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INNOVATION
& DESIGN Home Page Architecture Brand Equity Auto Design Game Room SMALLBIZ Smart Answers Success Stories Today's Tip INVESTING Investing: Europe Annual Reports BW 50 S&P Picks & Pans Stock Screeners Free S&P Stock Report SCOREBOARDS Hot Growth 100 Mutual Funds Info Tech 100 S&P 500 B-SCHOOLS Undergrad Programs MBA Blogs MBA Profiles MBA Rankings Who's Hiring Grads | | SEPTEMBER 20, 2000 ENTREPRENEUR PROFILES Turning Soggy Fries into Extra Profits Priceline's Jay Walker has a new system that helps fast-food restaurants sell product they might otherwise toss
No, hungry consumers won't get to name their own prices for Whoppers. But they will get unexpected price breaks when they dine at restaurants testing Walker's latest innovation, a point-of-sale system he calls Digital Deal. Test sites include several Burger King Corp. locations in southern Connecticut and a KFC store in New York City. Digital Deal allows clerks to offer special prices on such perishable items as burgers and fries. Say a customer orders a Whopper Jr. for $3.39. The clerk tells him that for an additional 61 cents -- raising the total to $4 even -- he can get an apple pie that regularly sells for 89 cents. The customer gets more bang for his buck. Burger King boosts cash flow and cuts inventory. And clerks are no longer burdened with having to count out small change. HEALTH HAZARD. Keeping an eye on inventory at a burger joint may seem trivial, but fast-food chains are forced to throw out heaps of product each day. Typically, burgers, fish sandwiches, and chicken are stacked in warming bins. But after 15 or 20 minutes, the food becomes soggy. In short order, it will become a health hazard. So the goal is sell the food quickly, before it will have to be scrapped. Digital Deal links point-of-sale registers with the actual inventory. When a sandwich is made, the time is noted and entered into the database. After, say, 7 to 10 minutes, the system prompts a clerk to make an on offer. Walker Digital, the 5-year-old business incubation firm that created Priceline.com and shares several of its chief investors, is setting up the system with Dallas-based Vectrix Corp., an Internet infrastructure provider. Vectrix' blue-chip clientele includes Nabisco, Conoco, and Chase Manhattan Bank. Walker Digital and Vectrix have declined to talk about Digital Deal, although a Walker Digital spokesman says his company will make a formal announcement about it this fall. Are fast-food customers biting? Up to 40% of them are, says a manager at a Stamford (Conn.) Burger King where the system has been tested since June 1. Such acceptance rates "translate into same-store sales increases of 3% to 5% and an even greater boost in profits," according to Walker Digital marketing literature. It also offers a bromide to the fast-food industry, which has suffered financial heartburn and lukewarm sales growth for more than a year. "HARD SELL." It could be a few months before Burger King brass say whether Digital Deal is worth flipping over. But among those who already have an appetite for Burger King's offers is shoe-store clerk Steve Conte, 18, of Stamford, Conn. "I've done it a lot. Sometimes I'm extra hungry, or I have a friend with me, or I don't want change in my pocket," he says between hasty bites of his deep-fried dinner. But the system has left a bad taste in the mouths of other consumers. "All of a sudden it has become a hard sell," chides Reuben Chodosh, a network television executive sitting a few tables away from Conte. "It's an intrusion." It's probably just as well, then, he never read the description of the patent (No. 6052667) awarded on Apr. 18 to Walker Digital for the system: "Method and apparatus for selling an aging food product as a substitute for an ordered product." Put it that way, and maybe you'd want to hold the fries after all.  By Kevin Ferguson  | | |
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