Electronic Cash CowsOctober 11, 2010 By: Janice Cha Night Club and Bar Magazine
Whether Vending Music, Cash, Products or Games, the Right Machine Can Turn Dead Space into Dollars
It’s Friday night and the music is loud at the Village Inn, a 120-seat sports bar and grill located in Skokie, Ill. Even with 40 flat-screen TVs around the room, the electric beer logo signs, flashing video games in the back corner and the action around the bar, it’s the digital jukebox near the entrance that’s attracting a fair share of patrons bearing cash or credit cards and a song in mind.
“People want to hear the music they like,” says Village Inn General Manager Diana Rumsley. “The jukebox is one more way to keep them happy and in the bar.”
The Village Inn (pictured below) is one of many bars and nightclubs working to maximize customer convenience (read: keep them on premises, spending money) while adding some extra revenue to the bottom line. Digital jukeboxes, ATMs and vending machines are three popular automatic “point-of-purchase” devices in use today. The trick to succeeding with such equipment is to survey your place and look for “dead” space — the odd corner where seating just won’t fit, an unusable section of the bartop, an empty wall area just off the restrooms — or high-traffic areas where catching patron attention is easy. Then, find the equipment that will turn that area into revenue-producing space. Read on for details about each type of technology.
Touchscreen entertainment options, in the form of digital jukeboxes and games, are well on their way to becoming the bar and nightclub industry norm. One supplier estimates that 60 percent of the nightlife market belongs to the digital segment. Since music is so integral to a bar’s success, focusing on the right digital jukebox for your establishment is important.
The digital nature of the units saves you on time and upkeep. There’s no need to change out CDs or wait for new music, as the song library is managed online. The Internet connection gives your customers access to up to as many as 2 million licensed tracks from major and independent record labels, and content updates are sent weekly or monthly via a secure central network. Newer machines let you program the screen to display house ads or photo slideshows of your patrons, and most units feature eye-catching lightshows.
Digital jukeboxes accept cash or credit cards, and some will issue the guest “credits” in return. Songs generally range from one to three credits each. The more money a guest spends, the cheaper each credit becomes — i.e. $1 buys two credits, $5 buys 14 credits, etc. Songs that reside locally on the unit’s hard drive — its permanent (albeit easily updated) collection, so to speak — cost the guest less to play than songs that get downloaded, known as “premium” content. Though there is money to be made on such machines, the real value to the bar owner comes from providing a musical setting guests enjoy; plus, the longer they have to wait to hear “their song,” the more drinks and food they’ll purchase at the bar.
Three leading U.S.-based suppliers of digital jukeboxes are AMI Entertainment, ECast and TouchTunes. Each company works with local representatives who, in turn, do the hands-on work with bar and nightclub owners. Their roles consist of supplying and installing the units — including jukeboxes and any other cash-operated amusement device — to bars. The representatives set up the sound system, either linking it to the existing system or creating a new one. They also service the machines and collect the money. The gross revenue is split among the manufacturer, the rep and the bar owner, with percentages depending on such variables as location and volume of business.
We spoke to TouchTunes rep Ken Valin, owner of Dial Amusement Co. in Barrington, Ill., who gave us a few pointers on touchscreen jukeboxes:
• Be realistic about how much play time a jukebox might get when you’re deciding what type of music package to add to your operation. “Sports bars tend to have a smaller time frame available for music fans, especially during big game nights,” Valin says.
• The sound system link between the jukebox and TVs should include an automatic override so that when the music comes on, the TV volume fades to mute.
• If music defines your bar, look for a provider that lets you filter your music collection by genre so you don’t have the buzzkill of hip-hop tunes in an Irish pub or country music in a jazz club. You also can set up time schedules so various types of music are available at different times of the day.
• At least one supplier, TouchTunes, offers customers a unique chance to hear advance releases of soon-to-be-released music through its Barfly system.
“If music isn’t set up properly it can destroy the ambiance of the bar,” says Valin, who oversees touchscreen jukeboxes at nearly 100 locations in the greater Chicago area. “When you have a network that lets customers play what they want to hear, they’ll pay for it.”
ATMs: Cash On Demand
A cash dispenser, or ATM, in a bar or nightclub is another revenue booster. For starters, customers spend 25 to 45 percent of the money they withdraw on the premise, according to various bank studies. Given an average withdrawal amount of $60, that’s about $20 extra in incremental purchases, thanks to the convenience of the ATM.
As icing on the cake, each transaction includes a convenience fee — a certain percentage of which goes to the host location. The surcharge is typically set between $1.75 to $2.50, but some venues charge fees as high as $12. (Some states have maximum fee rates.) An ATM with a $2 surcharge that sees six to 10 daily transactions can earn at least $360 per month for the bar owner.
“Nightclubs and bars tend to set the fees a little higher since their customers are considered a ‘captive audience,’” says Aimee Leeper, marketing manager for Triton, a leading provider of ATM machines. Most machines must permit customers to pull out up to $200 at a time. However, “ATM machine owners love the guys who withdraw small amounts multiple times,” Leeper notes.
Three major retail ATM suppliers are Triton, Nautilus and Tranax/Hantle. These companies work with a host of local vendors that oversee placement, maintenance and processing, often in a turnkey package.
The street price on new units is typically less than $2,000 but can range upward with added features. Monthly operating fees (including cash and receipt paper supplies; phone, cable or wireless costs; and routine maintenance) vary widely depending on location and on what kind of deal you strike with the company you select. The best thing to do is research several companies to find the one that best suits your business.
The success of your ATM depends on four things: location, signage, security and maintenance. If the unit is placed in an out-of-the-way spot, adding a well-lit sign will help drive volume by attracting attention, Leeper says. As for security, “You can buy alarms, physical attachment devices and cameras to keep the machine safe,” she adds. “Most people, however, wait until the first theft before they invest in security systems.”
When it comes to maintenance issues, be sure to consider service and repair availability, parts availability and the warranty before you sign an agreement for an ATM unit. “If you buy a foreign-made machine, do the parts have to come from overseas when it breaks?” Leeper notes.
Victory in Vending
Like digital jukeboxes and ATMs, vending machines offer customers convenience that keeps them on-premise, increasing their time at the bar and boosting your revenues. Being self-contained sales units, they also keep your bartenders doing what they do best: making drinks.
Crane Merchandising Systems and UTurn Vending, among others, supply this equipment with vended items that run the gamut — but for drinking establishments, the most popular impulse-buy products include snacks and candy, cigarettes, aspirin and other over-the-counter medications, dice and playing cards, disposable cameras, cologne, mouth spray, condoms and feminine products. Offbeat vended items include oxygen, breathalyzer tests and (spotted in Japan) underwear.
“Revenue depends on the product being sold, what you paid for it and how much you think you can sell it for,” says Brian Springer, vending specialist for All Brands Vending in Des Moines, Iowa. That said, vending mark-ups range from 100 to 500 percent. “People who really want something aren’t going to make a special trip to Walgreens. If they want it, they want it,” Springer says.
Vending machines can pay for themselves in 12 to 18 months. “Think of them as another employee but one working 24/7 with no time off,” Springer says. “At a sports bar and grill, the kitchen will close at some point. That’s where the vending machines come in handy.”
Current technology means not only can vending units accept credit and debit cards (a standard feature for machines deployed in nightclubs and bars), but also it’s possible to monitor sales and supply levels remotely. “Owners can log onto a secure website to check sales,” Springer says. On the horizon — and already in use in Europe and Japan — are machines that let people use their cell phones’ texting abilities to make purchases.
The typical vending machine purchase price ranges from $3,000 to $6,000. Optional add-ons that should be specified up front include credit card readers, graphics and neon lighting. Also, dispenser coil configurations can be tweaked as needed so you can change the product mix, and the most common machine size is 30” wide by 72” high by 35” deep.
Maintenance and refilling tends to be a weekly task, taking maybe 15 minutes to an hour to restock the inventory.
One area bar and nightclub operators may not initially see as a revenue-generating area is the bathroom mirror. Project Z installs patented LCD screen technology behind mirrors in large-volume venues, typically in the bathrooms or public areas, at no cost to the operator. Magnetically mounted, the screens display eight to 10 advertisements for various luxury and lifestyle brands for approximately 12 to 15 seconds each. The screens are configurable to also display messaging and promotions from the venue and are updated remotely; if a venue wants to highlight a drink special or upcoming event, management need only e-mail PZ-World, according to Wayne Forman, president of Project Z USA. Venues receive a quarterly report on ads placed and a percentage of the advertising revenue.
So look around your space. There’s money to be made where you may least expect it. NCB