Payments providers and revenue leakage via deposits and ticketing - and what to do about it.
Payments companies may be unaware of leakage of revenue to software providers and their payfacs when their restaurant customers start to charge deposits or ticket their reservations. These deposits or ticket payments will flow to the restaurant reservation system and their chosen payfac.
These sums are substantial and growing, as more and more restaurants take deposits or ticket. At simpleERB we are seeing growth of 70% per annum in the taking of deposits and ticketing.
This revenue disappears “silently” with the payment provider not knowing that it is happening.
Currently one of the large UK providers of reservation software is quoting 1.4% + 1.2% = 2.6% for prepayments such as deposits and ticketing.
That means that the restaurant may be paying nearly as much in cash terms for the 20% of its turnover that is represented by prepayments than it is paying you for the remaining 80% of its turnover!
simpleERB offers you a solution to the problem.
A worked example:
A restaurant turning over over £500,000, with average transaction of £25 and paying the incumbent payments provider 80 basis points plus 10p will be paying the incumbent payments provider £4000 + £2000 (£500,000/£25 = 20,000 covers pa) = £6000
If that restaurant decides, because of the money it is losing to “no-shows”, to take deposits of £10 per head and it takes 25% of its turnover as deposits via its reservation service it will now pay you only £4500 on the remaining 75%.
It will pay the reservation service 2.6% * £125,000 = £3250 It is now paying a total of £4500 to you and £3250 to them giving £7750 i.e. £1750 more pa.
What it means for the payment provider ….
If 20% of your customer base are restaurants and 25% of them start to use deposits or tickets for 25% of their turnover, then you will be losing 1.25% of your gross transaction volume to a competitor that you do not have a chance to compete with. If this volume is growing at 70% per annum, (as we are seeing at simpleERB), then in 5 years you might well be losing 18% of your total transaction volume in the restaurant sector.
The simpleERB solution
simpleERB integrates with your gateway and allows restaurants to take deposits and sell tickets using your gateway.
A worked example with simpleERB in place using your service:
If the restaurant switches to simpleERB and uses your service in simpleERB for taking deposits or selling tickets, its costs increase by only the difference between your card present fee and your card not present fee.. We are assuming 80bps + 10p and 4 covers per reservation which would mean £125,000 * 0.8% = £1000 + (20,000 covers/4*10p) = £500 totalling £1500 ie a saving of £1750 pa
You will recover that lost revenue, £1500 pa per restaurant on the worked example.
You will also earn a revenue share from reselling simpleERB - for a £500,000 pa restaurant this would be around several hundred pounds per annum depending on which plan they choose.
The restaurant will almost certainly save money in monthly fees by changing to simpleERB.
● The restaurant saves money.
● You recover lost revenue and profit.
● You gain revenue share with simpleERB.