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?
Drago, I am now seeing a lot of Ipads showing up in restaurants where the server present the bill and can accept cards right at the table. They also use the pad to display tasty dishes and deserts to upsell you. Your thoughts on where this is going?
Frederick – Great question. Generally I am pretty bullish on tablets at the table. I often call these Table Top Devices (TTD’s) and feel that they represent an interesting opportunity for some operators. The opportunities for the operators are typically aligned with a couple factors:
1) Increased Revenue – TTD’s can be used to increase sales through either upselling to higher margin items or consistently offering appetizers / deserts.
2) Increase Capacity – As mentioned in the article, some TTD marketers are promoting as much as an eight minute decrease in table turn time.
3) Concept Fit – Some concepts attract clients based on their at-the-table or in the restaurant entertainment. While this entertainment takes on several forms, a tablet at the table can be made to fit the concept and thus complement the overall concept experience.
4) Better Service – Providing guests with the ability to re-order drinks, call a manager to the table, or immediately pay and leave whenever desired can ultimately lead to a better experience.
To play fair, criticism for these devices include that they are a distraction for the guests, that they are an expensive way to make up for poorly trained wait staff or a poorly operated restaurant, and that they take up too much table space. Further, operators have to consider how table based ordering impacts customer service – How does a waiter know that their table order another drink? How do you validate that a guest who has ordered a drink is 21 years old? And don’t forget the technical operations associated with installing 20+ new at the table, wifi, rechargeable devices has on the operations of a restaurant.
All in all, for the right concepts, these devices will be a great addition. If the concept doesn’t align or if there isn’t enough patience around the adoption of the new technology, they just won’t work.
Cheers,
Drago
It will save the time as you mentioned totally agreed with you but now its time for make much easier for restaurant systems.