August 13, 2005

Restaurant CIO: Would You Like Wi-Fi with That?

By Evan Schuman, Ziff Davis Internet

A major regional fast-food chain—with 433 restaurants in the Southeastern United States—is going to offer free wireless connections to anyone who wants to surf while sitting in a burger joint.

The Krystal Co. (the nation's second-oldest fast-food restaurant chain, founded in 1932) is clearly hoping that a lot of customers will be intrigued and will munch on a burger and fries while gulping from its unlimited refill 802.11 fountain.

But for CIO David Reid, the challenge lay in getting the wireless system installed and supported for as little money—and with as little operational disruption—as possible.

The idea of offering a wireless option came when Krystal officials noticed that University of Tennessee campuses—which some Krystal restaurants are near—had gone fully wireless.

"We thought, 'If we could draw some faculty and students over there by being wireless as well,'" the chain could do some extra business, Reid said. And the installations would be "plug-and-play and simple and repeatable."

As luck would have it, the chain had already decided to upgrade restaurants' network connections to a variety of DSL and cable modem broadband hookups to accelerate credit card, inventory and transaction data communications.

"Because we were having a technician visiting the restaurants anyway," Reid said, the wireless setups were relatively easy, "and so cost-effective, the way we've implemented them."

Krystal is privately held and has about 7,500 employees and about $400 million in annual revenue, Reid said.

To keep things low in cost and easier to manage, Reid's department proposed making the service free. Although that certainly made the marketing component of the wireless access more attractive—after all, the goal of the program is to sell more hamburgers—the driving force for the recommendation was IT logistics.

"When you try charging for wireless access, a huge percentage of the costs involves handling the payment. Who has paid and who hasn't paid?" Reid said, pointing out that password management, billing, time-tracking and security focused on keeping non-paying customers off the system can get complicated and costly.

"So much time and effort involved in that and so little gain. It's so much easier to just make it free. To us, it just looked obvious. To just collect a few dollars when it's not even proven that it does have an impact on sales" didn't make sense, he said.

Reid said he personally believes the wireless service will boost sales. "We know that there are many cases of people coming to our restaurant solely because we're wireless," he said. "I really see the wireless is absolutely a differentiator. We're the only fast-food chain that has that in every one of our restaurants. And it's free."

Greg Buzek, president of IHL Consulting Group Inc., said he sees the move as a win-win.

The cost analysis for offering the service for free "makes sense if you're going to offer wireless service. The incentive is wireless service. And it's even more of an incentive if it's free," IHL Consulting's Buzek said.

"And if it's free, there could be more traffic than if there were a charge for the service. It makes total sense. The retailer could just drop in a router."

Buzek added that offering a free service also reduces another major wireless access nightmare: customer objections to service problems.

"When it's free, they don't have the same level of headaches if it's down," he said. "If someone goes to use their T-Mobile device and then can't, there are complaints. But if it's free, the customer doesn't have much of a leg to stand on if there's a problem."

Another analyst—Lance Wilson, director of wireless research for ABI Research—questioned whether the cost of managing wireless access would truly match or exceed the likely fees to be generated and speculated that Krystal's decision was purely a marketing call based on a belief that its customers wouldn't likely pay for such a service.

"Because of the nature of its clientele, Starbucks, which is upscale, can charge for [wireless access] and get away with it," Wilson said. "This chain, they know their customer base very well. Their customers may not pay for it. We probably have here a very savvy company that has correctly interpreted that they would not garner a tremendous amount of revenue from this."

As for the high costs associated with selling wireless access, Wilson said there are many "automated payment systems for wireless connectivity that are well-entrenched and that can handle [payments] seamlessly. There are a number of vendors that offer these systems. I think this has more to do with their customer base."

The chain's wireless access will be free—whatever the motivation—but surfing will have its limitations. The chain is using filtering software from St. Bernard Software Inc. to match requested domains against a list of domains that the ISV thinks are not family-friendly, Reid said.

"One of the concerns we had was that Krystal is family-friendly and we wanted to keep it that way," Reid said. "We didn't want someone at one table seeing an image on a laptop at another table" that might be offensive, including weapons or pornography.

But while Reid is proud of the wireless access he'll be offering his customers, he's keeping all store systems—including POS, inventory and credit card processing—on traditional hard-wired connections.

The chain opted for DSL and cable modem connections in almost all locations. One site needed satellite for broadband, and it is somewhat difficult to deploy. "It's almost like a radio transmitter. It needs to be within a mile of the people providing the connection and it has to be line of sight," Reid said.

As the broadband connections were installed, they disconnected the store's phone lines—using one of the DSL lines for voice communications, where possible—adding to the cost-effectiveness of the program.

"None of our internal operations are using the wireless. It's fully segregated from the public traffic," Reid said. "We didn't want anybody to sit in our dining room and try to break into our system."

The internal traffic will be using the public Internet as the pipe, and Reid is confident that Krystal's VPN will adequately protect the data traffic. But, he said, he is realistic about the lack of a huge incentive for someone to really try hard to break in.

"We try and keep in mind our place in the world," the CIO said. "We're selling burgers."