GUEST COMMENT ARY
National pay-pho ne accounts want operators
by Gail Sherman
vice president of marketing
Cointel Communications
The following is a transcript of a speech made at the
Business Communications Review 3rd Annual Private Pay-
phone Conference May 6 in Chicago.
Remember the scene from the movie The Graduate? A
very young Dustin Hoffman gets cornered at his coll eg e
graduation party by a middle-aged businessman intent on
sharing the secret to success with Dustin. " Plastics" he whis-
pers, "plastics."
As we all sit here at BCR's third pay-phone conference.
we might think of this as a graduation party of sorts. While
some of you are new to the industry, I see many familiar faces
among you , all graduates of the University of COCOT.
For the past two years , you 've done your homework and
learned your lessons on a wide variety of subjects-dealing
with the utilities commissions, getting a product to market,
perfecting answer supervision , installing and servicing pay
phones. And your progress has been admirable. By some
estimates , there are upwards of 25 ,000 [private] pay phones
installed and working throughout the country.
And that's a terrific accomplishment for two years ' work .
But the vast majority of these installations are at mom-and-
pop establishments-the neighborhood restaurant, the local
bar, the corner gas station .
Now you're reatly to enjoy some economics of scale .
Instead of securing location after single location , selling pay
phones one at a time; you want to go after a real account.
One with many locations to whom you can sell in quantity.
And with all that experience behind you, you 're ready to
conquer the most lucrative· account of all-the national
account.
Let me share with you the secret to success, the sure way
to capture those elusive but highly profitabl e national
accounts .
Vending .
If you doubt me, consider where the pay-phone industry
stands today vis-a-vis national accounts . Not one large-sca le
end user has purchased pay phones outright-either from a
manufacturer or a distributor/ operator. While these end
users have expressed a tremendous interest in private pay
phones. both in interv i_e ws with the media and to everyone
who has pitched them , their interest is in having an outsid e
vendor come in to own and operate the pay ph ones at their
locations . The national accounts are thrilled at the prospect
of getting a commission check that beats what they've been
getting from the phone company without having to assume
the risks involved in owning their own equipment. But before
you leave this co nference thinking how easy it would be to
set up a vending operation , let's take a realisti c loo k at th e
specific requirements.
A perfect example is Denny's. th e largest and certainly
the most celebrated national account to enter the pri vate
pay-phone industry to date. Denny's is a first-class operation
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and demands nothing less from its suppliers. I know
firsthand , because prior to join in g Cointel I worked for
Denny's advertising agency, Foote, Cone & Belding , as the
account exec utive on Winchell 's Donut House, a Denny's
subsidiary. I fou nd the Denny's management to be a pleasure
to work with because they are so professional. But their
standards are tough .
Here's a sampling of the req u irements De nny's has set
for its pay-phone vendor:
1. The ven dor must provide the pay phone of Denny's
choice , and the phone must be capable of complet ing coin
and credit-card calls .
2. The vendo r also must provide at the vendo r's expe nse
all services and equipment . partitions. fixtures . and anything
else needed to operate the pay phones.
3. If a Denny's location undergoes remodel ing, the
vendor wil l relocate phones to other locations of Denny's
choosing at the vendor's expense .
4. The ven dor is responsible for collections and must
assume a ll f inancial respons ibli ty for dishonored credit
cards and loss of uncollected fu nds.
5. All repa irs must be made within 24 hou rs of being
reported , requiring the vendor to have a service center open
around the cloc k.
6. If any phone is out of service more than 48 hours, the
vendor must pay Denny's the full commission that would
have been paid had the phone been in service.
It's a rigoro us list of requirements , and it demands a pay-
phone vendor with a first-c lass o peration to fulfill it. But if
you want to benefit from owning and operating pay phones
in the nat ion's most lucrative locations , you must be
prepared to offer your accounts the kind of equipment and
service Denny's demands of its vendor. And that requires
more tha n distribution rights to a pay phone . It requi res
sufficient capitalization and a responsive service organiza-
tion with broad capabilities.
To date, ve ry few pay-phone operators are positioned to
provide th at kind of full-se rvice vending to a national
account. Some ca n do it o n a local level. One pay-phone
distributor is try ing to organize some of these local ope rators
into a nationwide network th at can realistically ve nd a
national account.
It's to o early to tell whether any one organization can
vend pay phones on a broad enough scale to attract national
accounts . A nd it may be that natio nal accounts w ill have to
form the ir own network of local vendors if they wa nt to profit
from pr ivately owned pay phones .
But one th ing seems c lear. The large end users are not
go ing to buy pay phones , at least not in t he foreseeable
future. So if you want to do business with them , whether
nationaly o r on a local or regional level, be prepared to be a
vendor. Only then will you be able to own and operate pay
phones in some of the most prof itable locations around .
PLAY METER, July 1 5, 1986