Article

College bound

University dining-card programs can be costly, but not participating could cost even more.

November 5, 2007 by Valerie Killifer — senior editor, NetWorld Alliance

It used to be that college-dining options left little to the imagination. Students with meal plans attached to their identification cards were limited to late-night fare for purchase at a general store, while breakfast and lunch options consisted of what the cafeteria had to offer.

Fast-casual operators are catering to the college crowd through university dining programs that give students more options and operators and universities more green.

Through a dining-card partnership with Vanderbilt University, Nashville, Tenn.-based Bread & Company has expanded its campus reach, boosting revenue in the process.

Students are able to use preloaded and reloadable dining cards at about 10 restaurants, including Bread & Company and Quiznos, located on and around campus.

In addition to bringing in more students during the breakfast crunch, the dining-card program has perked up Bread & Company's otherwise-stagnant dinner daypart and has brought in an extra $60,000 in revenue per month, said George Green, Bread & Company vice president.

"Literally, time periods that were dead before are just hopping," Green said. "We thought it would take away from sales in other categories but it ended up bringing us extra."

While the program has been a boon for business, Bread & Company must pay the school a fee on almost every dining-card transaction. The fee is taken out of a check Vanderbilt sends Bread & Bakery monthly to cover bakery sales paid for with the student cards.

While for some operators the fee is minimal, for others it is roughly 10 percent of the sales conducted via student-dining cards.

Down to the dough

Bread & Company approached Vanderbilt about joining its meal-plan program, but Akron University and Kent State sought Hungry Howie's franchisee David Vance in regard to joining theirs.

At Akron University, the cards are called Zippy Cash and are used similarly to prepaid credit cards. Students can use the money on the cards to purchase items at Hungry Howie's, McDonald's or a variety of other close-to-campus restaurants.

Vance, operator of 11 Hungry Howie's Pizza Inc. units, dislikes the program because both universities take an unusually high percent of his monthly student cash-card sales. But Vance says students would take their money elsewhere if he was not a participant in the program.

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"I think it would take away nearly 40 percent of our business, so we don't have much choice," he said.

Hungry Howie's corporate encourages franchisees to participate in meal-plan programs, but the company recognizes it could be costly.

"Obviously, when you're on a college campus you don't have much choice. College kids are kind of living and dying by that card," said Jennifer Jackson, Hungry Howie's director of marketing. "From a franchisee standpoint, if you accept these cards, there are a lot of costs involved. There is no exclusivity and the cards are used similar to a credit card so the school takes a percentage of the total purchase. It can get kind of expensive."

While the average transaction fee is between 5 and 7 percent, Vance says he pays 10 percent to both Kent State and Akron University. Additionally, he said one of the schools threatened to take away the chain's on-campus delivery option when he tried to negotiate for a lower rate.

"Is it worth it? No," he says. "But if we don't do it, students won't visit the location."

Another disadvantage to the system is payment isn't instant. While credit-card firms settle accounts within a few days or faster, universities often take up to a month.

Nicholas Hadgis, dean of Widener University's School of Hospitality Management, said cash cards are a great growth area for students, who are able to use the cards for everything from vending machines to laundry service.

"It's more of an amenity and convenience for the student," Hadgis said.

Penn Station franchisee Denny Keidel was hesitant to try to the cash-card program at his location near the University of Cincinnati.

Keidel was approached by the university to join the meal program about five years ago, but he turned them down the first two years. The prospect of gaining school employees — who also are eligible for the program — as customers, finally sold him on the plan.

While school employees haven't increased as customers, the program has its merits.

"The benefit now is kids spend more money when they visit," Keidel said, because payment is not coming in the form of cash right out of their pockets.