Archive for the “Gift Card Strategy” Category

The Three Things Every Small Restaurant Group Needs 

Customer behavior is always changing – and to keep up, all restaurants need to be able to provide a top-of-the-line guest experience.  Whether your guests come into your locations or order online, they should have the ability to engage with loyalty programs, purchase and redeem gift cards, and place their orders with ease.  While national chains have a lot of resources at their disposal, using the right technology can level the playing field and help independent restaurants and small restaurant groups compete. 

As a provider of enterprise-class customer experience products to restaurants large and small, here are the 3 “must-haves” Paytronix recommends to keep your independent brand competitive: 

  1. Online Ordering: Since 2020, the number of restaurant customers looking to place food orders digitally has skyrocketed.  While some customers are looking forward to getting back to restaurants and gathering and dining with friends and family in person, many have permanently embraced the convenience of ordering and dining at home. 
     
    With Paytronix Order & Delivery, restaurants can streamline their online ordering operations, to make it easier for your staff to focus on what matters most.  As online ordering rose in popularity, many restaurants raced to partner with brands like Door Dash and Uber Eats to capture more orders, but were left with three or four tablets with orders coming in, and needing to manually enter those orders into the POS. HandoffSM brings all of the orders from third parties like Door Dash and Uber Eats and integrates right to your POS, reducing human error and freeing up staff to wait on in-house guests. 

    Once your customer receives their order – how does your management team know they’ve enjoyed their meal? On-site guests can talk to their server, and managers can make a situation right on the spot, but off-premise customers often don’t have any way to express themselves except to leave a bad review or decide not to return again.  With FEEDbackSM your restaurant managers can save a guest relationship right away by getting instant responses from customers, and enabling the manager to respond to negative experiences with discounts and offers at the touch of a button. 
  1. Loyalty: Loyalty programs do more than foster goodwill between you and your guests. They provide a valuable communication channel and help to grow your customer’s lifetime value. Built with the busy operator in mind, Paytronix delivers personalized, targeted, email messages in real-time so you can drive traffic every day. 

    The Paytronix platform also adds a layer of artificial intelligence to your campaigns by predicting future behavior, enabling highly productive segmentation, and making on-the-spot recommendations to increase spend and order frequency.  

    Regular customers are what drive business – but what happens when one of your regulars hasn’t been in for a while. How can you reach out to them and tempt them with a special offer or promotion to bring them back to your locations? A win-back campaign does just that, by identifying your customers who have missed an expected visit and sending them an offer to come back and remember what they love about your restaurant before they’re gone for good.  

    Check out this story of a brand who used a Win-Back Campaign to reengage with wayward loyalty members…with a 10.9x return! 
  1. Gift Cards: Restaurant gift cards are a popular way for your customers to share their love of your brand, whether for the holidays, a special event, or as a thank you and modern gift card programs include the ability to purchase and send a virtual gift card online as well as on site.  

    And for those customers who receive a gift card, making it as easy as possible for them to redeem their card creates a positive experience that they’re sure to remember.  Providing the option for both online and on-site redemption with an online ordering integration means that these customers can celebrate the way they choose. 

    By using loyalty, online order & delivery, and AI-driven insights with one platform, you have all the data you need to motivate your guests to buy more often and more frequently and a program with the flexibility to grow as you do. 

Interested in learning more? Get a demo with the team to learn more about what Paytronix can do for your brand. 

Understanding Comp Cards vs Gift Cards

As gift card sales come roaring back and diners return with gusto, it’s worth taking a hard look at a common but costly practice that ends up taking a toll on restaurants: using gift cards as comp cards.

Complimentary (comp) programs entitle guests to receive products or special discounts at your restaurants. Whether used as a goodwill gesture for guests or to extend a privilege to employees, providing comps is a part of doing business.

Restaurants use gift cards as a means to comp guests. Like paper certificates, guests readily recognize gift cards, which are convenient to issue, and easy to redeem. Unfortunately, comp programs follow distinct financial accounting procedures. Failure to isolate comp transactions from standard gift card transactions creates a “double taxation” penalty that can overstate your sales tax and income tax burden by as much as 12%!

Common pains of comp programs

Comps typically represent 3-5% of total sales — a meaningful slice of your business — and are often not well controlled or properly processed. The main risks of poorly administered comp programs include fraud and abuse, as well as improper financial accounting.

Fraud and Abuse – No One Wants to Lose Money
Inadequate measurement and control of comp programs can result in fraudulent behavior. Paytronix customers report that restaurants lose one in 10 controllable comp dollars to fraud. Paper certificates lack inherent controls and are particularly susceptible. Fraud is not limited to paper-based systems, though. A discount button on your POS system without appropriate controls also invites overuse and abuse.

Improper Financial Accounting = Increased Tax Burden
Improper processing of comp transactions also causes needless financial losses. Recording the value of comp transactions requires specific accounting treatment. You fall victim to the “double taxation” penalty when that treatment is applied incorrectly.

Fundamentally, this taxation penalty occurs because the comp value is a restaurant expense, not revenue. When you fail to appropriately recognize this expense, you artificially inflate your revenues, overstate your net income, and thereby overstate your income and sales tax liability. This overstating is a costly and unnecessary expense.

Gift Cards, the Common Offender
This taxation penalty often arises when comp situations are handled by issuing a gift card. A gift card is the wrong device for comp transactions. Comp cards and gift cards are both valuable elements in retaining and attracting guests. But, they are distinctly different instruments.

A gift card is sold to guests, represents taxable revenue, and appears on the balance sheet as an accounting liability until redemption.

The value on a comp card is recognized as an accounting expense. A comp should appear as a discount that lowers the subtotal of a guest’s check and reduces the amount of tax associated with the transaction. The comp is given to a guest – not sold – and therefore should be reflected as a business expense, not as revenue.

Consequences of Mixing Gift and Comp Cards
Companies have sometimes had to restate earnings to correct for improper comp treatment. This is because they could not differentiate their comp and gift card balances and were forced by auditors to expense 25% of the combined outstanding balance.

Many chains try to backout the comp transactions in their general ledger, but it is difficult to differentiate these transactions and to accurately account for the amount of comps extended. For example, some companies require that receipts be mailed to corporate for processing. This is a labor-intensive process where lost and unidentified receipts understate the true comp amounts.

Interested in the latest news on Gift Cards? Check out our 2022 Restaurant Gift Card Report

Plus, you cannot back out the sales tax. States generally conduct audits based on POS reports, not general ledger data. Assigning proper tax rates gets very complex when a check has different items with different tax rates and is paid with comp and other tenders.

In short, fraud and mishandled comp programs cost you money, so our comp cards provide you with a safe, practical way to offer complimentary value to guests while halting fraud and assuring proper accounting for every comp transaction. 

To maximize your restaurant gift card program, ask these 6 questions

Gift card programs are a staple of the restaurant industry. They benefit top-line revenue, create brand advocates out of guests, and can be used to bolster community relations, employee dining, and to recover guests. For all their benefits, however, gift cards can put a drain on accounting resources and add friction to franchisee relationships.

Managing a successful gift card program is far from simple. Below are six critical considerations that all restaurant brands must take into account in order to maximize the benefits of their gift programs.

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Protect your gift cards from fraud with these safeguards

Gift cards make gift-giving easier for consumers and provide a valuable revenue stream for restaurants. Unfortunately, gift card fraud is a common and pervasive problem for merchants. According to a recent report by Mercator Advisory Group, fraud affecting digital gift cards alone represents a $950 million annual loss to the gift card industry – and that doesn’t account for physical card fraud.

A common form of fraud that targets the merchant involves criminals’ use of technology to “guess” the gift account numbers at lightning speed, enabling them to test many randomly generated numbers until they hit a valid card. When successful, this approach, called a “brute force attack,” is the first step in enabling criminals to access the value on compromised cards.  

Any form of stored value is susceptible to fraud, including comp cards and stored value linked to a loyalty program. 

There are some steps merchants can take to reduce fraud exposure, typically provided by the gift card provider. When choosing a provider, ensure the following safeguards are in place:

Avoidance of sequential numbers. While using sequential numbers when issuing gift cards seems like a logical thing to do, it vastly increases the potential for fraud. Sequential numbers allow criminals to make educated guesses about subsequent card numbers in a series. You’ll want a provider that randomizes the number sequence on the gift cards it issues in order to prevent criminals from deducing entire card numbers. […]