Last year I noticed alot of the larger restaurant chains having “sales” on gift cards. I am considering doing something like this also. Are any of you doing this. I don’t know exactly how the deal is going to work yet, but am thinking it will be something like get $5.00 off for every $20.00 gift card purchased. Or a coupon for a free pizza with the purchase of a $20.00 gift card.
Any suggestions or thoughts about doing this would be great.
A few years back I worked at a steakhouse that sold $5.00 gift certificates that included a steak knife with their logo embossed on it…Folks bought them by the handful…I thought this promotion was doomed, until I later learned that on the redemptions the average cheque was over $40.00…It seems a lot were given out at staff parties to folks who had never been in our restaurant…So in the end the promotion worked real well…
I forget the exact number but I know I read somewhere that Starbucks UNREDEEMED gift cards balance is in the multi-million dollar levels…might explain why they are selling them at 20% off at Costco (5-$20 cards for $80)…I know we can’t compare our shops to that monster, but they gotta know something
This is known as “breakage”. I see roughly 15% breakage on gift certificates, so even at a 15% discount I’d be coming out even on the thing.
Not only that, but gift certificate sales are a nice cash-flow generator. Sure, some will be redeemed quickly… but many don’t come back for months. Those customers are giving you an interest-free loan.
I just got my new gift cards a few weeks ago and am in the process of launching my holiday campaign. We are giving $5 bonus for every $25 purchase. We’ve already sold a few and haven’t even put up the posters yet
I’m hoping to generate some nice cash flow from these cards and also to give out some “free” $10 cards to my very best customers for the holidays. The gift cards are a definite step up from the paper gift certificate. The best part is that I don’t incur any charge until the customer actually uses the card.
Last note, I’m in California and there is a new law that went into affect this year. Basically it states that a merchant shall provide cash back to the consumer if the gift card balance falls below $10. I’m not wild about the rule, but I’ll comply. Your state may have something similar… just food for thought.
I was just talking to GM at a local Olive Garden. He told me that his average for unredeemed gift cards is 30%. Thats a 30% profit, plus money upfront for future sale(that has some value), plus the normal profit when you eventually sell the food. Include that with the fact that no one actually goes out to buy gifts they just get gift cards. Gift cards a must have, but Im not a big fan of the discounting them.