Catching the cashless wave: With credit buyers soaring, fast-food

Journal Record, The (Oklahoma City), Jul 14, 2005 by Brian Brus

Instead of digging in pockets for loose change at fast-food restaurants such as Sonic Drive-Ins, customers are using credit and debit cards more often - and it shows in how much they're spending, the Visa credit card company reported.

Quick-service restaurants have seen service speeds and revenues increase as more people are going cashless. The average ticket for Oklahoma City-based Sonic Corp. and others has been 30 percent higher than those businesses where cash changes hands, a Visa spokesman said.

It's only been in the last three years when all of the major brands began accepting cards at a corporate level - when you saw McDonald's, Burger King, Wendy's, all come out and announce their cashless programs. And since then things have really picked up, Visa spokeswoman Randa Ghnaim told The Journal Record.

We've all been at the drive-through fumbling for change under our seats. - Consumers want choices, even in how they pay, she said.

In 2004, volume on Visa-branded cards within the quick-service restaurant, or QSR, category of the food industry reached $10.8 billion, a 67 percent increase over 2003, the company reported. For the first quarter of 2005, Visa realized growth of $3.5 billion in volume in the QSR category, a 59 percent increase over the same period in 2004.

That growth includes Sonic's recent roll-out of its own program of Pay At Your Stall (PAYS) to franchise drive-ins, which began in February and is expected to continue throughout the company's locations through 2006, Sonic said in its quarterly report in June.

Sonic's systemwide same-store sales increased 5.5 percent and 6.8 percent in the third quarter and first nine months of fiscal 2005, respectively, up about 1 percent from the previous year's numbers. Chief Executive Cliff Hudson said in the company's quarterly report that the improved performance was due in large part to its recently implemented PAYS - the credit card terminals at each drive-in stall - which has raised average check amounts and improved speed of service for credit-card orders.

According to a recent Merrill Lynch analyst report, Sonic has experienced an incremental same-store sales increase of 2 percent for its restaurants accepting credit cards compared with those without.

Sonic has projected its net income figures for the next quarter will be stronger than the same period a year earlier, in part because restaurant-level sales will be flat, as the benefit of increased sales volume leverage offsets higher other operating costs, primarily costs related to an increase in credit card transactions following the roll-out of Sonic's PAYS program.

Visa reported that more than half of the top 10 fast-food restaurant brands are either already accepting payment cards or are integrating them into their point-of-sale systems. Companies were initially reluctant to invest in cashless options because of assumptions card processing would slow down service lines. That hasn't been the case, Ghnaim said.

As cashless takes off, it's giving rise to other forms of electronic payment. You're seeing QSRs taking a look at gift cards - anything that can speed up the point of sale, because speed is the bread and butter of the industry, she said.

And as for dark visions of interest-bearing hamburger purchases hitting the economy, Ghnaim said Visa has found the majority of consumers sliding their cards over the counter are dipping into their available funds via debit cards - of the $10.8 billion in sales recorded in 2004, about 25 percent were on credit cards with the rest on debit, Visa reported.

It's a serious issue for us, too. No one wins when the consumer goes into debt, she said.