The Restaurant business is huge! It is a $65 Billion per year business with 18 million visitors to Restaurants EVERY DAY, over 81,000 restaurant , bars and cafe’s in Canada which employee a staggering 1.1 million people in this country. These numbers work out to 4% of the country’s GDP and 6.4% of Canada’s workforce according to the Canadian Restaurant & Food Association.
Take a look at the size of the Restaurant Industry Across Canada, as provided by Infographics from the CRFA
It is no wonder that deals, coupons, offers and special promos on Restaurants have always been a big hit with consumers. In fact, Restaurants remain the #1 category for local deals across the majority of Deal and coupon sites. And why not? Saving as much as 50% on a dinner out has proven to be a successful marketing tactic for some Restaurant owners and a great benefit for consumers.
Now, another deal category is becoming more popular in Canada in order to help Restaurants drive customer acquisition. The following services have been popular in the United States but have only recently started to pop up in Canada and we believe that several other high profile services will launch over the course of this year.
- Consumers find Vouchers a hassle
- Restaurant owners find vouchers a hassle
- The margins surrounding Daily Deal Marketing for Restaurants work for some but do not for others. More restaurants are looking for alternatives that the typical “deal-off” voucher or coupon
- Deal & Coupon marketing simply does not work as well in the very lucrative corporate/employee expense sector
- Typically higher end restaurants will not participate in Deal discounting or couponing, thus excluding them from potential inventory for Deal & Coupon marketing companies.
- If consumers make reservations through a Restaurant Reservation service, then they will be rewarded with 20-30% rebate off their bill automatically. No vouchers, no coupons, no apps. The rebate is automatically applied on your bill. (they know because you made reservations through a specific reservation system)
- In the United States, there are many services like this. However, the most popular has been Savored.com. Consumers make reservations through Savored and they receive the stated rebate off their bill. Groupon liked this model so much and the thought of competing within the Restaurant Reservation industry, that they ended up buying Savored. however, the service still runs independently. In Europe, the top service is The Fork.
- In Canada, the first company to offer a similar service was Delicious.ca from the folks at Dine.to. Dealicious is now a marketing partnership between Dine.to and Travelzoo
- Now Quebec’s powerhouse deal provider Tuango has launched a service called Reserva and Tuango’s competitor Vie Urbaine has launched what they call Access Resto. In each case, Consumers received rebates of between 20-30% at popular Montreal Restaurants in exchange for making their reservations on those services. There are no vouchers, nothing to buy, to coupons to redeem.
- The business model? Revenues for these services are based on fees charged to the restaurant for each reservation that is made. Fees vary, but are a few dollars per person. No different than most reservation systems.
- This marketing vehicle is yet another effective way for Restaurants to sell their unused seats at specific times of the day or week.
- the Restaurant Marketing industry is a lucrative one if done right. Restaurants are hyper local businesses that constantly need customer acquisition. Better known restaurants also market themselves as city or tourist destinations. Given the popularity of Restaurants and Restaurant deals and the demand by consumers, will other services across Canada launch their own similar deal-reservation service? Our estimation? YES!
- Also, these deal reservation services or deal provider services or old fashion reservation system do one thing that other Restaurant marketing service do NOT; they bring in customers. Restaurant owners have no time to marketing themselves and , therefore, are more than willing to pay a marketing services a performance fee for bringing in customers as opposed to paying thousands of dollars to yet another business directory or advertising service that just provide exposure. Now some business listing and review services are good and necessary, especially for discovery, but Restaurants need customers and they are more than willing to pay any service that helps them get guaranteed customers. As such, these deal reservations services, or daily deal services, or delivery marketing services like Tasteaway or Just Eat or other performance services will continue to be popular with Restaurant owners. If you are in the Restaurant marketing business, we encourage you to provide your Restaurant customers with a performance based service of some kind.
- Dealicious.ca still charges $5 per reservation to the consumer. Given the competition in this sector, they will probably want to drop this fee. In our opinion, fees to consumers work well when the inventory is exclusive or very hard to get. For instance, reservations in Cities like New York or LA or very hard to get. But if a service will get me a table sooner, then I will certainly pay an access fee to get both that reservation and that discount. In Canada though, there are very few restaurants where you have to wait a long time to get in.
- Teambuy already owns Menupalace and Tasteaway and it would make sense for them to launch a similar service starting in Toronto, then Vancouver and eventually across the country.
- Social Shopper Yes I see them evaluating such a service as well given their success on the West coast.
- Wagjag? Given their resources they have (Torstar, Metroland) this service would be a natural fit for a company like Wagjag in order to compete for the local Restaurant marketing dollars.
- Buytopia? I also see Buytopia taking a look at such a service.
- Yelp? Should they enter this realm after already launching and closing a restaurant deal service? Perhaps, but if Yelp does anything it will be in the US first and any service in Canada would be a long way off.
- How about Restaurant Directories like Urbanspoon? I would if I were them.
- How about local directories like RestoMontreal or Restaurantica from the Yellow Pages? Well, in makes complete sense that RestoMontreal would launch something like this, in fact, they should given that they have far more reach to consumers than Tuango and Vie Urbaine or Groupon does combined. But they are mostly focused on business listings for Restaurants. Purely as a competitive shield, and other revenue source they should launch a similar service. As for the Yellow Pages; they have not done much to grow or monetize Restaurantica. However, perhaps this service may bring back an interest in that brand. Very few companies can reach the amount of consumers and restaurants like the Yellow Pages can.
- Now, how about Opentable? Well, they already own the majority of reservation processing in this country and they already launched a deal option in the United States. They shut it down though. It is an interest debate whether services like Savored, Tuango’s Reserva, Dealicious and Access Resto from Vie Urbaine are competing against Opentable. Although some sales will be lost on Opentable’s side, I do not believe these deal reservation services are competitors to Opentable. Opentbale is a full featured, world class reservation platform for restaurants. The other services we are discussing are one off Deal promotion reservations. Rather different model.
- A thought on Corporate Expenses: The corporate world spends an enormous amount on Restaurant expenses. Employees traveling need to eat. Expenses would drop by 20-30% if companies mandated that employees used services like Savored or those here in Canada. this was not really possible with the typical Daily Deal voucher system given that no self respecting business person would take a client out to dinner and pull out their deal voucher! There is certainly a viable /marketingdistribution model for these Deal Reservation Services by linking to systems like Concur’s expense tracking or those from American express. Companies you then have employees reserve at “deal” based reservation restaurants, (especially in large cities) would save a serious amount of money. Just a thought, given that Deal based companies have never really approached the corporate sector very well. (some exceptions: Venngo.. they are Canada’s leading Deal provider in the Corporate sector)
It will be interesting to see how many more of these services launch in Canada. We’ll keep you abreast of the situation and if you would like any in-depth analysis into this sector, please do not hesitate to contact us.