Why Don’t Restaurants Charge for Reservations?
priceonomics.com
priceonomics.com
There was a restaurant that everyone in college in Vancouver went to back in 1993-1994, Antons Pasta, and you always had to wait incredibly long for - the place was packed 100% of the time at night.
I would see this line (fresh from my economics class), and wonder, instead of charging $5 for the tortellini, and have a 3 hour line, why don't they charge $5.50, or heck, even $6.00, and only have a 1 hour line. It's not as though having a 1 hour line is going to result in any lost business.
I'm thinking that part of this is the fact that a long line outside, means there will always be business inside, and there is always some paranoia in a restaurant of having empty seats inside, and better to have slightly missed profit opportunity, than to have some seats go empty and make a "reasonable" profit.
That's the only theory I could come up with.
It's probably a short-term profit to have the restaurant charge more and to have shorter lines, at the expense of foregoing the free/best publicity possible long-term.
I see further down that Antons is still in business, and still has a line - so perhaps we shouldn't second guess them - apparently they know what they are doing.
Many restaurant owners (and I know a couple) are quite happy to earn enough to live comfortably, and to be - for want of a better term - a cultural hotspot. I bet the owner of Anton's Pasta loves that his restaurant is that popular.
Isn't this also the case for most tech startups?
"Why don't restauranteurs maximize their profits? They're leaving money on the table," said Alice.
"They don't maximize their profits because, if they did, they wouldn't be running a restaurant in the first place. The fact that so many of them end up destitute is proof of that," replied Bob.
That seems to me more like a reaffirmation than an explanation. Doesn't it still seem mysterious when you put it that way?
If the market for restaurants were far from competitive (due to say, a law sharply limiting the number of restaurants in a town) I could understand that sort of attitude. It seems to me, though, that even though there's a lot of product differentiation, there are still many restaurants per cuisine type in every major city and ultimately, a meal is a meal. We should be able to learn something by granting that the market is competitive. So that in the long run marginal revenue equals marginal cost, and firms that can't do that, exit.
Given that, why are so many restaurants run as labors of love according to principles that would make a freshman econ major wince? And does that explain why so many restaurants that are run that way are run into the ground? Doesn't this state of affairs (which is pretty much public knowledge to anyone who's ever had a friend who worked in a restaurant) imply the existence of a large stack of $20 bills on the sidewalk for a profit-maximizing restaurant to swoop in and pick up?
That question isn't rhetorical; I find restaurant economics genuinely confusing, to the point where I am willing to believe that the most parsimonious explanation involves legions of chef/owners irrationally blowing their credit ratings on a mid-life crisis. A mid-life crisis with waitstaff and sanitation permits.
The original paper: http://www.unc.edu/~fbaum/teaching/PLSC541_Fall06/Becker%20J...
Yes, as long as you cancel more than 48 hours before the reservation.
(b) On the other hand, popular and in-demand restaurants already have schemes for letting rich and/or important people get reservations ahead of the plebs. When I went to French Laundry (after a six-month odyssey to get a reservation) the waiter mentioned that only about half their tables are actually open for reservation by the ordinary scheme, the others are reserved for booking by other means. If you're a rich dude who likes to bring clients there and always buys the expensive wine, you'd better believe that they're gonna give you the number for their secret reservation hotline.
In terms of the share of U.S. income going to the top 10% or 1%, the data would seem to imply that the U.S. is currently the most stratified it's been in over 80 years [1].
[1] http://economix.blogs.nytimes.com/2013/09/10/the-rich-get-ri...
Terrible, cringe-worthy logic.
If stratification still exists, whether or not it is of a lesser degree than in the past is irrelevant. It exists, and you can complain about it. In fact, if you don't complain about it, that may be misconstrued as implicit acceptance. So complaining is actually the better move, provided you actually want said stratification eliminated.
Think.
But perhaps I shouldn't be surprised people don't think of this, what with them not loving their family enough, etc.
Aside: in central London, booking is essential. Many decent (not even high-end) restaurants have most of their tables booked in advance. I did a double-take the first time I walked into a place with two-thirds of its tables empty and was turned away. "Fully booked" seems a lot more common there. I never knew a restaurant to charge for booking, but I did know people who paid "unofficially" to get tables, or had office assistants scramble for them.
I've heard about restaurants wanting charge for reservations by "prepayment of the meal", and it's somewhere I wouldn't go to.
"Alicia’s reluctance to user her and her restaurant’s name suggests one reason: customers are very sensitive not only to prices but to the perception of a rip-off."
Exactly
Amongst their peers, chefs are more interested about their fame than their pockets.
Personally, I would not... I imagine that is why.
If you believe you can execute it, go for it.
If you have a restaurant that will always have a permanent line waiting on tables, then maybe you could charge. But it would be easier to hide that cost in the bill.
Reservations force tables to remain unoccupied, and even when they're occupied, diners feel no need to rush to make room for the next set of diners since they reserved their time slot. A restaurant that's not popular enough to fill up completely doesn't need reservations, and one popular enough that they have to turn away people is losing money accepting reservations. So, why do so many restaurants do it?
"Arrive at 8 and be seated by 8:10" is a different thing than "Maybe you'll get a table".
I've been to restaurants that don't take reservations, and instead take a wait-list. It took something like 3 hours of waiting to get a table.
I could never go there for a client or investor dinner, because the unreliability of the table timing means I can't schedule it in. Considering a meeting like that is worth tends of thousands of dollars and requires that people with busy schedules all be around at the same time, I don't mind the extra $50-100 a person meals at those places tend to run.
tl;dr: They do charge a reservation premium, it just gets mixed in to the food expense rather than being a separate item. Additionally, people scheduling tend to bring large parties or are there for special events, which tend to spend more money.
And it's worth noting that a reservation is valuable even if there isn't always a wait. Unless the customer is a regular, he's unlikely to know what the wait would be like in the first place, and things vary depending on the day and time. A reservation removes that uncertainty for the customer, which is valuable even if a reservation wouldn't have been required.