Recently-launched Avenue 65 aims to increase occupancy rates and customer loyalty through its curated online restaurant reservation and deals site

By Editor May 18, 2012

ave65_logoA Q&A with Avenue 65 CEO J.D. Begin. The Montreal–based company was founded in Fall of 2011 and recently had its official public launch—starting with the Montreal market.

SUB: Please describe what Avenue 65 is, and the value proposition you offer to diners and restaurants.

Begin: Avenue 65 is a web destination providing diners a curated list of fine dining establishments, online reservations and exclusive deals. The deals vary according to the occupancy rate of restaurants.

Our value proposition to diners is threefold. First, we ease the process of selecting a restaurant by providing a curated list of fine dining establishments. Second, we provide easy and convenient online reservations. Third, we offer exclusive deals to diners upon their visit to the restaurant, without requiring the purchase of a coupon.

For restaurants, the occupancy rate is the most important factor in a restaurant’s profitability. Yet, all restaurants have excess table capacity outside of peak times. We provide them with a profitable way to fill this excess capacity with quality diners.

SUB: Who are your target users?

Begin: Our target users are young urban professionals aged between 25 and 40 who typically go to restaurants several times a week for both business and leisure. They typically use our service at least once a week.

SUB: Who do you consider to be your competition?

Begin: In the market that we are currently targeting, we could consider OpenTable to be a competitor even though 50 percent of our restaurants use both OpenTable and Avenue 65. In some U.S. cities, Savored now provides a value proposition similar to ours.

SUB: What differentiates Avenue 65 from the competition?

Begin: In contrast to OpenTable, Avenue 65 doesn’t accept all restaurants on the site. The restaurants on Avenue 65 have been vetted and reviewed by authoritative third party restaurant critics. Furthermore, our core focus versus OpenTable is to create a differentiation between premium and excess table inventory. This allows us to effectively promote excess inventory while maintaining premium inventory available to our users.

With respect to Savored, until this week, their business model was to charge users a reservation fee for which users would get a 30 percent discount on their bill. This limited their ability to get premium tables. In contrast, we decided to avoid this path from the start understanding that this model imposes an important constraint on gaining premium inventory. We also provide a lot more flexibility on how the deals are structured by restaurants. The most popular restaurants dislike discounts because they feel that it negatively affects their brand image. On Avenue 65, they can offer a deal showcasing their specialties so it enables them to promote what they are good at instead of pushing a discount. Finally, we have a self-service model for restaurants.

SUB: When was the company founded and what were the first steps you took in establishing it?

Begin: The idea had been evolving for several months before we took the leap and began working full time on executing the idea and developing the site starting in August 2011. The two most important steps, which we conducted in parallel, were recruiting the core team and validating the value proposition with some restaurant owners and prospective users.

SUB: What was the inspiration behind the idea for Avenue 65? Was there an ‘aha’ moment, or was the idea more gradual in developing?

Begin: The inspiration came in large part from observing some of the limitations of daily deal providers such as Groupon. They suffer from very little customer and merchant loyalty. Customers are not attached to a particular brand but only look for the best deals. For merchants, they actually have an incentive to try different daily deal providers as it allows them to target a different user base. So you end-up with a business model where it’s expensive to acquire merchants and users, but then you can’t keep them. At the same time, we felt that daily deals were not well adapted to higher-end restaurants. Many of them feel that participating in daily deals erodes their brand image, that it doesn’t attract the type of customers that they want and actually generates few returning customers. But beyond all those limitations, the central point is that, if your restaurant is already popular, daily deals don’t significantly impact your occupancy rate, which is where your additional profits will come from. Coupon buyers don’t go to restaurants at a different time than people without coupons. They tend to go at peak times when restaurants are already busy. So it not only has little impact on your occupancy rate but you also substitute a full paying customer with a discount customer.

So there was an ‘aha’ moment, which was to find a way to help restaurants utilize excess inventory. Thereafter, we did a lot of strategizing about the best way to go about it.

SUB: What have the most significant obstacles been so far to building the company?

Begin: By far, the most important obstacle was recruiting a great team.

SUB: You just launched the site publicly. Why was this a particularly good time to launch?

Begin: Our site has been up-and-running in public beta for a couple of months but we didn’t publicize it beyond friends and family. We wanted to test until we were satisfied with the user experience. We also wanted to have enough restaurant density on the site to provide users an adequate choice. We launched publicly when we were sufficiently satisfied with the user experience and had enough restaurants in the system.

SUB: Do you plan to raise funding in the near future?

Begin: We plan to raise a Series A in the second half of the year as we expand to other cities.

SUB: What are your goals for Avenue 65 over the next year or so?

Begin: At this stage, it’s all about getting more restaurants and more users on the system.

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