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The COVID-19 pandemic was extremely disruptive to the restaurant and c-store industries. Consumer behaviors toward dining and restaurants shifted quickly at the pandemic’s onset in early 2020, and even as pandemic restrictions begin to ease, consumers don’t appear keen to revert to their old ways. .The Order & Delivery Report 2022, which details this trend and the data surrounding it. This blog and the ones that follow will highlight findings from the Paytronix Order & Delivery Report 2022, as well as shed new light on recently acquired data.

Certain habits appear to have changed permanently. Customers clearly want to place orders digitally, a technology trend that picked up steam just as the pandemic took hold. Third-party ordering services have become a restaurant and c-store fixture, and savvy brands have both embraced these technologies as well as tools that allow them to simplify operations.

A Shift in Ordering Behavior

While on-premises ordering is resuming, it is still far below pre-pandemic levels. In the meantime, digital ordering continues to prove a rewarding investment for restaurants and c-stores, thanks in part to how easy it is to complete a digital order today. Paytronix data shows that digital ordering will continue to exist alongside in-store options, perhaps for good.

The graph below tells the story of 25 brands who operated continuously during the pandemic. The first graph represents their in-store sales while the green shows digital orders. In-store sales remained down 42% from their peak in January 2020; digital orders were up 113% during that same time period.

The nature of digital orders has changed as well. While delivery was king before and during the height of the pandemic, more recent data indicates that takeout orders now dominate online orders, with numbers even higher than they were pre-pandemic. Takeout jumped from approximately 35% of orders in January 2020 to a majority in March of 2022, a trend that appears to be increasing. Meanwhile, curbside pickup, which received a lot of attention during the early days of the pandemic, has all but disappeared.

Adapting to third party delivery

Now that it’s clear these third-party services have staying power, vendors are taking back control with tools such as Paytronix Handoff^SM, a system that takes orders from third-party marketplaces and automatically inserts them into a point-of-sale system, eliminating the need for “tablet farms”. It also allows restaurants and c-stores to make changes to their online menu and propagate those changes to all third-party delivery services. This gives brands the flexibility to customize offerings and pricing, as well as ensure that the services have the most current menu.

While there are clear advantages to partnering with third-party delivery services, there have been some growing pains as well. During the height of the pandemic, it was normal for a restaurant
or c-store to have multiple tablets cluttering their order counter to accommodate the various services they were utilizing, a system that could quickly become confusing and overwhelming, contributing to the stress of burned out and overwhelmed staff.

Third-party delivery will continue to be a viable channel in the future. Even if restaurants and c-stores are successful at converting third-party delivery customers to first-party delivery customers, third-party services will continue to play an important role in a customer acquisition strategy. Success in today’s “new normal,” means embracing new sales channels, and new technology.

Last week, Paytronix capped off the #TikTokToTechPX Challenge, run in conjunction with Boston Public Schools, specifically the English High School. We had asked the students to create a TikTok video that tells their story about what attracted them to technology. These students (and their parents) celebrated their exceptional work highlighting the potential of a career in tech.  

This is part of a greater Paytronix effort to bring diversity and inclusion to technology roles not only at Paytronix, but also within the industry at large. In working with Boston Public Schools, Paytronix reaches high school students who have an interest in tech to help show them a path to a role at a company like Paytronix.  

Congratulations to the winners, and we look forward to welcoming them as part of the next generation of tech innovators. 

Subscription programs have emerged as a key component in the restaurant marketing toolkit. Like the loyalty programs on which they’re based, well-designed subscription programs keep guests returning and help drive incremental value. They also reach important demographic groups to produce long-term benefits.

The latest collaborative study between Paytronix and PYMNTS, The Digital Divide: Restaurant Subscribers and Loyalty Programs, finds that subscription programs help restaurants lock in their most valuable and loyal customers.

Survey results show that 75% of non-subscribed consumers are at least “slightly interested” in joining a restaurant subscription program. And there’s a significant chance that new subscribers will become highly valuable to a brand.

Today’s restaurant subscribers are among the industry’s most engaged, and loyal customers. They visit more often, spend more, and stick around for longer.

It’s therefore no surprise that a strong correlation exists, as 80% of subscribers also use loyalty programs.

Subscription programs tap into a particularly valuable consumer demographic: the bridge millennial. College-educated, tech-savvy, and wealthy, this group takes full advantage of a brand’s loyalty offerings and spends more than the average consumer.

Subscribers have indicated that their primary needs are convenience, simplicity, and value. For most brands, implementing a subscription program is a logical step because it involves many of the elements that are already at the core of the guest experience.

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.