How Does Seated Make Money? Dissecting Its Business Model

Executive Summary:

Seated is an app that pays its users for trying out new restaurants. Participating members can earn up to 30 percent on restaurant reservations.

Seated makes money via affiliate fees. Those commissions are paid by the restaurants on its platform whenever a customer dines at their venue.

Founded in 2017, Seated is now one of the fastest-growing startups in the restaurant industry. Its founders have raised more than $30 million in funding to date.

How The Seated App Works

Seated is an app that pays its users for trying out new restaurants. Participating members can earn up to 30 percent on restaurant reservations.

Here’s how it works. First, you download the app, which is available for both Android and iOS devices.

After setting up an account, which entails adding your name, phone number, and other types of information, you can go ahead and start browsing available restaurant options.

Seated lists all the restaurants that offer rewards in your proximity. Once you’re done eating and paying, simply scan the receipt and wait for Seated to reimburse you.

The rewards that users earn can then be exchanged for gift cards at participating services such as Amazon, Airbnb, Uber, Target, Sephora, and more.

Members can earn rewards when dining at the restaurant as well as by ordering takeout or meals delivered directly to their homes. All of those can be booked directly within Seated’s app.

Furthermore, Seated offers an event-planning concierge service that allows foodies to organize and host group dinners, meaning the app itself will plan the group dinner on the user’s behalf.

Seated currently works together with over 1,500 restaurants across the United States. It is available in New York City, Dallas, Boston, Atlanta, Chicago, Philadelphia, and soon nationwide.

Detailing The Founding Story of Seated

Seated, which is headquartered in New York City, was founded in 2017 by Brice Gumpel, Attallah Attallah, and Stephen Carroll.

Interestingly, it hasn’t been the first food-related business that CEO Gumpel has started. But let’s rewind the tape for a little bit, shall we?

After earning his Economics degree from Brown University back in 20014, Gumpel went on to work as a financial analyst for Nomura in New York City.

He did so together with his girlfriend who was working as a graphic designer at the time. Together, they soon began to explore the variety of food options that a city like NYC has to offer.

“One day, we decided to start a food blog and, because my girlfriend is a graphic designer, the blog was beautiful,” Gumpel recalled in an interview he gave. “As we got more and more followers, we started getting invited to meet chefs, owners, and operators, so I got really close to the industry that way.”

Being the finance enthusiast that he is, he started to question the restaurant owners that invited him out for food and drinks about how they ran their business.

What he quickly discovered was that although the majority of restaurants fail, they can actually be a pretty decent business. The biggest threat to a restaurant’s profitability is low occupancy. In fact, if a restaurant were to run at a 90-percent occupancy rate, it would actually be a highly profitable business.

So, the three founders set out to solve that very same issue. Attallah, who graduated from Harvard in 2016, convinced the team to start out in Boston as the city offered the perfect mix of young professionals and discount-hungry (no pun intended) students.

They launched the first version of the app during the summer of 2017. Seated, after a quick test phase in Boston, was rolled out across a couple of other cities not long after.

However, two of the three initial co-founders, namely Attallah and Carroll, departed from Seated within the first two years to launch other startups in the restaurant and real estate industry. And don’t feel too bad for them: both of their companies have gone on to raise tens of millions in venture funding and are now employing hundreds of people combined.

They were collectively replaced by Bo Peabody, a seasoned tech executive who had been involved in the restaurant industry for over 25+ years.

Throughout that year (2018), Seated continued to expand into new cities (like Philadelphia), added new partners (such as Lyft), and raised a first undisclosed seed round in January 2019.

Unfortunately, darker times would soon be on the horizon. The Covid-19 pandemic decimated Seated’s business literally overnight. Luckily, the firm’s ability to raise the necessary cash cushion remained unaffected.

In August 2020, Seated announced a fundraise of $30 million led by Insight Partners and Craft Ventures. Simultaneously, the firm acquired VenueBook, which added some 120,000 event planners to the Seated platform, for an undisclosed sum.

Additionally, Seated expanded from solely offering dine-ins to pickups as well as home delivery. For the latter, it partnered with a network of courier services.

Over the next two years, Seated’s founders simply focused on staying the course, which meant adding more restaurants to its network.

Today, 1,500+ restaurants have already partnered with Seated, which employs close to 100 people across the nation.

How Does Seated Make Money?

Seated makes money via affiliate fees. Those commissions are paid by the restaurants on its platform whenever a customer dines at their venue.

The business model that Seated operates under is that of an aggregator. In essence, it aggregates restaurants on its platform and lists the best for any given customer query.

In the past decade, aggregators such as Skyscanner or Expedia have brought dynamic pricing to the travel industry, allowing airlines and hotels to fill empty seats and beds they otherwise wouldn’t have been able to.

As stated above, diners on Seated can earn up to 30 percent in cashback rewards, which they can then redeem for various gift cards and coupons at services such as Starbucks or Uber.

This only represents the best-case scenario, though. In reality, the rewards are determined dynamically and depend on factors such as the day of the week and hour, current occupancy rates, and so forth.

This enables restaurants to fill empty seats when occupancy is low while turning down the dial when they’re full.

However, restaurants don’t necessarily turn a profit on Seated customers. A 2019 piece by The Daily Free Press highlighted that Seated, at least back then, was more of a marketing channel than a profit driver.

“It’s obviously helpful, but it’s not anything that’s going to make or break us,” one owner told the newspaper. “In the end, it’s a zero-sum game. Thirty percent is all of your margin. If they have a cocktail, we’re not taking a hit on 30 percent of it.”

For many restaurants, Seated is probably considered more like a marketing channel than a driver of meaningful business. The hope is that diners would return in the future without utilizing the app, thus leading to positive margins later on.

But since each commission structure is negotiated with Seated individually, restaurants do have the ability to ensure that margins are still sufficient, even when accepting Seated users.

Another key aspect of Seated’s aggregator business model is distribution. The company, although forcefully, expanded into home deliveries, take away, and group events (via its VenueBook acquisition).

As a result, it is able to monetize customers and restaurants across a variety of dining experiences, which not only increases revenue but allows Seated to onboard different kinds of restaurants (such as the ones focused on takeout).  

Interestingly, Seated isn’t the only platform offering such a service. OpenTable, for example, has been offering Dining Rewards since 2009.

Seated Funding, Revenue & Valuation

Seated, according to Crunchbase, has raised a total of $30 million across 2 rounds of venture funding.

Notable investors in the company include Insight Partners, Left Lane Capital, Greycroft, Craft Ventures, and many more.

Unfortunately, Seated’s founders have chosen to neither disclose revenue nor valuation figures thus far. They may do so during a future funding round.  

Hi folks, Viktor checking in! Years of experience in various tech-related roles have led me to start this blog, which I hope provides you with as much enjoyment to read as I have writing the content.