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Market Expanding for Restaurant POS Solutions

By Rob Regan

As a merchant level salesperson, if you approach the restaurant market with the "one location, one terminal" mindset, you will lose the opportunity to sell a broad suite of payment solutions for this changing industry.

Two months ago, VeriFone's David Talach discussed how the convergence of increasing consumer debit use and Wi-Fi availability is creating new opportunities for pay-at-the-table systems in full-service restaurants (see "Full Service, Fast Service With Restaurant Payment Options," The Green Sheet, Sept. 12, 2005, issue 05:09:01).

This truly is an exciting opportunity that will begin to take off rapidly over the next year, particularly as the Wi-Fi build-out accelerates with the development of city-wide Wi-Fi networks that Google, for example, has proposed to build for San Francisco and EarthLink has already contracted with Philadelphia.

"Pay at the table" is one of several opportunities to up-sell new POS solutions that will help restaurant operators increase their revenue and efficiency.

At VeriFone, we've segmented the opportunity into four separate but complementary customer needs: paying at the counter, table, car or curbside, and upon delivery.

Let's take a look at each of these opportunities, along with the value proposition and solution sale.

Paying at the Counter

This is the ideal proposition for coffee shops (whether national franchisees such as Starbucks, or local one-store operations); pay-at-the-counter restaurants such as Denny's and Ponderosa; cafeteria-style restaurants and company cafeterias where diners pay at the register; counter pick-up locales such as pizza shops, and fast casual restaurants such as sandwich shops.

How do you make the sale? It's becoming easier by the day as consumers increasingly rely on credit and debit cards for everyday, smaller purchases. If proprietors are resistant, provide them with the following easily demonstrable points:

  • Cards are faster than cash.
  • Diners usually spend more money when paying with a card.
  • Customers exhibit greater loyalty when their favorite restaurant is there for them, no matter what type of payment they're carrying on any given day.
  • Competitors are increasingly accepting cards and adding gift card and loyalty applications to draw customers back in.

What's the ideal solution? A sleek, compact system such as a POS terminal with an ATM-style interface that is easy for servers to use and hand over to customers for PIN entry. Also be able to offer a variety of communications, including dial and Internet (LAN, Wi-Fi and even cellular). Some sites may also want a separate PIN pad with its own mag-stripe reader.

Paying at the Table

Pay-at-the-table applications are for use in table-service restaurants. Introducing mobile POS systems using Wi-Fi instead of fixed-line transmissions represents the greatest revolution in restaurant productivity in years. According to Mercator Advisory Group, the addressable market represents an estimated $438 million in POS equipment.

These applications will reduce wait times, increase table turns and enable restaurant operators to increase revenue and efficiency. This also represents an opportunity to replace today's solitary countertop system with an estimated three Wi-Fi systems, on average.

The solution here must be as friendly as the pay-at-the-counter solution, and should also have easy screen readability for any lighting situation and quick and fast printing. The system must also come in a smaller form to make it easy for servers to carry from table to table.

Paying at the Car or Curbside

This is already taking hold as popular table-service restaurants capitalize on the boom in takeout service. According to the National Restaurant Association's 2005 forecast, more than half of table-service operators report that takeout represents a larger proportion of their total sales compared with two years ago, and one out of three consumers have used curbside takeout. The value proposition for restaurant clients is compelling:

  • Speed up takeout orders; no asking for a card number over the phone.
  • Speed up service; wait staff delivers food and completes payment in one trip to the car.
  • Accept secure PIN debit payment.

Today, most car or curbside payment implementations require five steps: 1) server delivers food, 2) server brings payment inside, 3) server does base transaction, 4) server returns to car with check and 5) server or manager enters tip. With a wireless car side payment scenario, there are only two: 1) server brings food, check and terminal to car; 2) consumer swipes card and accepts receipt.

The ideal system in this environment is a portable Internet protocol (IP)-based system that expands the POS to the car or curbside. As with a pay-at-the-table type of solution, it must be small, portable and easy for both staff and customers to operate.

Paying Upon Delivery

This opens a new, untapped market. Fully 78% of U.S. households use some form of food takeout or delivery, according to the National Restaurant Association. Consumers tend to spend more if they can use their card, a phenomenon that the quick service restaurant industry is taking to the bank.

VeriFone's own delivery payment application, DeliveryPAY, operates on cellular networks just like your mobile phone. Using general packet radio service (GPRS) or code division multiple access (CDMA) signals, restaurant operators have maximum flexibility on which providers they contract for service, including the Sprint, Verizon and Cingular networks.

Wireless total cost of ownership is increasingly compelling as airtime costs continue to decline (at some point, even countertop users may opt for cellular and do away with line installation costs and service charges.)

Unlike earlier proprietary networks, the GPRS and CDMA networks are reliable with broad coverage.

Packaging up this solution should be relatively easy at this point. If you're selling a modular device into pay-at-the-table and pay-at-car-side environments, you're probably selling the same solution with just a different connectivity option.

This is simple for you to manage and extremely compelling for restaurant operators who want simplified training for their staff.

What's Next?

The wild card in the deck is the build out of public Wi-Fi networks mentioned earlier. The Philadelphia and San Francisco plans are groundbreaking in that they envision providing low-cost or no-cost broadband access citywide in large metropolises.

Until recently, public hot spots have been confined either to relatively limited areas measured by a few blocks, or citywide in smaller cities in rural areas where broadband is harder to come by.

The prospect of a citywide Wi-Fi network is intriguing, to say the least. It means that Wi-Fi may become as ubiquitous as cellular phone service, which will make it an incredibly easy sale to restaurant customers. For merchants, it means that customers can "roam" into their establishment from somewhere else without losing their PDA connection, or perhaps their voice over IP, or VoIP, phone connection.

It's also likely to drive down Wi-Fi costs even more dramatically. In the meantime, we have seen many smaller establishments bringing up their own Wi-Fi networks for PC and other IP devices, and DSL prices have been cut this past year.

All this reduces the barrier to IP adoption and increases the readiness of restaurants to take advantage of the latest in POS technology.

Rob Regan is General Manager, VeriFone Hospitality Systems. E-mail him at .

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