I found myself this week trying to justify to myself whether or not it made sense to implement pay at the table devices in a restaurant. Rather than the intangibles associated with the look and feel and how the device complements a particular concept, I was looking for some concrete economic reason why pay at the table would make sense for a restaurant.
While I won’t recreate the bell curves, and “too complex for their own good” crash and burn business models that worked their way through my head, I will share with you the one tangible that made the most sense to me – Incremental Sales.
There are obviously several ways a restaurant can increase sales.They can put tables out on the sidewalk and instantaneously increase their capacity. They can potentially train their servers so that appetizers, deserts, and premium liquors are sold with more frequency. They can advertise better, or implement programs to capitalize on available capacity during slower days. Or they could simply turn tables faster.
My friends in the table top device market often tout that they can decrease linger time at the table on average by eight minutes. While I think that is fantastic and an impressive figure, let’s make an assumption that “pay at the table” is only 25% as efficient as a table top device and therefore implementation of a pay at table solution could decrease linger time at a table on average by just two minutes.
Now to the High Level Sophisticated Back Of Napkin Mathematics – if a restaurant has 40 tables and each table has an impact of two minutes, then in a single seating of all tables you would decrease linger time by 80 minutes. So we just gained 80 minutes of capacity, right?
If during lunch, our typical table turn rate was 40 minutes and we just gained 80 minutes of capacity for every complete table turn, then through the implementation of a pay at the table solution, we could increase sales by 2 tables for each complete table turn. If during a typical lunch the restaurant on average turns each table 1.5 times (60 total tables served), then we would increase capacity by three tables in that applicable 60 minute period. An incremental three tables compared to the average of 60 tables would be a 5% increase in sales during lunch.
Continuing my HLSBONM, if an average lunch check is $25 / table and you have 60 tables the restaurant would have $1500 in lunch sales. With pay at table, this would be $1575 in sale. If this is applied to 200 at-capacity-days during a year, lunch profits would increase $15,000. Break even for this technology would thus be $1250 / month ($15,000 / 12). While I won’t go into the pricing for pay at the table, I can guarantee that it is measured in fractions of $1250 per month – even at the largest concepts.
Three tables during a lunch shift surely isn’t sexy, but an immediate 5% increase in sales is. Sure, some restaurants aren’t at capacity and are thus not losing business due to extended waits, so this model wouldn’t apply. But from my own vast experience eating lunch, the places I want to go have extended queues and I routinely go to option B. That said, what am I missing?