March 8, 2018 Hangry

Transaction Fee vs. Flat fee: Why Free Isn’t Really Free

We’ll get right to the point. When exploring mobile ordering options on campus, price is typically very high on the priority list. Commonly, campuses will look at the ‘large’ cost of a flat fee and turn the other way. You are then confronted with your other option which is usually some form of a transaction fee model. However, campuses often overlook that $0.50 and don’t realize the cost it adds up to over time.

See example below.

You’re Being Lied To

Some mobile ordering companies with transaction fees will offer a free set up that includes hardware and POS integration. What your campus is not realizing is that the transaction fees that often get added later on. These fees cut into your margins (as displayed above). Therefore, if you are a school that does a lot in sales, you would be very appealing to a mobile ordering company that charges a 3-5% transaction fee, because the more money that gets passed through the app, the more money they make off of you. Additionally, a mobile ordering company that operates using a transaction fee model, often views the end customer as the client, not the school.

Why? Well,  the more users there are, the more orders go in, and the more money the company makes. What does this mean for your school? It means that this mobile ordering company will be just as interested, if not more interested in partnering with off-campus brands as well as your campus. These mobile ordering companies will make more money by taking a cut from the restaurant’s app-generated revenue, which leads to your app users receiving more and more off-campus options on an app that you paid for.

Your Students Won’t Use it

In addition to the costs, you are also significantly capping the potential of your app by asking students to pay an extra transaction fee. According to Priori Data, just over 6% of all apps downloaded last year were actually paid for in some way (in-app purchases, service fees etc). Even with a strategic marketing plan, in-app offers and discounts; students will still choose a line over having to pay a service fee.

Why a flat license fee?

When we charge your school a flat license fee, we see YOU as our client and we want to keep the focus on providing the best software possible in addition to customer service. Our goal is to promote on-campus spending and build a community with economic benefit. This way, the cycle of spending is maintained and promoted across YOUR campus and YOUR auxiliary services.

Exploring mobile ordering options for your campus? Learn more.

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