How not allowing a split bill cost a restaurant a potential $17,500

How not allowing a split bill cost a restaurant a potential $17,500

My daughter & her Uni & college friends decided they wanted to find a spot where they could catch up & create a study group. They chose a restaurant and organised themselves to try it out to see if it would meet their needs. So they arrived, grabbed a menu and each ordered their meal. When they finished, they went to pay for their meals. With money in hand, they wanted to pay for their separate meals. They then were informed they would not accept split payment. This may not have been a problem 5 years ago when everybody carried cash. These kids were expecting to swipe their debit cards to pay for their own meals. As you can image, this caused a problem, because most did not have enough money to cover the whole bill. After a lot of mucking around, they managed to transfer some money to pay for their meals. So you have to ask, why would a restaurant make it so difficult for them to pay? It would be an understatement to say these young adults were not impressed. While they were waiting to get picked up, they unleashed their frustration on social media. It's fair to say their comments would not be welcome or useful if found on TripAdvisor. So when I picked up my daughter I asked, “How did the dinner go?”

Millenial Rage

She hissed “that place just sucks. They stuffed us around.” I asked, “What do you mean?” So she launches into a diatribe (for the sake of sensitive ears I have sanitised the verbal abuse she hurled at the restaurant). “Dad, all we wanted to do was find a place we would be happy to come as an informal study group every week.” “Instead, they tried to belittle us.” “You know we rarely carry any money. We have an Opal card for travel and a debit MasterCard so we can Tap & Pay”. “Why do we want to risk carrying cash?” “We just wanted to chat & discuss our courses over a meal like you do on Friday mornings.” “How come you guys can order, eat, talk & then just tap to pay, while this clown would only accept one payment?” “They were inflexible and unreasonable.” “So we won't be going back there.” I was trying to hide my wry smile when she couldn't believe how petty the cashier was. It's not like my teenage daughter never had a petty moment. Some of you may be thinking "what's the big deal?" I have 2 teenagers, so it's a rare occasion I carry much cash in my wallet. It's pretty shortsighted to expect anybody, especially teenagers, to carry wads of cash with them. I'm sure the concept of trying to work out who is responsible for what portion of the total bill is a pain.

Split bills only seem to be a problem in Australia

There's even an app designed to solve split bills. “ IN AUSTRALIA, it's widely accepted that going out for a meal with a group of friends will end with a calculator and wads of cash handed back and forth as the bill is divided up and paid. But the “no split bill” policy embraced by most restaurants is a strangely Australian phenomenon compared with other developed countries such as the US and UK — so much so that one Sydney entrepreneur last year launched an app to get around the problem..” Split bill? That’s un-Australian For those who think it's just a messy headache to sort this out, life would be a lot easier if you just did separate orders so then everybody can pay for what they ordered. I know that's an over-simplified solution. So this restaurant insisted on only having one person pay the bill.

How much did the Restaurant save doing this?

More importantly how much did it cost them?

Let me backtrack a bit here to when my daughter mentioned my Friday breakfasts. I admit I like talking & sharing marketing ideas to grow businesses. I do at least 2 breakfasts a week. Neil, me and a group of business owners have been catching up on most Friday mornings for the last 5 years. We usually talk about business, the latest marketing ideas and of course our families. Now we've been going to the same restaurant in Dee Why for the last 5 years. We have our own corner spot. We've been going so long I can’t even remember when I last saw a menu. We walk in and after about 10 minutes they bring our coffees. I get a cappuccino in a mug and a Bacon & Egg Roll with grilled Tomato and Chilli Sauce. Once everybody arrives, they bring out our breakfast. We are a predictable bunch because we always order the same breaky. Once in a blue moon, we may shock the staff by asking for a menu, just to shake them up. Once we finish, we just tap and pay. It's just so easy. On a rare occasion some actually pay with a handful of coins, they may have just raided the kids' piggy banks (Only joking). So after my discussion with my daughter, it got me thinking. What would have happened if the first time we turned up to Friday morning breakfast, they insisted on only accepting one payment. I can tell you we would have found a new restaurant to meet at. So then I started doing the calculations in my head. It turns out if we had gone to another restaurant, by my calculation the unhelpful host would have lost a bucket-load of money. It may not seem like we're spending a lot of money for a breakfast., but it adds up to a tidy sum.

So let's look at the numbers

On average, 5 guys turn up for breakfast on a Friday. To keep the math simple, let's assume we spend $14 each. So every Friday the restaurant expects us to spend $70 for our breakfasts. We rarely miss a Friday. So you could say we probably make breakfast 50 Weeks a year.That’s **$3,500. ** So when you consider that we've been doing it for at least 5 years, that's a whopping $17,500. Who would have thought that a bunch of guys meeting every Friday for breakfast was worth $17,500 to that restaurant? That's what you call Customer Lifetime Value. It’s so easy for the restaurant to get on a high horse crusade insisting these teenagers make only one payment because it was easier for them. So the price for not letting these teenage students Tap and Go means they lost a potential long-term customer. Now I'm not saying these students would've kept coming for 5 years, like us. But most of these 8 to 10 teenagers have part time jobs, so they have money to spend. On average, they would have been spending $20 to $25 for dinner. They may even have a drink or 2, so even if they only come for the next 6 months it's still a heavy bag of money that restaurant is missing out on.

Let's be conservative to see what they just lost

8 x $20 = $160 $160 x 26 weeks, that's still $4160. Can you really afford to lose a weekly revenue stream just because it seemed like an easier option? It's not alway easy to take a long-term view when dealing with customers. Now you see the enormous potential of having regular ongoing customers coming every week.

What should you do to get a share of this pot of gold?

A good place to start would be to access the businesses around you. You may be surprised to know that many businesses hold regular meetings or they would like to find an easy place to meet at. Why not create a flyer offering your cafe or restaurant as a place to meet? I have breakfast on Fridays with Neil, but I also meet with different business owners in Manly on Thursdays. The restaurant owner heard we were meeting through the Manly Chamber of Commerce. So he approached us asking if we'd like to hold our meetings at his restaurant. To sweeten the deal, he offered us the first coffee free. Then if we wanted to, we could get breakfast. So since October last year, 9 to 15 business owners meet for breakfast every Thursday to share business and marketing ideas.

My Thursday Morning Business Breakfast

I think you will agree, offering a free coffee seems like a good deal and a great idea! There are plenty of groups looking for somewhere to meet. Why not give it a shot? It could pay big dividends.

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