In the US alone, people spend over $115 Billion per year to purchase gift cards. Department store gift cards are the most popular kind, followed by restaurants and other retail and services. Of the $115 Billion spent to buy gift cards, ninety percent will be redeemed in about 60 days. However, $1 Billion worth will NEVER be redeemed.
When someone buys a gift card, they, in effect, become an unsecured creditor of the business. So, when you sell a gift card, you owe money to the person who owns the gift card. There is some risk to the purchaser of any gift card. Due to this fact, the federal government (and most state governments) has many laws related to the sale and use of gift cards. Some of these laws can be a bit counter intuitive, and often restaurant staff can make statements about gift cards that are not correct. Going into the holiday season, it may be a good idea to make sure your staff understands how to correctly answer gift card-related questions in accordance with the law and perhaps your own policies.
Before discussing the laws around gift cards, it’s important to note that not all gift cards are actually ‘gift cards.’ Many restaurants will offer a complimentary gift card to regular guests as a gesture or to invite a guest to return to the restaurant after a less than favorable experience. If you provide “comp gift cards,” it is very important to use a different form or format than your “paid gift cards.”
Comps are not regulated; Therefore, they can expire at any time, they can have limits placed on when or for what they can be used, and they have no cash value. We suggest providing comps using a different color card or form clearly marked No Cash Value. Since most gift certificate users can get some or all of the unused value as cash, it is extremely important that your staff not return cash for the unused portion of a comp gift certificate. You may also want to require that the entire value of a comp’d gift card be used in ONE VISIT (Note: this is not allowed in the case of a cash gift card). Make sure that the comp certificate looks nothing like the normal certificate. Include “No Cash Value” clearly on the comp’d card, and include any restrictions as well. You may also want to set your computer system to not allow gift certificate payment without a manager or supervisor first approving the transaction.
Can a gift card expire? Gift cards are regulated by the Federal Trade Commission (FTC). The FTC allows gift cards to expire only after five years. Oddly you can print an early expiration date on the material, however within five years you are federally required to either honor the card or exchange it for a new card. If you are in California, Connecticut, Florida, Maine, Massachusetts, Minnesota, Montana, New Hampshire, Oregon, Rhode Island or South Carolina, your gift cards can never expire.
Can you charge a fee for using a gift card after a certain date? According to the FTC, you can charge an ‘inactivity fee’ after a card has not been used for one year since purchase. Most states do not, however, allow merchants to charge an inactivity fee (and some limit the amount). For a complete list by state, visit www.consumersunion.orghttp://www.consumersunion.org . It seems that most guests would not react well to an inactivity fee regardless of the law, and the amounts which can be charged or negligible.
Can someone exchange a gift card for cash? Most states require that change be given/cash be returned only when a small amount of money is remaining ($5-10). In most states, if a guest has a $100 gift card and wants to purchase a diet coke and receive change, you can explain that you can return the value in gift cards only. See your states specific laws at www.consumersunion.org
In the old days, people would buy and use gift certificates. Gift certificates were a piece of paper, which itself was almost like cash. From gift certificates we made a transition to the plastic gift cards, which are now being replaced by more virtual methods such phone apps with scan-able codes.
Selling gift cards around the holidays is great for restaurants. Each gift card sale is like a referral; one of your guests is telling someone else, “I think you will like this restaurant.” Each gift sale is really a chance to gain new, repeat business. People often buy gift cards in bulk. An office may buy dozens of gift cards for holiday gifts, and assistants everywhere may fill their bosses holiday list with just a few quick bulk purchases of gift cards. In most cases, gift cards can be sold for very little or no work, and the money arrives in your bank account just like any other sale. When the card is redeemed, 27% of the time the guests will spend more than the value of the gift card. Also, remember, nearly 1% of all gift card sales are never used at all. Gift cards are good business.
The first step in maximizing your gift card sales is to make it as simple as possible for someone to buy them. The most difficult case may be for a guest to drive to your restaurant, park, arrive before opening, wait for the hostess to find a manager via the intercom and then pay with a credit card. If you do not want to sell gift cards online, consider making the process of purchasing in person as streamlined as possible. Create a number of ‘ready to go’ certificates of different values to empower your host or bartenders to complete the sales.
In general, the best way to maximize your gift card sales is to sell gift cards online via your website. We have no relationship or affiliation with any gift card company but The Gift Card Café is clean, simple and does everything you may need. Generally, you would install a big, clear link on your website, which would direct users to a gift card app. Many of these can be designed to match your own website. These services can collect payment via credit card, Paypal and even BitCoin. Users can then print a gift certificate with a unique code or email the certificate to the recipient. Most services have some sort of an app for redemption, which can track the unused portion of the certificates as well. If a guest spends $50 of a $100 gift card, you can simply return the gift card and invite them to use it for the balance the next time they return.
Many gift card services will allow you to offer discounts and promotions to incentivize greater sales. Many group certificate purchases are done on behalf of an office or some type of organization. One person may be tasked with finding gifts for the group. You can offer the person buying the certificates a certain value back to them in the form of their own certificate. For instance, buy $100 in gift cards and get $10 for yourself. With this type of promotion, the office manager or person responsible can ‘enrich’ themselves at no cost to their employer which may just tip the scale to buy all of their gift cards from YOUR restaurant. Most online gift card services can manage this for you.
Most gift card sales do take place online, but you should also try to sell as many gift cards to the guests visiting your restaurant as you can. A healthy competition between staff members on who can sell the most gift certificates may be helpful and fun. If you have the space and the volume, consider setting up a dedicated gift certificate sales area (maybe at a host podium or even a table in the dining area). Guests coming or going may pop over and purchase some last minute gift cards for stocking stuffers or a holiday party.
Tis the season – Due to the popularity of deal sites, such as Groupon, many people have discovered how to take advantage of the challenges restaurants face managing gift cards. It is extremely important to have a consistent set of systems to track redemption by card. Again, there are many services that can manage this. Most POS systems have some degree of gift card functionality, and even a simple excel sheet with numbers can work as well. Groupon warns its merchants that certificate holders will often call to check if the certificate has been redeemed. They do this when they have already used the certificate and are checking to see if the restaurant redeemed their certificate online. Very often, restaurants don’t take the time to redeem these through sites like Groupon, and the guest can then use it more than once. It is very important to remove the value of whatever has been used as soon as the guest leaves the table.
Services such as The Gift Card Café can be set up in quickly. Whatever system you use preparing to sell gift cards for the holiday can help your business a great deal.
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