Successful gift card programs give loyal customers a simple way to refer a business to friends, family and colleagues. Some programs are also used to bolster relations throughout local communities, as well as for trade programs, employee dining and guest recovery.
Overall, gift card programs are beneficial for top-line revenue, but at the same time, they can become a drain on accounting resources and add friction to franchisee relationships.
Most operators can relate to at least one of the gift program horror stories below. Check out the tips offered to steer clear of them.
1. Not enough channels
Gift card sales can be a financial boon for a restaurant. Extending the presence of the brand beyond its locations gives guests the opportunity to share their passion for it. Selling gift cards in-store, enabling orders online and offering virtual gift cards are all important best practices to keep in mind.
A recent study by American Express and Technomic revealed where restaurant gift cards are typically purchased—and 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.
2. Being chained to spreadsheets
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 multilocation 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 assign them to franchisees as appropriate.
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.
3. Recurring auditor nightmares
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 point-of-sale system, 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 time and spare operators some recurring auditor nightmares.
4. Holding guests hostage
Operators want to make it easy for guests to acquire gift cards 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 guest 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.
5. The franchisee freakout
When franchisees are redeeming gift cards but settlement funds are late or short, they get mad. Moving money through the chain for gift-card settlement needs to be accurate, reliable, timely—and automated.
When franchisees are happy, franchisors are 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?”
6. Guest-recovery grief
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, they 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.
To learn more about how to optimize your gift card program, click here.