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More franchises test mobile payments


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Popeyes is putting mobile-pay options on its counters, aided by Revel Systems.

Brands with young customers, especially, are embracing ways to pay with a smartphone. The challenge is sorting out which is best: Apple Pay, proprietary apps, Bitcoin or whatever’s next.

Smartphones have replaced cameras, GPS systems and even the lighters that concert-goers used to wave above their heads. Now, they’re edging in on credit cards, too.

From Apple Pay to proprietary apps, thousands of franchisees are moving into the mobile payments space. John Gordon of the San Diego-based Pacific Management Consulting Group says there are some clear advantages for these early movers.

“Typically there tend to be more repetitive and higher transactions via mobile devices,” Gordon says. “It’s yet another way to build connections with people.”

Taco Bell, with its younger demographic, felt customers would respond well to mobile. Jeff Jenkins, the brand’s director of digital experiences, said that with 5,700 locations now using mobile pay (out of about 6,000 total in the United States), he’s excited about the future.

“This is going to be a very transformational tool,” Jenkins says. “On the very first day we launched, 75 percent of stores had an order.”

Dairy Queen is testing a new app in Denver.

This fall, the Irvine, California-based company launched a proprietary mobile solution that allows customers to pay through the app with a credit card, debit card or gift card. Jenkins wouldn’t disclose development costs, but several web calculators put the price for an “average” large-scale app at $350,000 or more. Adoption was straightforward since no extra hardware was needed in stores—the order is pushed directly through the point-of-sale system and is handled in the kitchen like any other order.

In developing the app, Taco Bell met monthly with a small group of franchisees who served as early testers. Jenkins says that not only franchisees but also staff members served as boosters, and one customer even wrote a rap song about that app on day one.

“Our franchisee partners understand we have young consumers,” Jenkins says. “They really get it. They embraced it and spread the word.”

Tech-savvy franchisees have also been key in Dairy Queen’s expansion to mobile pay, according to EVP of Marketing Barry Westrum. He says the Minneapolis-based company is testing its mobile app in Denver because that’s where the interest is.

“Our franchise owners there are very progressive thinkers,” Westrum says. They were “some of our first operators to get into text messaging, text offers, delivery. They have some of our most progressive POS systems.”

As a result, 60 restaurants in the Denver area are now testing out the myDQ app, which also features loyalty rewards, offers and a store locator. Most of the franchisees are one- or two-unit operators, allowing a relatively small area (Dairy Queen has more than 4,500 stores in the United States) to serve as an effective test market. Westrum also declined to disclose development costs but said it was “what you’d expect” for an app along the lines of a national restaurant locator.

Dairy Queen’s app does not allow for credit card or debit card ordering, and certainly not PayPal or Bitcoin. Instead, it’s a new twist on the old gift card. Right now, customers load a certain amount of money on the app in advance and then pay with that. However, Westrum says the company is open-minded about future developments.

“We will be where our fans want us to be as relates to mobile pay,” Westrum says. “If they want to pay through Apple Pay, we’ll be there.”

Charlie Wiggs is a GM and SVP at Mozido, the Austin, Texas-based company that developed myDQ. Mozido recently acquired CorFire, which provided mobile payment to the Dunkin’ Brands app, the second-most used company mobile app in the United States after Starbucks. The company has significant traction in South and Latin America as well (they’ve worked with Mister Donut, a popular QSR chain in Spanish-speaking countries). Wiggs says the future of mobile pay goes far beyond mobile apps to providing an alternative banking system for those without bank accounts.

“We’ve always had a big focus on providing financial services for the cash-only customer,” Wiggs says.

But mobile pay isn’t without its problems. Taco Bell has seen 1.4 million downloads in its first seven weeks, or 200,000 per week, but then again, it also averages 36 million people in a week. “35.8 million visitors didn’t download our app this week” does not have quite the same ring to it. Furthermore, sources remained silent on the number or percentage of transactions actually using mobile pay (as opposed to people who download an app for a free mini Blizzard and then delete it after a week).

The first problem is a generational one. Anyone above the age of 22 is likely wondering why it makes sense to trade a thin, ultralight, unbreakable piece of plastic for a $600 supercomputer that stops working if you leave it in the sun too long.

The second problem is with app proliferation. Just as with loyalty cards, there’s a limit to how many loyalty apps customers will allow taking up screen space and memory on their phones.

“Eventually, there will be so many apps people won’t feel comfortable downloading” one more, Gordon says.

Then there are the competing standards, somewhat like the Betamax/VHS battle of days gone by or the HDTV/Blu-Ray fight today. John Lapeyrouse is vice president of IT for Covington, Louisiana-based Smoothie King, which recently implemented an iPad-based POS system in all 700+ of its locations. Lapeyrouse says competing standards are preventing any one system from spreading more rapidly.

“There is no winner yet in the mobile wallet space. There are lots of folks trying and Apple Pay certainly has a new slant on that,” Lapeyrouse says. “Our system is able to use Apple Pay as well. We just needed to be in a system that, no matter what our guests want to do, we’re able to integrate with it pretty easily.”

San Francisco- based Revel Systems, Smoothie King’s provider, also works with Popeyes Louisiana Kitchen, Rita’s Italian Ice and Pizza Patrón. The company just received $75 million in funding.

CTO Chris Ciabarra says his system, which is on 10,000 terminals so far, is adaptable to what the future brings. “Paypal, Apple Pay, Bitcoin, you name it,” Ciabarra says. “The software doesn’t change.”


How people are paying

Apple Pay: Apple has partnered with most major banks to create a secure alternative to credit cards. The iPhone generates a one-time code per transaction so thieves can’t get access to your bank account. The downside is this requires special POS technology that not every system supports, and does not work with other phone types. Panera and McDonald’s are among those accepting Apple Pay.

Proprietary Apps: Brand-specific apps have their own systems for payment, generally using credit or debit cards, and may store value like a gift card as well. Taco Bell, Dairy Queen and several others have developed their own applications.

Bitcoin: Bitcoin isn’t only a separate payment method, but also a separate electronic currency with extremely low transfer fees. It’s been slow to catch on, but at least one Subway franchisee in Pennsylvania is accepting it.

PayPal: This eBay subsidiary and popular online pay company publicly partnered with Burger King this fall. One questionably beneficial bonus is the “Pay After Delivery” feature, which allows customers to get their Whopper now and pay in two weeks.

 

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