Quick service restaurants often have to make technology decisions faster than other restaurant categories, and the regional fried chicken chain Zaxby's is no exception.
Zaxby's, which has more than 700 locations in the Southeast, has installed a wide range of mobile technologies for ordering and payments. The project is so significant that the Athens, Ga.-based company had to supersize its tech team.
"Five years ago, we had two people in our tech department," said Jeff Hood, financial projects director for Zaxby's. "Today we have 20 and a building for IT."
The chain's next project is to create a mobile gift card. Zaxby's has a mobile app that enables online ordering with credit card payment in-store, but its gift card program is stuck in the world of plastic. "The mobile app is robust but it's not tied to a gift card program," Hood said.
Gift card sales at the chain have tripled over the past three years, and Zaxby's wants to open a mobile channel to boost redemption, Hood said. The chain did not disclose redemption rates, though market statistics suggest consumers want to give, receive and use gift cards over multiple channels.
About 80% of consumers want the gift cards they buy to be redeemable online or in person, and 98% of gift card recipients redeem in a variety of channels, including in-store, online, mobile or a combination of options, according to recent research from the Retail Gift Card Association.
"With a digital gift card it's more likely it's not going to get stuck in a sock drawer," Hood said. "We want people to be able to load that on their phone and be able to use that to drive traffic to stores."
Zaxby's IT team will develop the mobile gift card service, which will also use technology from Paytronix Systems, a company that provides reward programs for restaurants.
Zaxby's hired Paytronix to process gift card sales and contribute to virtual gifting and other digital services. Among the services Paytronix will manage is the complex tracking of gift cards purchased at a third-party store and used at a franchise, or a card purchased at one franchise and redeemed at another.
"There are accounting challenges," said Michelle Tempesta, head of marketing for Paytronix, adding the taxes are different based on how the gift card redemption is classified—some chains classify gift cards as revenue, or as a liability until redeemed, or as a combination of the two depending on the reason for the gift card issuance (in some cases restaurants give out gift cards to people who complain about bad service, for example, which is typically classified as a liability). There are also different accounting processes for gift cards purchased and redeemed at different franchises, and rules for mobile gift cards or gift cards purchased at third-party locations, Tempesta said.
Paytronix recently updated its rewards interface with several omnichannel-friendly features, such as a centralized campaign center that allows merchants to track visits, spending, and average spend per redemption. The upgrades are also designed to accommodate tablets, smartphones and social media registration.
"In general, merchants are looking for one source to manage their gift cards, they want a breadth of services under one roof," Tempesta said.
Zaxby's does not yet accept contactless mobile payments in-store, which places it behind other quick service chains such as McDonald's and Starbucks, which have offered mobile services and contactless payments for some time. Hood attributes the delay to internal research on how to offer contactless payments in the most cost-effective manner possible, as well a change in gift card processors from Chase Paymentech to Paytronix, a transition that put other moves on the back burner.
The impact of these upgrades must also be taken in context with other projects that local store managers are undertaking, such as EMV migration—the chain hopes to minimize the amount of change and the expense at one time, Hood said.
"Our IT people are considering how to put EMV hand-in-hand with the other mobile upgrades, so we can be compliant with Visa and MasterCard but also have equipment in place that allows us to add other digital services," Hood said. The chain is also considering Apple Pay, Hood said.