Friday , February 26, 2021

Cooking up a Comeback

Restaurants and point-of-sale providers alike are scrambling to stage a fast recovery from an induced coronavirus coma. Success will depend on technologies like contactless payments and online ordering.

Americans love dining out. In 2020, restaurant industry sales were originally projected to grow for the 11th consecutive year, reaching a record $899 billion, up 4% from 2019, according to the National Restaurant Association.

Those projections went out the window early this spring when states began ordering restaurants to close their doors to on-premise dining in an effort to help stunt the spread of the novel coronavirus.

Months after the first orders to halt in-restaurant dining went into effect, restaurants that remained open have limped along by offering curbside pickup and delivery. Those options reportedly generate anywhere from 20% to 30% of a restaurant’s normal revenues, clearly not enough sustain business long-term.

That’s a problem not only for eateries but also for merchant acquirers and payment-solution providers, as restaurants are a highly lucrative market for them. The majority of all restaurant sales are paid for with credit or debit cards.

In addition, restaurants typically have different and more specialized payment-technology needs than those of storefront merchants. These needs include POS systems that integrate with the kitchen, as well as reservation, seating, and back-office applications.

To help ease the economic pain restaurants still in operation are feeling in the face of government-imposed restrictions, some payment-technology providers have rushed systems to market that enable restaurants to accept online orders. In some cases, these systems also help restaurants avoid paying card-not-present fees for curbside pick-up and delivery orders placed by phone.

Other providers have developed financial-relief programs for their restaurant clients while temporarily waiving licensing fees.

Island of Safety

But those are short-term solutions. Long-term, payments experts foresee restaurants needing point-of-sale solutions that help create what the restaurant industry refers to as a contactless environment. That means reduced contact between the wait staff and customers, including much less handling by staff of credit and debit cards.

Indeed, a contactless environment for payments is considered table stakes for restaurants going forward, restaurant experts say. This is particularly crucial given ongoing concerns among health officials and consumers about a resurgence of the coronavirus as the economy emerges from state-imposed lockdown orders.

“Restaurants are always looking for technology to help them manage their business more efficiently, and as the industry moves toward contactless environments, POS technology will be one of the legs of that stool,” says Toby Malbec, managing director for ConStrata Technology Consulting, which has clients in the foodservice, hospitality, and retail sectors.

POS technologies that can reduce the handling of cards include mobile payments, pay-at-the-table options, online ordering and delivery, and text-to-pay applications.

But moving to contactless-payment acceptance isn’t enough. Despite the array of payment options that reduce contact between staff and customer, consumers will require visual proof that options like portable and tableside POS terminals have been cleaned and sanitized before they use them.

“Consumer standards for cleanliness and sanitization are going to be much higher going forward,” says Jack Baum, chief executive of Ziosk, which makes a tabletop ordering tablet for casual-dining restaurants that includes an encrypted card reader. “Consumers are going to want to see that POS terminals, tables, [and so on] are openly being sanitized.”

Ziosk, whose technology is used by such chains as Chili’s, Olive Garden, and Red Robin, also includes a post-dining survey with questions on cleanliness. Restaurants can use the feedback to determine whether consumers see their business as an island of health safety, Baum adds.

In addition to myriad new POS technologies that can reduce contact, there are opportunities for tech providers to offer peripheral non-payment applications, such as electronic menus and loyalty programs. The latter is something restaurants in normal times have typically shunned because of the cost of offering rewards in the face of the industry’s low margins, which average about 4%.

Less Touching

Adding mobile payments to the mix is one of the easiest ways for restaurants to eliminate the need for consumers to pass their cards back and forth at the table or at a cash register. But a tipping function needs to be included to make this option more practical for restaurants, and this is a feature mobile payments currently do not support, says Jarrod DellaChiesa, president of DellaChiesa Hospitality LLC and a technology consultant for Synergy Restaurant Consultants.

“Mobile payments are going to need to evolve so they can be integrated into restaurant POS systems,” DellaChiesa says. “POS vendors are going to have to come up with those tools.”

An alternative to mobile payments is text-to-pay, which allows a restaurant to send a consumer a text message containing a virtual invoice with a link embedded in it. After clicking on the link, the consumer sees the bill along with a button, which, when clicked on, initiates payment through a virtual POS terminal. The consumer then enters his card number and CVV code.

“This is a solution that can make the consumer feel more in control of his card when paying,” says Lyndsey Lang, chief strategy officer for FattMerchant Inc. a payment-technology provider and processor that is exploring the technology.

Handheld POS terminals are another option to eliminate the passing back and forth of cards between servers and customers. When the bill is presented, wait staff can leave the terminal at the table and allow the customer to pay when ready. The customer can add the tip, print a receipt and go.

Restaurants can address the cleanliness issue by requiring wait staff to wear gloves and wipe down the terminal in front of the customer before putting it on the table.

One advantage to a pay-at-the table solution is that it streamlines the payment process, freeing servers to tend to other customers. “About 20% of a server’s time is spent on payment,” says Gordie Gardiner, CEO of TableSafe Inc., a provider of a pay-at-table tablet. As a result, he adds, “The traditional way of paying in restaurants is inefficient and slows table turnover.”

Increasing turnover speed will be important to restaurants as they reopen, since many states are expected to limit capacity, at least at first, for health reasons. Faster table turn can help restaurants seat more customers during operating hours, even with state-imposed capacity limits, Gardiner says. TableSafe says its solution speeds table turnover by six to 10 minutes.

Meanwhile, handheld terminals present a way for restaurants continuing curbside pickup to collect payment at a card-present rate on phone orders. That’s important, especially for restaurants currently surviving on pickup and delivery, because the difference between a card-not-present and card-present rate is being felt more than ever, says Leslie Truelove, chief marketing officer for Ziosk.

Online Is Crucial

While POS systems that reduce contact between staff and customers at the table are expected to become common in restaurants, payment experts also expect restaurants will want to bundle online ordering with one or more of these technologies.

The reason, payments experts say, is that restaurants that have stayed open during the pandemic offering delivery and curbside pickup won’t see that portion of their business completely revert to the dining room once on-premise service resumes.

Indeed, survey data from the National Restaurant Association indicates consumers across all age groups are primed for takeout and delivery in the wake of the coronavirus shut-downs.

“Online ordering was coming prior to the pandemic and it will not go away once restaurants begin to reopen, because a lot of consumers new to the experience have gotten used to it,” says Chris Lybeer, chief strategy officer for Revel Systems Inc., which makes an iPad-based POS system that includes an online-ordering application.

In fact, adds Lybeer, “I can’t see restaurants operating in 2021 without an online-ordering channel.”

To help restaurants that don’t use its POS platform but want to offer online ordering, Revel decoupled the application and began offering it separately. “It’s compatible with older POS systems, which a lot of restaurants have,” Lybeer says.

Since the pandemic began sweeping across the United States earlier this year, Revel says it has had requests from more than 1,000 existing and new customers about implementing its online-ordering module.

That compatibility means restaurants don’t have to scrap their legacy POS system to add online ordering. But Revel has also earmarked a portion of its monthly merchant fees for a fund to help restaurant clients that have been hit the hardest financially during the pandemic.

Pathway to Delivery

Online ordering also provides restaurants with a pathway to delivery, as current and laid-off staff can be put to work as delivery drivers.

Third-party delivery services, such as Grubhub and Uber Eats, have come under fire during the pandemic for their fee structure. Delivery services typically charge a percentage of the total ticket. In some cases, charges can be as high as 30%, which significantly erodes a restaurant’s margins.

“Getting hit with high delivery fees is not a sustainable business model for restaurants,” says Alex Barrotti, CEO and founder of TouchBistro Inc., a software developer for iPad POS systems in restaurants. By contrast, “restaurants that can offer their own delivery service don’t have to pay a commission on the sale,” he says.

Besides the high fees charged by third-party delivery services, Barrotti points out that the customer relationship is owned by the delivery service, not the restaurant, which can negatively affect customer loyalty.

In April, TouchBistro launched an online-ordering application for takeout and delivery orders. Development time was fast: the company had it in market in three weeks. During its first few weeks of use, restaurants received $500,000 in orders, the company says. The application is free to all TouchBistro customers for one year.

In addition, TouchBistro launched another application to help restaurants stimulate cash flow: branded gift cards. The app enables restaurants to create their own cards using customized designs and templates. It’s also integrated with the restaurant’s POS system. Licensing fees are being waived for the first three months.

One way to enhance online ordering is to allow customers to schedule in advance when they want to pick up their meal. Upserve Inc., a provider of restaurant-management software, includes a scheduling module in its online-ordering application. The scheduler can also be used to accept reservations online.

With online scheduling, restaurants can receive orders throughout the day, which is a convenience for consumers that can help build loyalty, says Adoniram Sides, head of product for Upserve.

Aside from developing new POS technologies, opportunities exist for POS providers to develop peripheral applications that can increase customer loyalty.

Much of the customer data gathered from online-ordering systems can be used to create a customer profile that can be become the basis for a loyalty program that could, as an example, display the customer’s favorite dishes for faster ordering, says DellaChiesa. Plus, customers that opt-in to the loyalty program can be asked to provide their email address or mobile number to enable email and text-marketing messages.

Another peripheral application opportunity lies with in-restaurant digital menus that customers can access by scanning a QR code. Digital menus can make consumers who are wary of handling printed menus feel safer when restaurants reopen, payments experts say.

Cash Out

Despite the opportunities for restaurants to embrace technology that can help create a contactless environment, what remains unclear is what percentage of restaurants will survive as the pandemic recedes.

The National Restaurant Association predicts the casualty rate will be about 20%. While fewer restaurants is bad news for acquirers and POS tech providers, the good news is that cards and digital payments are expected to cannibalize a good portion of restaurants’ and bars’ cash sales.

“People are a bit fearful of handling cash now because of its potential to harbor germs and viruses,” says Nick Starai, chief strategy officer for payment gateway NMI. “I don’t see cash sales going away completely in restaurants, but there is an opportunity to grow card volume at its expense.”

To leverage that opportunity, however, POS providers will need raise their game when it comes to customer service and ease of installation for new technologies. Many restaurants have horror stories to tell about how implementing a new POS system or application was more complicated and time-consuming than they were led to believe, according to payment experts.

“The goal is to make it as easy as possible for restaurants to adopt new digital payment technologies,” says Revel’s Lybeer. “When a restaurant says it wants Apple Pay, they need to hear they can be up and running with it quickly and easily. The bumpier the road to adding new payment technology, the more likely restaurants are to stand pat.”

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