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For Restaurateurs A Gift Certificate Sale Is Like An Interest Free Loan

--By Chuck Gohn

Think about it. Customers give you hard cash in exchange for a piece of paper that may or may not be redeemed at some future date. In the meantime, you have free use of their money to purchase inventory, pay the rent, or help make payroll. Too bad your banker isn't as generous.

So why do so many restaurateurs shy away from aggressively marketing gift certificates? I suggest that many operators view gift certificate sales as a high risk, low benefit venture. Consequently they budget little or no advertising dollars to promoting gift certificates, and they make purchasing them as convenient for their customers as a trip to the DMV.

Yes, a certain amount of risk is involved in selling gift certificates. In fact, there are almost as many ways to embezzle money using gift certificates as there are espresso carts in downtown Seattle. And with high tech printing as nearby as the neighborhood copy center, the risk has become even greater. According to Frank Abignale a one time forger turned security consultant, gift certificates are an easy target for color copiers - especially if the buyer can persuade the restaurant to leave the payee's name blank.

The bottom line is that gift certificates are equivalent to CASH, and should be treated accordingly. But don't let their vulnerability frighten you. A few simple controls will help ensure that gift certificates don't become the Nightmare Before Christmas:


Avoid the temptation to purchase the generic "A Gift For You" gift certificates at the local stationary store. Not only are they unattractive, but there is little to prevent a con artist from purchasing a pack or two at the same store and redeeming them at your restaurant. Invest in custom designed certificates that include your company logo or other features that distinguish your certificates from the no name brands.


Add a line to your custom certificates stating that any unused portion in excess of $5.00 will be issued as a new gift certificate. That way if a lost or stolen certificate goes undetected, you may prevent someone from using a $50 gift certificate to purchase a $5.95 hamburger, and receiving the balance in cash.


Consider adding some security features to your certificates such as an embossed logo or artificial watermark to help prevent unauthorized photocopying. One of the more effective features is the Copy Void Pantograph. If someone attempts to photocopy your certificate with a color copier, the word "void", "copy" or other custom message becomes apparent, making the copy non-negotiable.


Set up a Gift Certificate Log and enforce its use. Require that all items on the log be completed for each certificate issued. If your employees have a habit of forgetting to log the relevant gift certificate information, then consider using two part carbonless (NCR) certificates that will help ensure that all of the information gets recorded at the time of the sale.


Even the most meticulously maintained log can leave a big hole if someone is not verifying the information contained in it. Review the log each day to verify that all certificates have been accounted for. Follow-up immediately on any missing certificates, and tie the gift certificate sales and redemptions per the log to your POS register tape.


Chuck Gohn specializes in accounting systems and cost control for restaurants. He can be reached at 800-595-2326.