1 SPEED A Competitive Advantage In Restaurant Services What it means and how technology provides it Presented by NOTE: GO software is now Verifone, Inc.
2 Speed rules! There are 277,208 fast-food outlets from coast to coast -- one for every 1,000 people in the country. Technomic Inc., a food-consulting firm To stay competitive in their industry, many conventional fast-food chains are finding it necessary to squeeze more sales from existing locations. Fine dining restaurants are also looking to eek out more transactions or turn tables faster without rushing their customers dining experience. Attaining true customer satisfaction is the number one driving factor in maintaining competitive advantage and that advantage can be delivered through speed. This white paper explores three technology driven trends and processes that restaurateurs should integrate into their operations to improve their point of sale interaction time with customers. Cashless transactions IP-based processing technology Adoption of Internet usage When implemented together, these functions will provide the restaurateur with increased revenue, and improved customer satisfaction. As consumers continue to embrace the use of loyalty cards, gift cards and stored value cards, restaurateurs must re-evaluate their current point-of-sale processing capabilities and make business decisions on enhancing their current procedures. By jumping on this tech bandwagon, restaurateurs can recognize significant and quantifiable ROI. Enhancing speed and improving efficiency is best delivered through viable technology, not faster employees. Technology can be a known and stable factor (unlike employees) that provides a number of ways to improve customer service most significantly through speed and security in payment transactions. Cashless Transactions Debit, ATM and even gift cards are becoming more and more popular with consumers as an alternative to carrying and paying with cash or being limited to the cash they may have (or not have) on hand. As these cards popularity with consumer continues to grow, so does the consumer s expectation of having this payment option being widely available from the restaurants they visit. 2
3 Studies show that on average QSR customers who use cashless payment methods spend more money than customers who pay with cash. This is especially important at the drive-thru, which accounts for approximately 60% of all QSR sales. A recent Visa study of 100,000 QSR transactions showed that customers using payment cards spent an average of 20 30% more than those who paid with cash. In the past, payment processors would allow QSRs to process payments without a signature, only up to a fixed amount, without actually checking the customer s account to verify the amount to be processed. These transactions represented increased risk for the processors and as such, resulted in higher transactions fees. Improved technology (discussed below) now allows for real-time transaction processing and consequently payment processors are relaxing their policies. Payment processors now permit merchants, like QSRs, with relatively small average transaction size, to accept plastic without requiring customers to sign a receipt or enter a personal identification number, or PIN. These transactions are now immediately verified against the cardholder s account. This real-time verification allows QSRs to qualify for significant reductions in the fees associated with processing transactions - in many instances up to 50 basis points or more. The QSR can now operate like any other retail business without sacrificing customers experience at the point of sale all thanks to new technologies. While the old QSR process may be more vulnerable to fraud and can result in a higher processing fee, now real-time processing can capture the benefits of higher ticket prices without paying more processing fees. IP Based Processing Technology 1988 marked the first time payment processing broke its manual processing cumbrance and entered the electronic processing age. Existing telephone lines provided an established network infrastructure across which data could be transmitted. Transactions were now being authorized and processed within seconds over telephone lines connecting through modems directly to payment processors; light years faster than compiling and mailing them as they had been. A separate, dedicated phone line was typically required for processing use and represented an additional expense. 3
4 In the United States, a 2001 National Restaurant Association survey revealed that more than half of all restaurant operators now access the Internet for business-related purposes. Easier Internet Access Businesses found that accessing the Internet was becoming more important as a way to communicate such as through , and a way to transact business such as through e-commerce. Until recently, most small businesses connected to the Internet using telephone dial-up, maybe even on the same phone line used for payment processing. Unless there was yet another dedicated line for Internet access, the company could not easily complete or receive phone calls, much less process credit cards. File sizes for payment transactions transmitted back and forth between the merchant and the payment processor are very small in size, often not larger than 256 characters. Even with the slow, by today s standards, connection speed provided by dial-up modem connections, the actual time transmission time between parties is only a matter of seconds. But it wasn t the transmission that took up valuable time; it was establishing the connection or making the communication handshake that took up valuable time. Businesses began to flock to the Internet to leverage its network structure. Internet Protocol provided a reliable and secure application for communication processes. IP technology provides speed and flexibility; works well with a distribute enterprise; and leverages existing infrastructure and business methods. This solution is relevant to restaurant businesses of every size, from single-unit operations to multinational corporations. But it wasn t until 1998 that the first payment processor adopted TCP/IP processing options for their merchants. This was an important development because merchants now had a more efficient option in which to process their transactions. Always On, Always Available Today s growing acceptance and availability of newer broadband connections, such as digital subscriber (DSL) and cable, finally offer businesses a cost effective alternative to multiple phone lines or more costly 4
5 T1 options. But more importantly, it provides them with the capabilities of having always on, always available Internet access. Quick-service restaurants represented $190 billion in sales in 2001, with payment cards accepted at approximately onethird of them, according to MasterCard International. Always-on Internet access eliminates the time it takes to make a connection, or establish handshake that happens with every traditional telephone connection. With dial-up, waking up the modem, dialing the processor, and then waking up the processor s modem and acknowledging the connection can take 20 to 30 seconds. With Internet processing, the transaction can be complete within 2 to 3 seconds. Speed Yields Quantifiable ROI By providing their customers cashless payment options, restaurateurs will benefit from faster transactions, shorter lines and faster service. These enhancements will reduce potential customer walkouts or drive-aways should there be long lines at the counter or drive-thru. Furthermore, improved services elicit customer loyalty and increased repeat business. Faster transactions allow for increased volume, and thus more transactions per day. And, as research shows, the use of payment cards increases average ticket size by 20% or more. So, with additional daily transactions, higher average ticket sale and more repeat customers, restaurateurs will see improved revenue, to say nothing of their rapid ROI on any investment in IP payment processing technology Bringing It All Together Payment Processing Software Solutions Today, payment processing is much more complex than connecting with the processor, getting authorization and making deposits into the merchant s bank. And as alternative, cashless payment options continue to flourish, there is increased complexity in the authorization and settlement for multiple card types (debit, credit, gift, VISA, MC, Amex, Loyalty cards). To add to the complexities, there are often varying operating systems and databases within the same organization that makes accessing information very difficult. Typical full-service restaurant transactions have additional intricacies that need to be provided for in processing software, such as pre-authorization, post-authorization and actual gratuity. Because of the many communications 5
6 back and forth between the restaurant and their processor for any given, single transaction, the value of always-on connection continues to appreciate. Additionally, end of the day reconciliation procedures, including tip and split tenders capabilities are important features for restaurant software and also increase speed and efficiencies. Payment processing software is the catalyst that executes and unites frontend transactions with back-end communications with payment processors. Conclusion Often the only element of business that management can truly control is its technology. And as technology continues to change and improve, it is paramount for executives to stay abreast of and embrace the current trends that have proven ROI and provide operational efficiency. Technology solutions must enhance customer service not replace face-toface interaction. In the restaurant industry, the convergence of cashless transactions, Internet-based processing technology and improved Internet access through broadband connections have yielded strong returns for those who have implemented them. But amazingly, in spite of this convergence and heightened consumer demand, today as few as 25% of QSRs have implemented cashless point of sale capabilities. Competitive advantage and increased revenue will reward those restaurants that do embrace speed. About GO Software GO Software, a subsidiary of Return On Investment Corporation (OTCBB: ROIE), is a leading provider of POS (point-of-sale) payment processing software. More than 100,000 businesses use GO Software's solutions to process payments at high speed, expand their tender types and lower their credit card costs. GO Software provides payment processing solutions to meet the needs of any merchant, regardless of transaction volume, platform or sales environment. 6
7 GO Software Restaurant Solutions GO Software has been offering secure, high-speed, direct payment processing using IP technology since GO has been successfully integrated into all types of restaurants, from individual fine-dining establishments, to local, regional and even international large chain QSRs. Our restaurant processing software is adaptable to legacy systems and easily integrates into existing infrastructure. It supports drive-thru POS as well as multiple registers and can be used in centralized or distributed environment. We offer a large number of restaurant certifications. Technology is also expected to contribute to greater effectiveness in generating revenues, whether achieving same location revenue growth, increasing guest counts as well as increasing size of average check. Technology also is expected to play a significant role in differentiating the service offering, whether by building a more powerful brand and expanding/adding new locations. Thus, the majority of respondents expect technology to play a pivotal role in generating value for their organizations. Hospitality Technology s Third Annual Restaurant Industry Study All rights reserved 2003 GO Software, Inc. All trademarks and trade names referenced in this document are the property of their respective owners 7