Invest Like the Best with Patrick O'Shaughnessy
Nick Kokonas - Know What You Are Selling - [Invest Like The Best, REPLAY]
30 Dec 2025 · 78 min
Key points
- Nick Kokonas says he would rather be right 80% of the time, since a business that wins more than half its bets wins overall, like a casino.
- Kokonas says Alinea's no-shows and misstated party sizes cost over a million dollars a year, which led him to propose ticketing at Next.
- Kokonas says Tock charged restaurants a flat 3% for carryout during COVID, far below delivery apps that he says lose money despite growing revenue.
Restaurants are fine businesses once they know what they sell
Restaurants are not bad businesses. They are badly sold ones. Kokonas argues that most operators lose money to no-shows, empty off-peak nights and middlemen because they do not know what they are selling or who buys it. Ticketing, direct customer relationships and owning the sales channel fix this, and that thinking became both Alinea and Next and then the software company Tock.
Takeaways
- Restaurants leak revenue by not knowing what they sell. Kokonas says the core lesson for any business is to know what you are selling and then sell it. Alinea lost over a million dollars a year to no-shows and misstated party sizes before he pushed ticketing.
- Ticketing turned a leaky model into high margins. Next sold tickets for changing, theater-like menus. Its first day of sales brought in $562,000, and Kokonas says it made over 30% margins in year one. Industry peers had called ticketing a terrible idea.
- Tock exists because booking software served intermediaries. Kokonas felt systems like OpenTable served themselves over restaurants. After a long blog post he founded Tock with Brian Fitzpatrick, starting with high-end restaurants, turning away unready customers, and avoiding a sales team for three years.
- Efficient selling can double or triple restaurant margins. Typical costs of 30 to 35% labor, 30 to 35% food and 30% fixed leave about 10%. Kokonas says efficient restaurants make 20 to 30%, by selling tasting menus deliberately, pricing off-peak nights and collecting emails.
- Ownership and a better-than-even hit rate build wealth. Kokonas wants to own things because owning is a likelier path to wealth and keeps his fate in his own hands. Like a casino, a business right over half the time wins, though he prefers being right 80%.
- Direct selling and tight supplier terms cut middlemen. Alinea self-publishes and sells books through its own channels, since he says authors get about 10% of cover price. Prepaying suppliers roughly halved the price of dry aged beef.
- Fast COVID moves and flat fees beat delivery apps. Alinea imposed hygiene rules early and sold $35 beef wellingtons, reaching 1,000 meals a night. Tock charged restaurants a flat 3%, while Kokonas says delivery apps lost more money as revenue tripled.