Change Series: Covid Prompts Rapid Transformation in How Restaurant Guests Pay

The shift to digital ordering experiences and the recent pandemic have dramatically accelerated changes in how restaurant guests order and pay.

On a recent episode of the Xenial Table Stakes Podcast, we talked with Bob Larimer, a technology executive with Hardee’s franchisee Boddie-Noell and Marc Castrechini of Global Payments Integrated. In this conversation, we discussed the fact that the Covid-19 pandemic rapidly accelerated rollout and adoption of new payment methods that tend to simplify and streamline the transaction. These changes were born out of necessity, and they seem to be here to stay. Both businesses and consumers, it seems, recognize and appreciate the value of reducing friction in the transaction process. 

In this post, we summarize our conversation with these two technology leaders as part of our ongoing change series.

To help with perspective, Boddie Noell owns and manages 346 Hardee’s stores and employs approximately 10,000 people. Bob Larimer is VP of IT for Boddie Noell. 

What’s driving innovation in payments?

Before Covid-19, there were already major changes underway. Take EMV, for example. It has become the widely adopted standard for securing transactions at the point of sale. Mobile wallets, contactless payments methods, and other types of emerging payments mediums were around, but their popularity and adoption varied widely. They were more popular and commonly used in Asia-Pacific, while the U.S. was behind the curve somewhat. 

In recent years, and especially during and coming out of the pandemic, adoption in North America and elsewhere has skyrocketed. We will likely see even more widespread adoption of mobile wallets. The reason is that as people become more familiar with changing one behavior (for example, placing and paying for a food order online or in-app for curbside pickup / takeout rather than dine-in), they are more inclined to try other new behaviors as well. 

What does a move to ‘cloud payments’ mean for merchants?

Are there things that QSRs and other merchants should keep in mind?

Traditional solutions were familiar but there was a lot of administrative burden associated with them, such as difficult integrations and the need to manually install updates.

Cloud solutions simplify support because the support tech can access the payment device or application directly. Cloud also automates and streamlines updates. And by virtue of how they are architected and built, integrations with cloud solutions also tend to be easier.

Cloud solutions work for the store as well as they do for ecommerce or online ordering, and it can be the same solution. 

The rapid adoption of new ordering channels and technologies during the pandemic has revealed issues that forced businesses and vendors, alike, to adapt. Take, for example, online ordering. Most large QSR brands and many other restaurant concepts were somewhere along the spectrum of adoption. 

Enter the pandemic, and everyone had to offer some kind of off-premises service just to survive. 

When people got forced into it rather suddenly and uncomfortably, they started to run into some of the business management / operational issues such as juggling tablets and fee/revenue reconciliation. This was manageable at a certain capacity and scale. But as adoption skyrocketed, it became a management nightmare. Reconciliation, alone, almost became someone’s near-full-time job. And let’s face it: there are already a lot of things for a restaurant manager or owner to manage!

Originally, operators were thinking mainly about how to get more orders in the door and how to accommodate what guests want. 

Now we’re at the stage where operators are asking “how do we settle the disruption to our businesses that this has caused?”

Boddie-Noell was already adopting delivery and working with third party providers. They worked with an aggregator so they could do menu management and last mile integration to the POS.

This avoided the stack of third-party tablets and the manual data entry. 

“We were pacing our adoption of delivery, as we do with everything,” says Larimer. “The business has to be fed, and corporate reports need to go up the chain, but everyone, including operations, needs to be on board and comfortable.”

When the pandemic hit, Boddie Noell fast tracked delivery, and very quickly rolled it out to about two-thirds of its stores that were ready. Its delivery business exploded, and now it’s a very integral part of Boddie Noell’s business. Of course, they did it while balancing the need to provide high-quality food, fast, with the needs of the business.

Currently, Boddie Noell is working on a direct-order channel on mobile. It’s integrated with the same aggregator platform supplying central menu management, reconciliation, and last mile to the POS.

What is an area of emphasis for you and your company and/or brand?

Because so much of our focus has been on off-premises including the drive-thru, we’ve put our focus and energy there. As a consumer, I love things that make any transaction easier, faster, and safer. So I’m looking to offer the same to our restaurant guests, while we focus on providing hot, good food.

Please give us your take on QR Codes enabling the ordering and/or payment experience.

For a long time, consumer adoption was mixed. You might have a technology enthusiast who would scan a code on a poster in a retail store to look up product info or get a discount. They were not widely used in the U.S., especially compared to other regions of the world. 

Why the gap? I think there needed to be some guidance for the QR code. That usually came by way of a mobile wallet or mobile app. For that, there really wasn’t an ecosystem provider in the U.S. early on.

If we’re relying on individual apps to serve the role of a mobile wallet by saving our payment card information in each one, and we have dozens of different apps installed on our phone, one for every QSR we visit, it starts to become a burden.

What we’ve seen more recently is that phones have gotten exponentially better at picking up QR codes with the camera. That has made scanning them about as easy as it can get.

One hurdle has been installation: the basic idea of showing a QR code on your phone and getting it scanned by a POS scanner required the POS provider to do a lot of heavy lifting to code the integration.

More common these days: Using the POS to print or display a QR code that is unique to a customer transaction. This is not difficult, but if you need to roll it out to hundreds or thousands of locations, it becomes a management and deployment challenge.

The cloud solutions and approaches for doing this type of thing are simplifying it considerably, and making it easier in terms of deployment, management, and consistency. And everyone involved is better able to access all the benefits because it’s simpler all around, and no one has to touch every POS system to make it happen.

The pandemic has driven more widespread adoption of QR codes everywhere, including the U.S.

Using a QR code for a payment transaction is now ubiquitous. It works reliably. 

How are brands like Hardee’s thinking about enabling socially distanced payments in the drive-thru?

Traditionally, QSRs have used an EMV-enabled credit card payment device for counter and drive-thru. That’s an expensive piece of equipment. You pull up to a drive-thru today, and you’ll often see crew members handing the device out to the guest’s window on a pole. The manager constantly hopes the duct tape holds, so the device doesn’t fall to the ground and break. 

The QR code is a great way to solve for touchless, socially distant transactions in the drive-thru. The guest uses their phone to scan a QR code on the confirmation screen or on the line-buster’s tablet computer, or from their printed receipt. And they follow the instructions to pay. It all takes place with their phone. No need to touch a payment device. 

The opportunity and technology are here. But similar to earlier iterations of contactless, and U.S. adoption of mobile wallets, we’re just waiting for merchants and consumers to adopt the QR code payment method.

There’s an opportunity to make things easy—frictionless, really—and we’re getting a lot closer to that.

Consumers are going to want to pay in convenient and unique ways and there isn’t going to be one single winner. So as a payments provider, we constantly ask: how do we make sure our technology is enabling what is coming down the line for everyone in the ecosystem, and then how can it reduce friction for everyone, from individual stores/locations to end users (consumers).

What are some questions restaurateurs should be asking when they are looking for a Payments partner?

  1. Are they integrated with my POS provider? If the answer is no, I know what it takes to put together an integration. It’s very complex. So I always tell them to make sure they understand the scope of work and deliverables and how those are going to be measured if they go the one-off integration route.
  2. I always suggest that they not accept the boilerplate contract. We do a lot of editing of contracts with our attorneys. Some things we’re able to get into the contracts, and some things we’re not. It’s a compromise, and you want an agreement that serves both the vendor and the merchant.
  3. I also suggest that operators be future-focused. What things are they thinking about down the road, and what are the vendors thinking about developing and releasing in the future? What are vendors developing and preparing to offer that would help us and serve our guests?
  4. Finally, we’re in the speed and transaction business. So when we’re looking at technology, it has to get our customers through faster. Every second faster helps us build sales. So we’re looking for vendors/service providers that can help us decrease the time that a transaction takes and make it easier for consumers and our restaurants. That will increase transactions, which will increase sales.
  5. What are the fees? Per transaction is a fixed cost and you can easily understand the cost per year based on your typical number of transactions. But it’s important to look more broadly at what all your fees would be. What’s your fee structure based on the percentage of credit card sales? I talk to a lot of franchisees who may be considering various payments providers. I always tell them to not get fixated on just the per transaction fee but look at the total cost. Then ask them what they can do to bring the interchange cost down such as smart routing.

What should restaurant brands be thinking about with regard to security when it comes to payments?

The good news is that the bar for security is very high and you should be able to expect that from your partners.

They should be able to not only recommend solutions but be conversant in and developing whatever is next.

Overall, the restaurant industry has been somewhat slow to adopt EMV. Within restaurants, Quick Serve was a bit faster to adopt. Quick serve counter service was faster to adopt than quick serve drive-thru.

We have continued evolution and attention to security issues, which is helpful for everyone.

When we had early concepts of EMV and PCI come out, there was an awareness factor for many of the downstream business users. What people need to understand is that these standards added a lot of maturity and compliance to our space, which is helpful.

It’s important when you’re selecting a partner to work with someone you have confidence in.

Restaurants have been moving to e-commerce which in restaurant terminology means online / in-app and third-party ordering. That’s where their attention is. Although these channels are somewhat new to restaurateurs, we know it’s been a mature market for awhile, in other segments like online retail. 

EMV and the need for P2PE were two of the best things that happened to our company. It was hard and there was a lot of work involved in getting our restaurants and corporate up to speed from a security standpoint, but we were better off because of it.

Every year we’re iterating and improving our security model. 

So now we’re onto things like keeping ransomware out of a restaurant and off the POS. Imagine having ransomware on your POS and having someone else in control of it, and you being unable to serve guests. That would be terrible. 

Our guests can feel very comfortable that we take security very seriously especially on the payments side of things.

The industry is moving fast, with new payments types and so forth, and regulation tends to lag a bit, but as issues pop up, we’ll find solutions.

Standards and requirements may seem like a burden and resource-draining on the surface, but what it can end up doing is raising awareness of issues that the merchant may not even have been aware of.

What is the most exciting payments innovation that you’re anticipating or you’ve seen?

I look at the technologies I’m using as a consumer in my own life. I always ask how these technologies might fit in the QSR industry and in our business.

It’s exciting working in QSR and seeing all the various mobile and wallet options that have come out that we can integrate with our POS. It’s exciting for us because in QSR, it’s all about speed, and these wallets make the transaction faster.

While the pandemic presented challenges at the outset, it has actually increased our average check dramatically, as people have pivoted to buying for families. Mobile and third party orders have gone up two- and three-fold compared to in-store. Going forward, any payments technologies that help us in the digital space, will help us drive higher per check average.

It’s been great to see advances in reducing friction in the guest transaction experience. But even more exciting: making payments transparent. Say a customer saves their payment card with the QSR or their app. When guests do that, we see increased spend.

Probably most exciting: the combination of frictionless payment with frictionless loyalty accumulation. This has helped brands understand their customers so much better including trends, new vs. repeat visits, per customer spend, etc. Online ordering puts us in tune with specific customers so we can understand patterns such as spending habits, spending by demographic, day of the week/daypart, etc.

The word frictionless is appropriate. I’m a technologist, but I’m also a consumer. And I tend to like brands that help me ‘cut the line’ and interact in the most frictionless way I can find.

Xenial offers payments innovations

Through our parent company, Global Payments, Xenial offers payments solutions with global reach and award-winning service. Our Touchless Payments solution gives guests no-touch convenience and peace of mind, by using only their Smartphone and a QR code presented for scanning on a digital screen or a printed receipt.