Jack-In-The-Box Foregoes Contactless Trial, Opts For Immediate Full Chain Rollout

Written by Evan Schuman
November 10th, 2006

When IT managers at the $2.5 billion Jack-in-the-Box fastfood chain started looking at contactless payment issues this year, it was clear that the RFID-enabled credit cards would be more than a faster way to get customers processed. It would add to the 2,000-restaurant chain’s coolness factor and give young customers another reason to check out the chain. This is especially the case with the demographic that fast-food managers most want to cultivate: 18-34-year-old men.

But taking the next traditional step?limited trials in a handful of carefully-watched locations?wasn’t going to make the bold statement needed. The company opted instead to immediately rollout out contactless payment to every one of the chain’s restaurants?both for the 1,400 restaurants they own and about 600 that are franchised?in 17 states.

It is likely the largest endorsement of contactless payments yet in the restaurant space. Last year’s chain-wide rollout of contactless payment by the $41 billion 7-Eleven convenience store chain was one of the largest contactless endorsements overall.

Such a move would be expensive and challenging, but the nation’s largest credit card associations?including MasterCard, Visa, AmericanExpress and Discover?needed a chain like Jack-In-The-Box to go full throttle on contactless.

Consumers who don’t 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 point-of-sale systems for Jack in the Box Inc.

“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-thru 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 five percent of the franchised locations will not be initially deploying contactless is because they are accepting debit-card payments and the two are initially not compatible. The rest of the Jack-In-the-Box chain does not accept debit cards, mostly because the inputting of the PIN would likely slow down transactions too much, said Cason Lane, the chain’s manager of corporate communications.

Much of the hardware for the chain’s contactless rollout is coming from Santa Clara, CA-based VivoTech, including a line of DT readers that VivoTech President Mohammad Khan said they customized for Jack-In-the-Box so that it would “accept both contactless as well as magnetic stripe cards for orders placed through drive-thru.”

Verdesca said the final hardware choices were VivoTech and Fort Lee, NJ-based OTIGlobal. “Both were very valid competitors” but testing found that the OTI drive-through unit “wasn’t as durable,” he said.

The reasons for the chain to embrace contactless payment were accelerated payment for customers, but also the hope that the newness of the technology may attract some customers to the stores for the first time and hopefully get them hooked.

Competitive issues, though, also played a role, with Verdesca keeping a close eye on what other fastfood 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. “We’re 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 was not worried about that because of assurances the card associations were offering. “From our perspective, the security risk is within the cards themselves” and is not a reason to hold off supporting them, he said.

The chain’s contactless move also positions the chain technologically to eventually accept cellphone payments and to more easily integrate a loyalty program within their POS system.

One technology that the chain is doing limited testing of in “select San Diego locations” is a self-service kiosk, Verdesca said, that would accept various forms of payment and allow customers to modify their orders (“extra cheese, extra bacon,” he 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 it’s 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. It’s merely on our horizon as a possibility.”


One Comment | Read Jack-In-The-Box Foregoes Contactless Trial, Opts For Immediate Full Chain Rollout

  1. Pete Abell Says:

    This is a good example of a retailer using RFID (Contactless payment) technology strategically which is similiar to how Marks & Spencer reached their decision to change their image.It is likely to pay off handsomely for Jack as the demographics will support it. The privacy and security issues are more for the consumerists, middle aged and older sets to fret about. Watch for more Cell Phone and PDA users tapping these devices on payment terminals in the US as we are behind our Asian and European cousins in trying the technology.


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