New Franchise Concept Puts Unused Gift Cards to Use

This story appears in the August 2013 issue of Entrepreneur. Subscribe »

Gift cards--they're the perfect solution to every gift-giving situation. The problem is, we're not always great at remembering we have them, or at matching recipients with the right plastic. In fact, the "spillage" rate for gift cards--those that are lost, expired, partially redeemed or entirely unused--was about 1.6 percent in 2012 and has been as high as 10 percent in recent years, according to CEB TowerGroup. And that's not peanuts when you consider that gift cards generate sales of more than $110 billion in the U.S. each year.

Hossein Kasmai, a Florida-based serial entrepreneur, hopes his latest franchise venture, Gift Card Monkey, will help Americans get those cards back into circulation--and put some of that cash value in their pockets.

Gift Card Monkey has three components. It's an online site where consumers can sell, trade or buy discounted gift cards. Franchisees can purchase a stock of cards to sell at kiosks in malls or convenience stores. But it's the

third aspect of Gift Card Monkey that makes the company unique: Franchisees can sell a software package and small device, similar to a credit-card swiper, to local businesses; the technology allows merchants to accept any gift card, be it for Hooters or Home Depot, as cash. Consumers can either take the greenbacks, with up to 30 percent off face value, or use the card to pay their bill.

So far, five Gift Card Monkey franchisees have signed up more than 100 merchant clients, and Kasmai hopes to add 20 franchisees by the end of the year. He's also in talks with national chains to adopt his system.

"I can tell you Gift Card Monkey is as innovative as any concept out there," says Kasmai, an electrical engineer who designed the patented technology himself. "I still believe it's the coolest concept in the franchising world."

We got Kasmai to tell us more about his venture.

Retailers must hate Gift Card Monkey.

It's funny, when I got in this business I had the impression that retailers probably prefer to sell these cards and never see the customer again. But that's not the case. They want customers in the store. When someone gets a $100 gift card, they buy something that costs $110; then, before you know it, they've spent an extra $50. Smaller retailers want people to come in and try their food or recommend the store to their friends.

So in most cases, they like our concept. We're putting customers right in the store, and people who buy the cards want to shop there.

How do franchisees get paid?

Franchisees work to integrate us into retail locations in their territories. There's a $99 startup fee for the software and hardware, and that's it. For each transaction the franchisee gets a percentage, and the retailer gets a percentage. So far there have been no problems, and everyone who has started using the machine loves it.

How complicated is the technology?

When we developed this product, we knew for a fact we were going to be dealing with retailers and minimum-wage employees without a technical background. So it literally takes three clicks to process a gift card. Processing a credit card is probably more difficult. There's no maintenance involved, so franchisees don't need to be technical. For 90 percent of our clients, franchisees make one visit, and that's it. If the retailer has problems, we have a 1-800 system that's really easy to use.

Most of your clients are convenience stores. Is that your target market?

Convenience stores are low-hanging fruit--the gift cards get people into their stores, and they love that. But we're creating relationships with large retailers and chains, and we're hoping people can use gift cards like they use Visa or MasterCard. Imagine T.G.I. Friday's accepting cards from Chili's or Tony Roma's. Many already do competitors' coupons.

Why "monkey"?

Franchising is dominated by old-school thoughts. Our name indicates that we're innovative, fun and future-focused. Also, my kids came up with it.

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