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May 9, 2000 Gobbling the Second Tier: Restaurant.com teams up with Sysco to target restaurants outside major markets By Meesha Halm Forget Le Cirque. For Restaurant.com, Maylom's barbecue joint in Muskogee, Okla., will do just fine. While most dining portals are butting heads in a handful of the metropolitan markets, Restaurant.com is trying to aggregate a critical mass of restaurant content as quickly as possible by scooping up smaller, second-tier markets like Salt Lake City, Utah, and Little Rock, Ark. It plans to circle back to get the big guys later. The site, slated to soft-launch at the end of April, is an attractively designed, searchable, national restaurant guide, augmented by gorgeous food photography, daily syndicated lifestyle editorial and dining incentives including frequent diner plans and gift certificates. Restaurants that sign up for the annual service receive their own full-feature Web sites. They'll also get secured transaction technology that will enable them to process take-out and delivery orders, offer online coupons and link to third-party online reservations systems. Restaurant operators will have password-protected access to their Web pages so they can update things such as the daily specials as often as they like. Restaurant.com plans to woo restaurants (and consumers) to its dining portal by aggregating a broad range of features and functionality at a fraction of what the other guys are charging. The average restaurant Web site on CitySearch costs $300 a month (depending on the number of pages and features.) Food.com recently waived its $400 set-up fee in favor of an increased monthly charge of $79; it also takes a 5 percent commission on each transaction. By comparison, Restaurant.com charges just $495 a year to build a Web site as robust as a company wants. That's why Bill Henkens, owner of a Seattle-area sports grill, agreed to sign on. "I've been chomping at the bit for something like this. Other companies that approached me in the past wanted so much money it was ridiculous. I'm getting the same features for $2,000 less a year. I figure it costs me less than $2 a day." The price was also right for David Greco, owner of Mike's Deli in the Bronx. "Some guy wanted to charge me $4,000 just to add a shopping cart to my existing Web site. For $495, Restaurant.com has offered to add a shopping cart and make it better." Restaurant.com can afford to offer more for less because of an unusual deal it struck with Sysco, the nation's largest foodservice distributor, which sells tablecloths, canned tomatoes and the bulk of a restaurant's commodities to an estimated 325,000 establishments nationwide. As part of the alliance, which took nearly a year to forge, Restaurant.com gets to pitch the service at Sysco's 60-plus trade shows. Meanwhile, Sysco's 6,500 sales representatives have agreed to prospect customers and help to gather content to build the sites. The only expense Restaurant.com pays is a commission if a sale is generated. (To grease the wheels, Restaurant.com offers its $495 price only to restaurants who buy its service through Sysco; those who buy direct from Restaurant.com must pay $825 a year. Since any restaurant can buy the service through Sysco, the higher price is more hypothetical than real.) The arrangement grants Restaurant.com quick and inexpensive access to the largest segment of dining establishments, and also gives it credibility. "Sysco is a huge company," reckons Greco. "If I know they (Restaurant.com) are affiliated with them, I know there's going to be good stuff." Sysco says it's less interested in sales commissions than in using Restaurant.com to grow its distribution business. Jack Carlson, executive vice president of sales and marketing for Sysco, explains, "We are committed to providing our customers with a wide variety of services to help them succeed. When our customers succeed, we sell more groceries." The company also hopes that existing customers will want to buy more of their goods from Sysco. Most establishments, Carlson explains, order from as many as five or six distributors. "We hope to earn their loyalty and in turn, get more of their business." Restaurant.com COO Scott Lutwack is busy inking other partnerships in the bar and hotel industries. But the real test comes next month, when it unveils its site to the public. Early signs seem to indicate that the strategy is working. The company gave away the first 30,000 micro sites to Sysco's top customers to populate its initial database. But last week, at the first two trade shows where it demo-ed the product, Restaurant.com signed up 300 restaurants in Salt Lake City and another 125 in Little Rock.
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