Monday, February 2, 2009 No reservations for the IPO or reservations about an IPO?

On Friday, issued a press release indicated that they had filed for an IPO. Apparently not daunted by the current financial malaise, Opentable wants to go public.

While we applaud them for their fortitude, it seems a curious time for such a bold move given not only the current situation in the financial markets but also the state of the restaurant business.

Restaurants are hardly in an expansion mode - just in New York City alone, we see a lot more restaurants closing than opening. Stories abound of restaurants reducing menu prices: value meals are the latest fad at four and five star restaurants in NYC as the economy continues to sag and consumers cut back on spending. This is going way deeper than just Bennigans closing down.

If restaurants really believe that Opentable can actually drive incremental demand (the oldest line in the travel industry, by the way) then maybe there is hope that participation drives customers faster than it drives costs.

And what about growth prospects beyond just adding more restaurants in existing markets? The only business more fragmented than the hotel industry has to be the restaurant industry. So, every new market that Opentable expands to requires feet on the street explaining the model and getting restaurants to sign up. And just how far down the food chain can Opentable go? Does a Friday's in Grand Junction (where I involuntarily ate last week) really need to be on Opentable? I doubt that people in Grand Junction are clamoring for online reservations...

So, in a down economy, with less people eating out (and therefor using Opentable) and less restaurants taking reservations (they pay a fee to Opentable) is this really the time for an IPO? We bet there wont be many reservations for that table.

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