Soon, there may be no such thing as a free reservation

Editor’s Note: You know the situation. It’s your wife’s birthday in three months. You call up her favorite restaurant and ask to for a reservation at 8 p.m. Saturday night, convinced that for once you’ve planned far enough in advance. The hostess picks up. “I’m really sorry sir, we’re fully booked then,” she replies, “How about 5 p.m.?”

OK, so how can that be? It turns out restaurants, like people, sometimes lie. And because people sometimes lie about coming in for their reservations, restaurants overbook and try to sell the off-peak time slots first. If they don’t, they can lose a hefty amount of money.

Nick Kokonas, co-owner of Alinea, named one of the best restaurants in the world, decided something had to be done. At the next restaurant he opened, conveniently named Next, he decided to sell tickets for reservations. It was a success. So much so, he decided to create a platform from which any restaurant could do the same.

Economics correspondent Paul Solman sat down the Kokonas to discuss Tock, the service that allows you to buy or put down a deposit for a reservation. Tune in tonight to Making Sen$e’s weekly segment for more information about the service. The text of Kokonas’s extended conversation with Paul below has been edited and condensed for clarity and length.

Paul Solman: Okay, so what’s the basic idea here?

Nick Kokonas: The basic idea here is that the reservation systems—the way that we’ve known them for the past 50, 60 years—need to be updated. We know that. I mean, we used to have three people, full-time, every day, answering phones. One person’s sole job was to listen to the messages that were left on a voicemail machine. By the time you listen to 80 messages, write all that down, and call everyone back, you’ve got yourself a full-time job. It sounds very antiquated, but this was four years ago. So what we’ve begun to do is to sell tickets restaurants—a restaurant like Next or Alinea, or Coi in San Francisco or Qui in Austin, Texas for example.

Paul Solman: Only fancy restaurants?

Nick Kokonas: No, not at all. It started fancy like many things do. And we did that because we had the ability to take some risk.

At Alinea restaurant, which is the restaurant that I built with Chef Grant Achatz, customers would call often asking for the same thing, for a reservation Friday or Saturday night at 7 or 8 o’clock. And we would be booked months out, as are many restaurants.

Paul Solman: Yeah, that is true. Why is that?

Nick Kokonas: There are a couple of reasons. One, is that there’s a no-show rate of 10 percent, 12 percent. So some restaurants overbook, just like the airlines do. So the restaurants lie to the people, and then the people who know they might not show up are lying to the restaurant. I think it’s a minority of the restaurants, and a minority with the people, but it sort of spoils the kettle for everybody else.

Paul Solman: So this is a way of reducing the number of no-shows and making the restaurants own process more transparent?

Nick Kokonas: Yes. And by making the process more transparent, it makes it easy to pick from the inventory that’s there and book it. You make a small commitment to the restaurant in return. Maybe it’s $5 or $10 deposit.

Paul Solman: So just by putting down $5 bucks, do people more consistently honor the reservation they’ve made?

Nick Kokonas: Hugely more consistent. Even if it’s just a small amount of money, they don’t want to lose that deposit. That creates better hospitality once they arrive, because the restaurant doesn’t have to go through that process of double booking tables. In turn, the restaurant can take some of that money and go to the purveyors and the farmers and say, hey, we’re going to prepay for some of this product, because we know who’s coming in for sure. There’s less waste at the restaurant as well. It creates a virtuous cycle.

Paul Solman: Do you actually pay your providers up front now?

Nick Kokonas: We do. Not all of them, but the ones where we have recurrent monthly expenditures that are predictable—our fish purveyors, our meat purveyors. We go to them and say, instead of giving us a credit line, why don’t we prepay half of next month? They give us a little bit of a discount, and they can then plan better what they produce, what they bring in, the meat that they dry age, the produce that they grow, all of those things. So we end up with a better product, our customers end up with a better product, and we have less waste, which is good for everybody.

Paul Solman: But there’s OpenTable, right? Yelp? There are already apps where you can make reservations relatively transparently, or at least it looks that way.

Nick Kokonas: To a certain extent, Yelp, OpenTable, all those companies, are gatekeepers. Tock is very, very different than that. We are providing a toolbox to restaurants, and then we get out of the way. You’re not getting a Tock-branded experience. We’re not trying to create a network or affiliate marketing program. What we’re trying to do is give small business owners, in this case, restaurants, the tools to manage their inventory and make it available to people via their mobile phones.

Paul Solman: So, if I want to make a reservation at Next I go to the web on whatever device I’ve got—

Nick Kokonas: You just go to and you click ‘book a table,’ and it takes you through Tock, but it feels like a branded Next experience.

Paul Solman: And how many restaurants use Tock now?

Nick Kokonas: Today just Next will be going on Tock, and we have the luxury, like we did four years ago, of testing out the new software that we’ve built on our own restaurants first. Then we’re going to seed it out to pilot program restaurants, which already range from San Francisco all the way to London. Then, probably in July or August, we will open the software as a service to restaurants around the world. Already, hundreds and hundreds of restaurants have put themselves in the queue for the software.

Paul Solman: And is Tock a system that you hope will spread to virtually every restaurant in the world that takes reservations?

Nick Kokonas: Because we own restaurants ourselves, we know the nitty gritty business problems of running a restaurant. We know how hard restaurant industry people work, the hours they put in, and how they wrangle with technology. People always say that restaurants and restaurant people don’t like technology. They just want to use a paper and pen. Well, restaurant people don’t like bad technology. With Tock, we can know all the dietary restrictions for these people ahead of time and customers don’t have to call the day of and say, ‘oh, and by the way, someone is allergic to shellfish,’ or, ‘my girlfriend’s vegetarian.’ Getting all of that information ahead of time makes chefs better able to plan their days. And, so we’ve built something that can be utilized by the industry that works, that’s simple, that’s efficient and that’s inexpensive.

Paul Solman: How much does it cost for a restaurant to use Tock?

Nick Kokonas: $695 a month, flat fee.

Paul Solman: That’s a lot of money. So you are talking high-end restaurants at this point.

Nick Kokonas: Well, no. If you think about it, OpenTable charges $1.25 per reservation? So, if you have a restaurant which has 200 seats, you could be looking at doing you know, 50 to 100 tables a night, multiply that by $1.25, multiply that by seven days, and you can easily be looking at $700 a week. That’s pretty normal.