The company was started in 2014 by Gary Vaynerchuk, Ben Leventhal, and Michael Montero. The company is privately owned and is not required to disclose financial information. However, in 2016, it’s estimated that they had 1,000 restaurants signed up. Even at the lowest subscription price point, that would be an income of $89,000 per month. The three tiers in price are $89, $399, and $899 per month. If you took an average of those prices, $462, that would amount to $462,000 per month, just on restaurant subscriptions. That does not include any of the revenues generated from patrons.
How the Company Started
Vaynerchuk was on the phone with his brother. The brother and their mom were going out to dinner in New York City. They had previously called for a reservation. When the brother and mother arrived at the restaurant, they were told it would be a 40-minute wait.
The brother started using his cell phone and the host panicked, thinking he was writing a bad review on Yelp.com. After a few moments of the host speaking with the manager, the brother and mother were instantly seated.
This restaurant experience with Vaynerchuk’s family sparked an idea that restaurants are overbooking, and wanted to come up with a way of reducing this problem. They do this because patrons often hedge their bookings with multiple restaurants and then make a decision at the last moment, leaving the restaurant with an empty spot.
The company received seed capital in 2014 of $2 million. Vaynerchuk was one of the principal funders along with six other venture capitalists. The company received another round of funding of $13 million. Airbnb was involved with that funding round.
The concept involves paying to play. Patrons reserve a spot and pay a fee for the reservation. When they have to pay, their expectations are going to be high. They will expect better service and better food.
While Vaynerchuk believes a saturated market is good for all the players, it makes it more difficult to compete. It becomes a race to the bottom on price. When this happens, there is no pricing power left.
The concept could drive away customers that refuse to engage in a pay-to-play scheme. These are customers who would have been willing to wait (and buy drinks during the wait). It’s possible to lose that revenue stream because these customers won’t come back.
While the concept works well in large cities like New York, restaurant patrons in smaller communities may not be so willing to pay to play. Reservations are not that difficult to get in many of these communities, so a service like Resy.com would not be needed. This makes scaling the service challenging.
As the concept catches on, will there be a secondary market for selling reservations made on the system? It’s not hard to imagine finding listings on eBay (or some other venue) with inflated prices.
This sets up the market for intermediaries who will mark up bookings. If this happens, and intermediaries are not able to sell the reservations, no shows at restaurants will likely increase.
Why it Works
If you have any familiarity with the internet business, you will have heard about Gary Vaynerchuk. He has been responsible for several successful online business start-ups. He is also a venture capitalist in his own right. Ben Leventhal is a well-known entity in his own right.
As the concept grows, more restaurants will want to be a part of the network. The company charges restaurants a monthly fee to participate, so this is a recurring revenue stream.
The concept helps participating restaurants reduce the occurrence of patrons not showing due to booking at multiple restaurants, then deciding at the last minute to go somewhere else.
The app is geared towards customers who don’t want to wait to get into their favorite restaurants, and are willing to pay for the privilege to be seated immediately upon arrival.
The concept works well with business travelers who take out clients to gain business. They usually have large budgets and will use the service to get into the premier places that wouldn’t be available had the app not existed.
Airbnb likes the concept and fits well with their service. Since they are the lead principal in a recent funding round, this will help Resy get noticed as it’s likely Airbnb will incorporate the app for its guests.
Participating restaurants will help promote the service, especially since they will get part of the fee the customer pays to use it. This can help cover the cost of the service, and if they get enough customers, may even make money from it. The restaurants negotiate the percentage of the fee they will receive from what the customers pay.
Other hospitality vendors like Airbnb, will jump on board if the concept catches on. They too will add to the promotional mix, as they can use it as part of their service offerings. It’s not difficult to imagine a Maitre D or greeters using the app to book reservations for their guests.
Over time, Resy will capture valuable information about patrons. They can use this information to cater to the patrons in cooperation with the restaurants (POS data and CRM).
On the Google Play store, there are recent negative reviewers. Many of the reviewers are claiming the app is not intuitive and has many bugs. Some reviewers stated that they set up for the alerts, but were never able to get a reservation even though they immediately responded.
Other reviewers say the app does not compare with OpenTable’s app. They feel OpenTable has a better interface and is more feature rich.
If the app was new, you could understand it having some growing pains. However, it is three years old at this point. It seems as though those problems should not exist. It is something the company will need to address.
It’s interesting that there aren’t too many reviewers on the Apple iTunes store. It’s unclear why this is the case. There are two reviewers, one who loved it and gave it five stars, and the other who said the app won’t update nor can you delete it.
Resy displays reviewers’ ratings when booking the reservation. These reviews come from third-party providers such as TimeOut.com or Yelp.com. This helps patrons decide if it’s worth it to make a reservation.
On Glassdoor.com, which allows employees of companies to rate the companies they work for (anonymously), there is one review at 4-stars with a favorable recommendation overall.
Lessons Learned By The Business
- Resy only chooses restaurants that meet criteria set by the company. They learned from other online reservation systems that letting any restaurant join is not efficient and is not in the best interest of the patrons.
- The company believes it has separated itself from the competition by allowing patrons to have a more intimate relationship with individual restaurants. They do this by making floor plans and seating charts available to the patrons, giving them more choices of where to book. The app can allow patrons to pay for their meals within. This can help the company further refine their data analysis offered to restaurants.
How Other Businesses Can Learn From This
In a highly competitive business, it’s important to stand out. Use whatever strategic methods you can to differentiate yourself from the competition. Often, this means partnerships with companies that are supplemental to your business (Airbnb for Resy).