Hold the Lettuce?

As society marches toward a cashless--or at least cash-rare--existence, fast-food companies are flirting with accepting credit cards.

Considered one of the last bastions of the cash-and-carry business, quick-serve restaurants have been reluctant to join the plastic parade because the fees would eat into their tiny profit margins and the delay of processing the card could take the “fast” out of fast food.

Some have taken the middle road, accepting debit cards or installing automated teller machines as part of their never-ending quest to give customers the most effortless experience possible.

But there are signs that the industry is on the verge of caving in.

Burger King, for instance, has installed credit card systems at some newer restaurants and at airport locations and is considering making them available throughout its network. And last year, McDonald’s began a test at some restaurants in San Diego and elsewhere to see whether its customers want to pay for their Big Macs with plastic.

“If McDonald’s or Burger King does something, you’re pretty much done,” said Jim Buckley, director of marketing at A&W; Restaurants Inc. “We’re going to wake up one morning and that’s the way it is.”

Experts say it’s only a matter of time before credit cards break through the final frontier. Think about it: Gas stations, convenience stores and dry cleaners already take them. So do doctors, movie theaters and taxicabs.

Credit cards are “creeping toward universality,” said Ron Paul, president of the Chicago consulting firm Technomic Inc.

By the end of last year, total credit card debt outstanding in the United States had surged to a record $238 billion, up 26% from $189 billion two years earlier, according to the Wakefield, Mass.-based research firm Veribanc Inc.

A recent MasterCard study found that 19% of consumers’ purchases of goods and services were made with credit cards in 1996, up from 13% in 1990. During the same period, cash and check usage declined.

Even so, breaking the credit card barrier won’t be easy for fast-food chains.

Arby’s, for instance, tried them out in some Salt Lake City and Phoenix restaurants but is planning to drop the practice. “It slows down the whole purpose of fast food,” said Martin Shea, spokesman for Triarc Cos., the New York concern that owns Arby’s.

Others say they’ve found little demand for using debt to cover the typical $4 to $5 fast-food bill. Taco Bell, for one, experimented with credit card payments about five years ago in Ohio. “The reason we didn’t go forward is consumers didn’t see it as a large enough benefit,” spokeswoman Laurie Gannon said.

And some companies, such as CKE Restaurants’ Carl’s Jr. chain, say they’ve had a better response so far with ATM cards.

Indeed, even as McDonald’s continues testing credit card payments, as many as 350 of its franchisees in Southern California will soon install ATM machines so diners can withdraw cash before ordering.

But Kevin Mazzu, McDonald’s marketing manager in the Los Angeles region, said the ATM roll-out doesn’t mean that credit cards have been ruled out. He said the test with charge cards is continuing.

“We are always looking to improve convenience,” he said.

That fast-food chains are even considering accepting credit cards is a measure of the pressure on merchants these days to cater to consumers’ demands.

The companies have probably “received a lot of consumer pressure from people who just plain want the convenience of charging,” said Ron Kendrick, an executive vice president at Union Bank of California in San Diego.

Most people used to reserve credit cards for major purchases. Now, eager for frequent-flier miles and to take advantage of other incentives, they are charging everything from gasoline to groceries.

MasterCard says that “convenience credit-card users”--those who use their cards for smaller everyday purchases and generally pay off most or all of their balances each month--now account for about 60% of all credit card charges. That’s up from 50% six years ago.

These convenience users are thought to be one of the chief reasons why total credit card debt has swollen. And they are exactly the type of consumers that some in the credit card business contend will appreciate being able to charge a quick meal at McDonald’s.

Credit cards in the fast-food business are “a fait accompli,” said A&W;’s Buckley. “In the next few years, 80% to 90% are going to have to go that route.”

That rankles some consumer advocates, who contend that the credit card companies, after saturating the market with plastic, are now trying to ramp up business by enticing consumers to charge even the smallest of purchases.

For the more than half of American credit card holders who don’t pay off their balances each month, that’s a dangerous trap, said Ken McEldowney, executive director of Consumer Action in San Francisco.

“Long after they’ve eaten their last sandwich, they’re going to be paying 19.8% interest,” he said.

But in the overcrowded fast-food industry, any inkling of what might lure customers from one competitor to another is crucial, A&W;’s Buckley said. “Everyone is looking for an edge,” he said.

The fast-food industry has been motivated by improvements in technology that have made credit card transactions quicker and easier.

A fast-food patron could swipe his card through a machine, receive approval in 2 1/2 seconds and be munching his fries while another customer was still counting change, said Charlotte Nelson, vice president of consumer affairs at MasterCard International.

For their part, credit card issuers are hungry for fast-food business. Although the percentages for the fees they stand to earn are tiny--2% of a $5 transaction is a mere 10 cents--the sheer volume is what has them salivating, industry insiders say. And as credit balances rise, so do interest payments.

Where all this is leading, many believe, is a future in which cash is scarce: Consumers who now use their charge cards for revolving credit will shift to the increasingly popular debit cards. Or they’ll switch to the so-called smart cards that are now being tested, which allow users to “store” value in a chip embedded in the plastic, spend it, then load the card up again.

“There is a revolution in the marketplace today, from credit cards to debit cards to stored-value smart cards,” Nelson said. “What it all speaks to is choice.”

Nelson and others envision the eventual development of one card that will replace them all. It could serve as a credit, debit or smart card--whichever the holder decides will work best for a particular transaction.

Instead of dragging their heels as they have with credit cards, fast-food companies could be one of the first in line with these emerging payment methods, seeing them as weapons in the customer convenience wars.

Proponents contend the new cards will also help reduce the problems and risks common to cash-intensive businesses, such as employee pilfering, robberies and the difficulties of counting, storing and moving large amounts of currency.

Someday soon, they say, consumers might use these cards with touch-screen ordering systems and computerized vending machines.

Taco Bell, for instance, conducted a pilot project in which customers could order their meals by touching selections on a computer screen, then pick up the food at a window.

A&W;, meanwhile, has licensed its brand name to a company that is testing vending machines equipped with modified aerospace industry technology that turns frozen food into a hot meal in about a minute.

These kinds of high-tech systems “are not Space Age,” said Peter Romeo, editor of Restaurant Business magazine. “It just has to catch on to the mainstream.”

For now, one of the main factors holding McDonald’s and Burger King back from going systemwide with credit cards is the bank fee. Company insiders said they want to negotiate the most favorable deals possible with the issuing banks.

Nonetheless, any remaining barriers to a “cashless society” will probably be swept away within three to five years, said Neil Foley, vice president of management information systems at Burger King.

And he doubts the absence of these payment options is keeping any stomachs from being filled. Customers “always seem to have cash with them when they turn up at Burger King, fortunately for us.”

(BEGIN TEXT OF INFOBOX / INFOGRAPHIC)

Burgers and Plastic

The use of point-of-sale terminals--machines that read magnetic date strips on credit, debit and ATM cards--has accelerated the use of credit cards. Terminals installed at U.S. fast-food outlets:

1993: 4,500

1994: 10,600

1995: 15,600

1996*: 21,000

* Estimate

IN THE CARDS

Use of credit cards for personal consumption expenditures has increased markedly since 1980, particularly during the 1990s.

Payment method trend.

CONVENIENCE USERS

Customers who use credit cards for small transactions and generally pay off most or all of their balances now account for 60% of all credit card charges.

Sources: Visa International, MasterCard International, Debit Card News. Researched by JANICE L. JONES and LOIS HOOKER / Los Angeles Times