

In her book The Invention of the Restaurant, historian Rebecca L. Spang traces the history of the business to the 1760s in France. The first restaurants were different than inns because their menus offered a variety of broths favoured by “the sophisticated urbanite” – as opposed to “the coarse worker capable of digesting whatever was placed before him.”

Reservations came into being largely in the 19th century, when tables or rooms could be reserved for diners, Prof. Spang said in an interview with The Atlantic in July.

A sort of “competitive consumption” arose after the Second World War, she further explained, with guidebooks and restaurant reviews helping to determine the hot spots – where, subsequently, a reservation became difficult to acquire.

For decades, most restaurants of any quality took reservations. Walk-ins were the realm of diners and fast food. Since the late nineties, however, many businesses have moved away from that system.

In the past 10 years in particular, the trend has accelerated. Now, a restaurant’s popularity can often be measured by the stories foodies tell their friends about enduring two-hour waits.

Former restaurant critic Joanne Kates pointed to this change in her farewell column in this newspaper: “The new restaurants mostly have unfriendly reservation policies (i.e., they don’t do it),” she noted.

By the numbers

$24.9-billion: Full-service restaurant sales in Canada in 2014.

15%: Rough proportion of no-shows – customers who either cancel a reservation on short notice or fail to show up entirely – estimated by the restaurant industry.

20% to 25%: Estimated revenue bump a busy restaurant receives from allowing walk-ins only, rather than reservations.

10%: The profit margin restaurants aim for. At 30 per cent margins, a place would be “killing it,” according to one restaurateur.

35%: Common proportion of revenue that goes toward the cost of goods.


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