Diners check can order and tally bills with E La Carte's tablet system.
NEW YORK (CNNMoney) -- Many startups have been hatched over dinner. Rajat Suri's was sparked by the bill delivered afterward.
Dining with seven friends at a Harvard Square restaurant, Suri and the others found themselves trying to divvy up the bill. Some of the MIT and Harvard University graduate students wanted to pay with credit cards. Others had cash. More than an hour after their meal, they were still trying to sort it out.
"Our joke was, 'How many MIT students does it take to figure out a bill?'" Suri, now 25, recalls. "I figured if we have that problem, others do too, and there must be a way to fix it."
At that moment, an idea was born: equipping restaurant tables with tablet computers that would allow diners to split checks, peruse menus, place orders, make payments and play games.
Suri transformed that thought into E La Carte, a 15-employee company in Silicon Valley, which plans to roll out touch screen tablets at 20 restaurants within the next few months. So far, the tablets have been installed in several Bay Area eating establishments, where Suri says they've boosted sales by 10% to 12% by capitalizing on diners' impulses.
"You can have the best waiter in the world, but there's no way for him to know exactly when you want that next margarita," he notes.
Ehab Youssef, owner of the FireHouse Grill & Brewery in Sunnyvale and Palo Alto, Calif., has been using E La Carte at both of his restaurant's locations for several weeks. He says patrons are responding positively, though he can't yet tell whether the service has boosted sales.
"For us, the clientele is younger, professional," Youssef says. "They want to get in and out quickly. They're a techie crowd, and we of course want to sell more to them, like adding bacon to your cheeseburger. It's a great arrangement for us."
Venture capitalists think it's a smart deal, too. E La Carte has raised more than $1 million from investors including Y Combinator, SV Angel, and Applebee's, though the latter has not announced any public plans to use the technology.
But even if E La Carte's tablets appeal to restaurant owners and investors, can the company make money on them? Suri doesn't plan to charge restaurants for installing the tablets. Instead, he says, they'll pay a monthly fee: usually from $60 to $80 a month, depending on how much E La Carte's service boosts sales. While that's a bargain for restaurant owners, it's not much of a revenue stream for E La Carte, which has expenses of its own: developing and maintaining its software, the interface for which must be customized for each client, and purchasing tablets from a third-party hardware manufacturer (Suri wouldn't disclose the name).
And some details remain foggy. Suri wouldn't name most of 20 the restaurants that he says are installing his technology in the coming months. He also declined to say how many are already using E La Carte, and would not disclose the company's current or projected annual revenues.
Those details are the key to seeing where his company is heading. If E La Carte keeps its rock-bottom monthly fees and develops no other revenue streams, it can only survive by saturating the market and winning contracts at major chains. If Applebee's -- a unit of IHOP parent company DineEquity () -- decides to roll out tablets at its 2,000 locations, paying some $70 per venue each month in accordance with E La Carte's current fee structure, that would generate about $1.7 million annually. (Conversely, 20 standalone restaurants would yield just $16,800 a year at that rate.)
And E La Carte has competition. TableTop Media, a company based in Dallas, offers a similar 7-inch tablet called the Ziosk. Microsoft (Fortune 500) has pitched its Surface technology as a potential tabletop menu. And some restaurants are have started handing out iPads instead of menus.,
But Suri is confident he can make it -- and he's risked a lot to do so. A few months after he founded E La Carte in 2008, he dropped out of a Ph.D/MBA program at MIT to wait tables and bend industry contacts' ears about his new company.
"My old classmates were like, 'He dropped out to be a waiter?'" Suri says. "And my parents wanted me to be a doctor and stuff. But it didn't feel like a risk. I was just excited."
He thinks diners are ready for something new. "The restaurant industry hasn't changed in a thousand years; the service experience has been the same since taverns in medieval times," he says. "It's time to shake that up."
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