The Dining Game
Nick is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.
“Whether it’s the restaurant or the supermarket or the kitchen supply shop, it’s hard to think of sector that is more commercialized and more replete with entrepreneurship and innovation. It is all monetized. … Quality customers are often more important to a restaurant than a quality chef.”
Professor Tyler Cowen’s recent book, An Economist Gets Lunch, is his latest success at illustrating “markets in everything” – and like his wildly popular blog, Marginal Revolution, the engaging read’s ideas and insights are also directly applicable to making discerning choices in stocks, partnerships, and other investments.
[continued from "Technology Leads to More Cooking – and Even More Sports"]
Slepko: You’ve mentioned your best fine dining experience was a $200 French meal in Tokyo at a two-star Michelin restaurant. Other things you written have also made you sound like you are a Michelin man. Does Michelin (NASDAQOTH: MGDDF) and its guides have anything to fear from the Zagat-Google (NASDAQ: GOOG) axis? Or are they both likely to be pushed aside by an upstart?
Cowen: It’s not clear that the Michelin Guide makes money – we don’t know because it’s packaged in with the company. I suspect for a long time, if not always, it has been a loss leader – USD 21 million a year by one estimate. The real question is, “What’s the fate of the broader company?” Look at the S&P 500 or the Dow, and how much of those hang around – there seems to be a natural expiration date on companies. When the tire company goes, there goes the guide since [the guide] doesn’t seem to be an economic model. So, I think the future of that sector is Yelp (NYSE: YELP) or something like Yelp.
Slepko: Instead of Zagat, should Google have acquired Yelp – which you seem to use a lot?
Cowen: Well, Zagat I don’t find useful, but I figure if something survives and I don’t find it useful, then a lot of people must really like it. Clearly, I’m not the typical user so there’s no reason to think a mistake was made there. A real foodie should find Zagat useless, but Yelp is really good and is better than TripAdvisor (NASDAQ: TRIP) – for food [Yelp] gets smarter user feedback, I am not sure why…But again, Yelp is great for what it gives away for free, so that doesn’t necessarily reflect on its business prospects. There are a lot of great products that are given away for free.
Slepko: You also blame Yelp for ruining restaurants faster than they otherwise would – from a two year cycle down to a six month one.
Cowen: But you get more restaurants too, so I wouldn’t blame Yelp, I just think they change the rules of the game. If you find a good place, it becomes more urgent to go sooner.
Slepko: What about reservation companies like OpenTable (NASDAQ: OPEN), and its competitor CityEats [a division of Scripps Interactive Scripps Networks Interactive (NYSE SNI), owner of other proprieties like the Food Network]?
Cowen: I don’t use either one, though I do read about them. I think over time, restaurants will move away from trying to control the quality of their reservations and that means greater scope for businesses like OpenTable. I do sometimes eat in those kinds of restaurants…but I kind of feel that if I have to worry about a reservation, then I shouldn’t be going. It’s a sign that maybe that it’s not for me. Like they don’t want me (and I don’t mean this in an arrogant way), but it’s like there’s some kind of barrier for me to go there at 5pm and it just seems like a mismatch.
Slepko: Will OpenTable work in a place like Paris?
Cowen: I’m not sure. The way you eat in Paris is that you have to be at the restaurant you want to be right before 12:30, and if you aren’t, then you are blocked out. That seems inefficient and would change over time, but I’m not sure who would be well-positioned to take advantage of that.
Slepko: What is it that would position someone well to capture the prestigious Paris market?
Cowen: Speed of service, without sacrificing too much in terms of quality.
[continued in "Redboxes to Rib'boxes? Stick with the Food Trucks"]
Nick Slepko (hukgon) has no position in any company mentioned here at the time of publication. The Motley Fool owns shares of Google and TripAdvisor and has the following options:. Motley Fool newsletter services recommend Google, OpenTable, and TripAdvisor. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.If you have questions about this post or the Fool’s blog network, click here for information.