There’s a better way to pay for dinner–at least according to this start-up. The founders explain the origins of the idea.
The best opportunities for entrepreneurs often exist in those bits of life that we all take for granted. Restaurants are a perfect example. How many millions of times a day do people get their meals, eat, and wait for the server to drop off that little black folder with the slot for a credit card?
And yet, there are many reasons why a different system could benefit to restaurants and patrons alike. A rogue waiter skimming credit card servers can be a security nightmare. Customers can walk away with both copies of a charge slip, stiffing the restaurant.
Even if all is on the up and up, the usual payment process means that the customer experience is almost completely contained between the patrons and the waitstaff, which gives managers little to no opportunity to learn of problems, unless they become so significant that people formally complain.
That is what Joe Snell and Andy Pope, co-founders and CEO and CTO, respectively, of Viableware realized. They thought there might be room for a better approach.
A Better Mousetrap
The two-and-a-half-year-old company offers a payment system with a secure framework–a major barrier to entry–and additional advantages for a full-service restaurant, the particular market niche they’re pursuing. Viableware uses custom tablet hardware rather than depending on a consumer-oriented product like an iPad or a Square card reader for a smartphone.
Creating their own hardware in partnership with major design firm Synapse Product Development was a major reason that the start-up costs ran into the “millions.” “We had to pay them a lot of money because we wanted to do it right,” says Snell.
A waste? Not at all. Although Apple clearly has mindshare when it comes to tablets, the hardware requirements of a restaurant leave plenty of room for opportunity. “These things are going to be handled by thousands of people,” Snell says. “They’re going to get ketchup spilled on them.” Units will get poked and prodded, and need to last for years. “A consumer device [is not] designed like that,” he says. Deploying an iPad or Samsung Galaxy tablet would have left them on the hook for replacements when things went wrong. (So far, the company has raised $5.5 million largely from angel investors in the Northwest and is in the middle of raising a $3.5 million series B round.)
Viableware wrote the software to work with what Snell says are the two top restaurant point-of-sale system, MICROS Systems and NCR Dinnerware. The start-up also has more than half-a-dozen software development kits from other leading systems “so we can tie it in when we have interest” from a customer.
The portable payment stations–called “RAILS”–handle the entire transaction, passing payment information to the card processor without retaining credit card data afterward. Customers can get details of the meal and skip the receipt or ask for it to be emailed or printed. A RAIL can split the check for the patrons and charge the parts to their various credit cards.
The RAIL can display an ad, as an additional revenue stream, and survey patrons about the dining experience. Although most restaurants would be lucky to get 1 or 2 percent response for a paper card left at the table, in its beta tests, Viableware says it has seen roughly 75 percent participation.
Morgan Plant, vice-president of food and beverage at Joie de Vivre Hospitality, which operates a chain of boutique hotels, has been testing the system in a pilot project. “If you dine in Europe, they’ve been using pay at the table for years,” she says. “For years, my IT director and I have been talking about this. There weren’t great solutions out there.”
They saw Viableware last year at an industry trade show. The idea of not having cocktail waitresses holding multiple credit cards for customers and being a potential security point of failure is a relief, and the survey capability has turned out to be very handy. “If they check [that the meal] wasn’t good, it will send a text message to all the managers so they can reach the customer before they leave, which is huge,” says Plant.
How much money could this translate into? According to Snell, there are 400,000 full-service restaurants in the U.S. alone. The business model is to provide the necessary hardware and software for between $300 and $600 a month per location. “If I focus just on this market and we get any percentage of market share, we would have a very successful company” without expanding the target market, he says.
To rephrase a cliché, sometimes if you build a better mousetrap, your customers start booking reservations far in advance.
Erik Sherman’s work has appeared in such publications as The Wall Street Journal, The New York Times Magazine, and Fortune. He also blogs for CBS MoneyWatch. @ErikSherman