How A Bad DMV Experience Inspired Jonas Frey's Multi-Million Dollar Business
On this episode of Money Rehab with Nicole Lapin, Jonas Frey explains how a frustrating DMV experience inspired him to launch Appointment Trader. The platform operates as an online marketplace for trading reservations at top restaurants, golf courses, and other services. Frey shares how he bootstrapped and secured initial funding to build the community-driven platform, which charges a 30% commission on reservation resales.
The episode explores the market dynamics of Appointment Trader, including reservation pricing based on exclusivity and demand. Frey addresses criticism that the platform furthers exclusivity versus democratizing access. It also examines legal and regulatory challenges, such as proposed legislation to prohibit reselling reservations without business consent.
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1-Page Summary
The Origin and Business Model of Appointment Trader
Appointment Trader emerged as an innovative solution for trading high-demand reservations, founded by Jonas Frey after facing difficulties booking a simple DMV appointment.
Frey bootstrapped and secured initial funding from an investor to launch Appointment Trader.
After depleting his funds during COVID, Frey spent his last $30,000 in credit to build Appointment Trader's infrastructure. He convinced a friend to invest $62,500 for a 25% equity stake, providing crucial capital.
Appointment Trader operates as an online marketplace for trading reservations.
Users can buy, sell and swap in-demand reservations for dining, golf and various services. Frey aimed to democratize access to exclusive experiences. Appointment Trader collects a 30% commission, allowing rapid growth leveraging a community-driven workforce.
Market Dynamics and Economics
Reservation pricing varies based on popularity and exclusivity.
Top-tier restaurants like Carbone command premium reservation prices over $250, while less exclusive options fetch around $80. Algorithms set pricing based on demand factors. For Formula One weekend, an Uchi Austin reservation traded for $2,500.
Critics argue Appointment Trader furthers exclusivity, but Frey sees it as democratizing access.
While critics claim Appointment Trader makes dining unaffordable, Frey contends it enables broader access by letting anyone purchase coveted reservations traditionally unavailable to non-elites. Policies aim to curb hoarding and no-shows.
Legal and Regulatory Challenges
The platform faces opposition from restaurants and booking services over reservation resales.
Proposed New York legislation, backed by American Express and OpenTable, would prohibit reselling reservations without restaurant consent - a threat to Appointment Trader's model. Frey suggests lobbying stems from disrupting fee-based platforms.
Appointment Trader explores restaurant partnerships and remains optimistic despite challenges.
The company explores partnerships giving restaurants a cut of reservation resale fees in exchange for using Appointment Trader's technology. Frey sees expanding opportunities despite regulatory hurdles like airline seat trading currently being illegal.
1-Page Summary
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Counterarguments
- Reservation systems like Appointment Trader could inflate the cost of access to services that were previously more affordable, potentially pricing out average consumers.
- The 30% commission rate might be considered high, and could be seen as taking a significant cut from the service providers (restaurants, etc.).
- The argument that the platform democratizes access may not hold if the platform primarily benefits those with more disposable income who can afford to pay for reservations.
- The business model could encourage a secondary market that prioritizes profit over genuine use, leading to potential artificial scarcity.
- There may be ethical concerns about selling something that was originally free or intended to be accessible without additional charges, such as DMV appointments.
- The platform's operation could be seen as unfair competition for traditional reservation systems, which could be detrimental to those businesses.
- The idea of trading reservations like commodities might be seen as undermining the hospitality industry's efforts to create a direct and personal relationship with their customers.
- The platform might inadvertently contribute to a culture of hoarding and speculative booking, even with policies aimed to curb such behavior.
- The legality of reselling reservations is questionable and could lead to a clamping down on such practices, which would threaten the business model of Appointment Trader.
- The comparison to airline seat trading being illegal might suggest that the business model is operating in a legal gray area that could be subject to future regulation.
Actionables
- You can analyze local legislation regarding the resale of services to identify potential business opportunities or risks. By staying informed about laws similar to the proposed New York legislation, you can make better decisions when participating in or starting a marketplace for services. For example, if you notice a trend in legislation that favors consumer rights, you might focus on creating a platform that emphasizes transparency and consumer protection.
- Explore creating a community group focused on ethical reservation trading to foster responsible practices. This group could serve as a space for users to discuss fair pricing, ethical considerations, and ways to prevent the furthering of exclusivity in service access. As a member, you could contribute to developing guidelines that ensure the community operates in a way that aligns with the values of inclusivity and fairness.
- Consider developing a personal system for evaluating the fairness of a service marketplace, taking into account factors like commission rates, pricing strategies, and access. Use this system before engaging with platforms like Appointment Trader to decide whether their business practices align with your personal ethics. For instance, you might decide to only use platforms that cap their commission rates at a certain percentage or that provide clear benefits to all parties involved, including service providers.
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The origin and business model of Appointment Trader
Appointment Trader emerged as a unique solution to inefficiencies with booking compulsory services, like DMV appointments, and has evolved into an expansive marketplace for various reservations.
Jonas Frey founded Appointment Trader after struggling to book a DMV appointment, realizing that reservations for various services and experiences were a tradable commodity.
Jonas Frey, while trying to get a DMV appointment in Las Vegas and facing long wait times, was surprised to find that unlike other commodities in the U.S., time slots for services weren't tradable. This led to the creation of Appointment Trader, initially focusing on DMV appointments. Frey expanded the concept to trading other high-demand services such as doctor's appointments, golf tee times, and RV parking spots.
Frey started Appointment Trader by bootstrapping the business with his rent money, eventually finding initial funding from a friend who became an equity investor.
Frey was financially stretched when he started Appointment Trader, having all his money tied up in a previous business that had failed during COVID. Facing a lucrative job offer from Facebook, he instead chose to use the last $30,000 of his credit card limit to build Appointment Trader. He was supported by his wife, who would bring him sustenance as he continued coding and setting up his business infrastructure—which included installing a fiber line in his apartment to run a server next to the washing machine, reducing AWS costs. Bootstrapping the business, he convinced a friend to invest, who purchased 25% equity for $62,500. This initial cash injection proved to be foundational for the company's survival and growth.
The company's unique business model involves incentivizing customers to sell their reservations if they can no longer use them, reducing no-show rates and increasing accessibility.
Appointment Trader operates as an online marketplace where users can buy, sell, and trade reservations for in-demand restaurants, golf courses, and other services.
Appointment Trader serves as a decentralized platform allowing users to trade in-demand reservations and access services they typically wouldn't be able to. Jonas Frey, realizing that many high-demand reservations at restaurants or golf courses aren’t open even when available, aimed at democratizing this luxury. By creating a marketplace where users with reservations have an incentive to sell them, it opens up accessibility.
Appointment Trader collects a 30% ...
Here’s what you’ll find in our full summary
The origin and business model of Appointment Trader
Additional Materials
Counterarguments
- The concept of trading appointments could be seen as commodifying a public service, potentially leading to inequities where those with more financial resources can secure appointments more easily than those without.
- Bootstrapping a business with rent money and credit card debt is risky and could lead to financial instability, which might not be a sustainable or advisable approach for most entrepreneurs.
- While incentivizing customers to sell their reservations can reduce no-show rates, it might also encourage a secondary market where reservations are booked with the sole intention of resale, which could inflate prices and reduce fairness in access to services.
- Operating as an online marketplace for reservations may inadvertently contribute to a culture of overbooking and speculative reservation holding, which could distort the actual demand for services.
- A 30% commission on each completed trade could be considered high, potentially deterring ...
Actionables
- You can identify a service in your community that's plagued by long wait times and create a local bulletin board for sharing appointments. For instance, if getting a haircut at a popular salon requires a long wait, set up a physical or digital board where people can post and exchange appointment slots they can't use.
- Consider starting a small side hustle by offering to wait in line for others for in-demand services or events. You could advertise your services on local community forums or social media groups, charging a fee to stand in line for tickets, product releases, or other events where long waits are expected.
- Explore the possibility ...
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The market dynamics and economics of the reservation trading business
Appointment Trader has created a new market out of an unmet need for flexible reservation trading, and this has spurred a complex web of economic behaviors.
Appointment Trader has found that the pricing and demand for reservations can vary significantly based on the exclusivity and popularity of the service or experience.
Jonas Frey, the voice of Appointment Trader, discusses the economics of trading reservations from exclusive restaurants to DMV appointments. The platform uses data-driven algorithms to suggest pricing based on various factors, drawing a parallel with the dynamic pricing of airline tickets. Restaurants can set occupancy thresholds for free reservation issuance, transitioning to monetized reservations as demand increases.
Reservations for top-tier restaurants like Carbone or Polo Bar can trade for hundreds of dollars, while less exclusive options may only fetch $80 or less.
The exclusivity of a service is a key determinant of reservation value. Spots like Carbone and Polo Bar in New York can trade for hundreds of dollars, with the Polo Bar fetching over $250 per reservation on average. In contrast, less exclusive options may only trade for around $80. Market makers bid on reservations according to their popularity scores and event data. A reservation's price can leap during high-demand periods, reflected in an $80 off-season average climbing to about $100 during peak times over the last 50,000 trades.
The marketplace reacts to demand, as seen in the example of Uchi Austin's reservation during Formula One, which traded for $2,500 for a table of eight. The algorithm might suggest listing a reservation for $75, but sellers can adjust this price based on demand. For example, a popularity score of 10 might sell for $180.
Appointment Trader has faced criticism that its business model is making dining and other experiences even more exclusive and unaffordable for the average consumer.
Frey counters criticism by proposing that Appointment Trader democratizes access by allowing anyone, not just the elite, to purchase prestigious reservations. Frey asserts that this system breaks down barriers to exclusivity by enabling a broader range of people—particularly young professionals born between 1990 and 2000 with incomes starting around $50,000—to access reservations that were previously hard to come by.
Frey argues that Appointment Trader is actually democratizing access to these experiences by allowing anyone to purchase reservations, rather than just the wealthy or well-connected.
This broader access challenges traditional models where reservations were released 30 days in ad ...
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The market dynamics and economics of the reservation trading business
Additional Materials
Clarifications
- The reservation trading business involves platforms where users can buy and sell reservations for various services like restaurants or events. These platforms use algorithms to suggest pricing based on factors like demand and popularity. The goal is to create a marketplace where users can trade reservations efficiently, addressing issues like exclusivity and accessibility to in-demand experiences. The dynamics of this business model aim to balance supply and demand for reservations while offering opportunities for both buyers and sellers to participate in the market.
- Data-driven algorithms for pricing reservations involve using computational methods to analyze various factors such as demand, historical data, and market trends to determine the optimal price for a reservation. These algorithms can adjust prices dynamically based on real-time information, similar to how airlines adjust ticket prices. By leveraging data analytics, platforms like Appointment Trader can suggest pricing that maximizes revenue and matches supply with demand effectively. The algorithms help in setting prices that reflect the value of reservations accurately, considering factors like popularity, timing, and other market dynamics.
- Market makers in reservation trading are individuals or entities that facilitate the buying and selling of reservations by providing liquidity to the market. They help match buyers and sellers by quoting bid and ask prices, ensuring there is a continuous flow of transactions. Market makers play a crucial role in setting prices based on demand and supply dynamics, contributing to the efficiency and stability of the reservation trading marketplace. Their actions help create a balanced and competitive environment for participants looking to trade reservations.
- Popularity scores in the context of reservation trading platforms like Appointment Trader are metrics that indicate the desirability or demand for a particular reservation. These scores are often calculated based on factors such as historical trading data, customer reviews, and the reputation of the service provider. Event data includes information about specific occasions or periods when demand for reservations might be higher, leading to fluctuations in prices based on the anticipated level of interest during those times. This data helps inform pricing strategies on the platform, allowing sellers to adjust reservation prices dynamically to match the current market demand.
- During high-demand periods, such as holidays or special events, the prices of reservations can increase significantly due to increased interest and limited availability. This fluctuation in pricing is driven by market dynamics and the basic economic principle of supply and demand. As demand for reservations rises, sellers can adjust their prices accordingly to capitalize on the heightened interest, leading to higher prices during peak times compared to off-peak periods. This pricing strategy allows sellers to maximize their profits by aligning reservation costs with the increased demand for sought-after experiences.
- During events like Formula One, reservation trading can see a significant surge in demand and prices. This is because high-profile events attract more people looking for reservations, leading to increased competition and higher prices in the reservation trading market. Sellers can capitalize on this heightened demand by adjusting their prices accordingly, sometimes resulting in reservations selling for significantly higher amounts than usual.
- Criticism of Appointment Trader's business model stems from concerns that it may exacerbate exclusivity and affordability issues for the average consumer. Critics argue that by enabling the trading of reservations at varying prices, the platform could make sought-after experiences more inaccessible to those without significant financial means. Additionally, there are worries that the system could lead to reservation hoarding and an increase in no-shows at establishments, impacting both consumers and businesses. Despite efforts to democratize access, some view Appointment Trader as potentially widening the gap between those who can afford premium reservations and those who cannot.
- Democratizing access to exclusive reservations means making reservations for high-demand or exclusive services available to a wider range of people, not just the wealthy or well-connected. This can involve using platforms or systems that allow anyone to purchase these reservations, breaking down traditional barriers to entry. By providing broader access, democratization aims to make exclusive experiences more inclusive and available to a more diverse audience. This approach challenges the traditional model where access to such reservations was limited to a select few, potentially opening up new opportunities for individuals who may not have had access before.
- Reservation hoarding in the context of the hospitality industry typically refers to individuals or entities holding onto multiple reservations without intending to use them, potentially depriving others of the opportunity to book those slots. No-shows occur when individuals with reservations fail to appear at the scheduled time, leading to wasted resources and lost revenue for businesses. To combat these issues, platforms like Appointment Trader implement policies to encourage responsible trading and reduce the negative impact of reservation hoarding and no-shows. These policies aim to ensure that reservations are utilized efficiently and ...
Counterarguments
- While Appointment Trader claims to democratize access to reservations, it could be argued that the platform may inadvertently create a pay-to-play scenario where only those with disposable income can afford to participate, potentially excluding average consumers.
- The idea that pricing varies based on exclusivity and popularity might lead to inflation of prices, especially for high-demand services, which could price out regular customers who are not willing or able to participate in a bidding war.
- The argument that the platform challenges traditional reservation models could be countered by noting that it may also undermine the direct relationship between service providers and their clients, possibly leading to a less personalized experience.
- The claim that the platform has a lower no-show rate than the industry average could be questioned by asking if the comparison is fair, considering that people might be less likely to miss reservations they've paid extra for.
- The sell-through rate policy intended to prevent hoarding could be criticized for not addressing the root cause of the problem, which is the creation of a secondary market for something that was originally intended to be a direct transaction between the service provider and the cons ...
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The legal and regulatory issues surrounding Appointment Trader's operations
Appointment Trader, led by Frey, has faced opposition from certain restaurants and industry groups that have spurred legislation to curb or prohibit reservation resales, leading to significant legal and regulatory challenges.
Appointment Trader has faced pushback from some restaurants and industry groups, who have attempted to pass legislation to limit or prohibit the resale of reservations.
Frey notes proposed legislation in New York that aims to prevent diners from selling their reservations unless the restaurant agrees. This proposal, supported by American Express, Resy, and select restaurants, is indicative of legislative actions that could limit or shut down businesses like Appointment Trader. Frey suggests that lobbying efforts in New York may have been spurred by Appointment Trader's growth, which threatens the traditional subscription fee model used by booking platforms like OpenTable. He also mentions the irony of restaurants driving traffic to services like OpenTable and paying for the privilege, a practice Appointment Trader seeks to disrupt.
These efforts have been spearheaded by platforms like OpenTable and Resy, which view Appointment Trader as a threat to their business models.
The proposed legislation in New York is connected to platforms like Resy and backed by companies like American Express, suggesting they see Appointment Trader as a competitive threat. Frey acknowledges the contention with OpenTable and Resy, indicating establishments have to pay these platforms to generate traffic. He implied that the upset response from these concerns could hint at their involvement in endorsing legislation against the reservation trade practiced by Appointment Trader.
Frey contends that objections to Appointment Trader are not rooted in consumer harm but on the self-interests of those proposing the legislation. He compares the situation to an absurd scenario like Sony having to approve the sale of a PlayStation on eBay, underscoring his view that the legislation is unreasonable and self-serving.
Despite the legal and regulatory challenges, Frey remains confident in Appointment Trader's ability to navigate these issues and continue expanding its business model.
The company is exploring partnerships with restaurants, where it can provide its infrastructure and technology in exchange for a share of the reservation trading revenue.
Frey is expanding Appointment Trader's business model, looking at partnerships with restaurants. He expresses the mutual benefits of such collaborations, mentioning how Appointment Trader can offer their technological infrastructure to establishments. Moreover, these allia ...
Here’s what you’ll find in our full summary
The legal and regulatory issues surrounding Appointment Trader's operations
Additional Materials
Counterarguments
- Reservation systems like OpenTable and Resy may argue that their business models are designed to ensure fairness and accessibility for all patrons, and that allowing reservation resales could lead to a system where only those willing to pay extra can secure reservations at in-demand restaurants.
- Restaurants may contend that reservation resales could disrupt their operations, customer experience, and revenue management, as they rely on reservations for planning and staffing.
- Some consumers might argue that the resale of reservations could lead to increased prices for dining out, making it less affordable for the average person.
- There could be concerns about the potential for fraud or scalping in the reservation market, which could harm both consumers and restaurants.
- Industry groups might argue that the legislation is intended to protect the integrity of the booking system and ensure that all stakeholders, including restaurants, booking platforms, and diners, are treated fairly.
- Critics may suggest that while Appointment Trader's model is innovative, it could inadvertently create a secondary market that prioritizes profit over customer service and dining experience.
- There could be an argument that the traditional booking models provide stability and predictability for both restaurants and customers, which could be undermined by the volatility of a trading market.
- Some might argue that ...
Actionables
- You can explore the concept of a personal trading system by setting up a social media group or online community where friends and locals can trade or swap reservations and tickets for restaurants, events, or services. This could be a simple Facebook group or a dedicated Slack channel where members post available reservations or seek swaps, fostering a micro-community of shared access to in-demand experiences.
- Consider creating a personal inventory of your bookings, such as restaurant reservations, gym classes, or event tickets, and offer them to friends or colleagues when you can't use them. This not only helps you minimize personal loss from cancellations but also builds a network of reciprocity, where others may offer their unused reservations to you in the future.
- Engage in conversations with local businesse ...
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