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.

Are you maximizing your sales channels?

Gift card sales can be a financial boon for a restaurant. Extending the presence of the brand beyond your locations gives your guests the opportunity to share their passion for it.

A recent study by American Express and Technomic revealed where restaurant gift cards are typically purchased – and your restaurant locations are just the beginning. Of the study’s participants, 27% reported purchasing restaurant gift cards in grocery stores, while 20% reported purchasing from mass merchandisers. When gift cards are made available through third-party retail channels, material sales growth takes place.

Offering gift cards through more sales channels will help sales grow exponentially; but it also muddies the accounting waters, which makes the next consideration critically important.

How are you tracking third-party sales?

Selling gift cards through third-party channels adds a level of complexity to gift card accounting. Tracking sales fees, discounts, and breakage across multiple gift card programs within a multi-location entity can cause headaches for any finance group. Today’s software tracks discounts and costs with each type of gift card, enabling corporate to control when they are deemed expenses on the P&L and to assign them to franchisees as appropriate.

The bottom line: when selecting a gift card software provider, make sure that the platform delivers the requisite automation to avoid manually tracking gift card costs and discounts.

After the sale, how are you tracking the redemption of those gift cards?

Reconciliation of gift card sales and redemption across systems is time-consuming. Restaurants need to be able to trust liability and redemption figures for financial reporting. When the gift card software is directly integrated into the POS, reconciliation time is reduced considerably.

Being able to report gift card liability in a timely and accurate manner is paramount. Look for a provider that delivers accurate reporting through processes audited using Statement on Standards for Attestation Engagements 16 (SSAE 16). It will save you time and spare you some recurring auditor nightmares.

Are you empowering your guests to use their gift cards quickly and easily?

With gift cards, you want to make it easy for your guests to acquire and redeem stored value. Ensure that the funds are redeemable both at the point of sale and with online ordering.

When high-frequency, modest-check brands make payment convenient for guests, visits increase. Automatic reload improves the guests’ experience by enabling them to put value on their gift account and redeem it without disruption. It should be secure and simple to check gift balances inside a restaurant at the POS, as well as outside via mobile apps, mobile-friendly web pages, and interactive voice response.

An important note on security: you should require your guests to use a PIN when redeeming their card online or checking their balance to reduce your fraud exposure.

Are your franchisees happy?

When franchisees are redeeming gift cards but settlement funds are late or short, they get mad – and understandably so. Moving money through the chain for gift card settlement needs to be accurate, reliable, timely – and automated. When franchisees are happy, you’re happy.

Whether running a centralized or decentralized money movement system for gift card settlement, it’s critical to limit the time that the brand’s accounting team spends on managing the gift card program. Smooth operation will also mean less time spent answering the evergreen franchisee question: “Where’s my money?”

Are you using gift cards vs. comp cards appropriately?

We’ve all been there: a guest is unhappy and you want to make it right. Handing that guest a gift card for $25 or $50 is a quick and easy operational solution – and the guest may come back to redeem it. Consider using comp cards for guest recovery instead.

Unlike gift card funds, comp cards are expenses that can be tracked by purpose, such as guest recovery, community outreach, or trade. Comp cards can be set for the exact price of the meal, as opposed to a round amount, and they can also carry an expiration date to create a sense of urgency for a return visit, which gift cards legally cannot.

 

Want to see how your 2020 sales stacked up? 

The 2021 Annual Gift Card Report from Paytronix is coming soon. The report explores useful trends in closed-loop restaurant gift card sales and insights into the value of gift card programs in the industry during a turbulent, unprecedented year. Want to know when it’s ready? Sign up here to be notified when the report is available.

Michelle Tempesta

The Author
Listening to the market, making recommendations for scalable product requirements, and developing useful content are the services that Michelle’s group brings to Paytronix users. Her constant thirst for marketing results is underpinned by a BS in marketing from Plymouth State University and an MBA from UIC.

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