When the $2.5 billion Jack in the Box fast-food chain started looking at contactless payment this year, it became clear that a faster transaction time wouldnt be the only benefit to accepting RFID-enabled credit cards. Embracing the technology would also add to the 2,000-restaurant chains "coolness" factor, an especially important point given that the demographic fast-food managers most want to cultivate is 18- to 34-year-old men.
But taking the next traditional step—limited trials in a handful of carefully watched locations—wasnt going to make a bold enough statement for the chain. So it opted instead to immediately roll out contactless payment to every one of its restaurants—for the 1,400 restaurants it owns and about 600 that are franchised—in 17 states.
This is likely the largest endorsement of contactless payments yet in the restaurant space. Last years chainwide rollout of contactless payment by the $41 billion 7-Eleven convenience store chain was one of the largest contactless endorsements overall.
Such a move is expensive and challenging, but the nations largest credit card associations—including MasterCard, Visa, American Express and Discover—needed a chain like Jack in the Box to go full throttle on contactless.
Consumers who dont start seeing a lot of contactless merchants are much less likely to be interested in using the contactless card. So the card companies all offered substantial "financial assistance" to pay for the extensive hardware needed, said Michael Verdesca, director of POS (point-of-sale) systems for Jack in the Box.
"The associations funded the majority of the hardware costs," Verdesca said. "We just decided that we wanted to take advantage of the incentives. It definitely is the direction that we want to go in."
The contactless installations began in mid-October and will be completed in all of the company-owned restaurants—and 95 percent of the franchised locations—by Dec. 31, he said.
The chain is paying for the portion of the hardware that the card associations will not pay for, but the franchisees are responsible to pay for their installation costs. Verdesca said the counter installations "are really easy" and simply plug into existing POS units, and the drive-through unit installations will likely cost "a couple of hundred bucks" because someone has to "drill a hole in the wall and run [cable] through to the building."
The reason about 5 percent of the franchised locations will not initially deploy contactless is because they are accepting debit-card payments and the two are currently not compatible. The rest of the Jack in the Box chain does not accept debit cards, mostly because the inputting of the PIN would slow down transactions too much, said Cason Lane, the chains manager of corporate communications.
Much of the hardware for the chains contactless rollout is coming from VivoTech, including a line of DT readers that VivoTech President Mohammad Khan said have been customized for Jack in the Box so that it would "accept both contactless as well as magnetic stripe cards for orders placed through a drive-through."
Verdesca said the final hardware choices were VivoTech and OTIGlobal. "Both were very valid competitors," but testing found that the OTI drive-through unit "wasnt as durable," he said.
Accelerated payment wasnt the only draw to going to contactless payment; the chain is also hoping that the newness of the technology will attract new customers to the stores and get them hooked.
Competitive issues, though, also played a role in the decision, as Verdesca keeps a close eye on what other fast-food chains are doing. "It may be just a novelty thing, but I know which other brands have them in some of their restaurants" including McDonalds, he said. "Were the first large brand [in restaurants] to actually do it chainwide."
The big negative with contactless payment systems are recent reports questioning the security and privacy-protection capabilities of the RFID-enhanced cards. But Verdesca said his team isnt worried about that because of assurances the card associations are offering. "From our perspective, the security risk is within the cards themselves" and is not a reason to hold off supporting them, he said.
Jack in the Boxs contactless move also positions the chain technologically to eventually accept cell phone payments and to more easily integrate a loyalty program within its POS system.
One technology of which the chain is doing limited testing in "select San Diego locations" is a self-service kiosk that would accept various forms of payment and allow customers to modify their orders ("extra cheese, extra bacon," Verdesca said) while theoretically increasing order accuracy and speed of service. The system also has the ability to recycle cash (take the cash paid by customer 288 and use it to deliver change to customer 289), Verdesca said.
The chain is hesitant to incent customers to use the self-service kiosk by offering product discounts—which can get complicated with multiple prices being charged for the identical product—so its instead offering free dessert and other rewards for customers who try it. But Lane stressed that the self-service kiosk "really is just a proof-of-concept test at this point. Its merely on our horizon as a possibility."
Retail Center Editor Evan Schuman can be reached at Evan_Schuman@ziffdavis.com.
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