Pizza for pesos marks decline of dollar

 @ibtimes
on August 29 2007 10:25 AM

When Pizza Patrón announced plans to accept Mexican pesos in its 59 Southwestern stores, the Dallas-based fast food chain was besieged by anti-illegal immigrant hate mail and even death threats.

But rather than fear for its life, the company used the Mexican currency to make a killing.

From the new business perspective, it has been phenomenally successful, said Andrew Gamm, director of brand development for Pizza Patrón.

Once it started selling pizza for pesos in January, the company's same-store-sales rose by almost a third from the previous year. Pizza Patrón has now opened six new stores, with plans for 15 more throughout Nevada, Arizona, Colorado, California and Florida by the end of the year, and 40 more in 2008.

The Texas chain is hardly alone in trying to turn foreign currency into retail gold. Stores in U.S. cities ranging from Dallas to Waikiki have found that accepting international currencies can entice immigrant and tourist shoppers, happy to save a trip to the bank.

It is about convenience. If somebody walks in and they only have 4 American dollars, but they have the equivalent of 10 dollars in other currency, a store'll help them out, said Ron Paul, president of Technomic Inc., a Chicago-based restaurant market research firm.

I think the only negative stigma is that it sounds like it is supporting illegal immigration, he added.

Caught in the center of a nationwide debate about work permits, health care and legal amnesty for illegal immigrants, stores like Pizza Patrón are sometimes accused of breaking the law.

But according to the Treasury Department, international currency is a legal form of payment in the United States, unlike in some other countries.

MAKING MONEY ON MONEY

The American dollar has been widely accepted in global marketplaces for years, though U.S. retailers were slow to embrace the idea of international currencies.

But as the dollar has declined in value, some national chains started to see pesos, Canadian dollars, and even yen translating into big business.

Wal-Mart Stores Inc. accepts pesos and Canadian dollars in its U.S. stores near the Mexican and Canadian borders, using a currency calculator on the price register to update values each day.

In fact, more than 50 percent of U.S. retail firms along the northern border take the Canadian dollar and 21 percent near the southern border accept the peso, according to research by Michael Pisani, professor of international business at Central Michigan University.

The U.S. dollar is not the exclusive global currency it was a decade ago, he explained.

Pisani found that border retailers boost sales as much as 6 percent by accepting Canadian dollars and Mexican pesos. With one measure of the dollar falling in early August to a 15-year low against a variety of major currencies, foreign tender has gained additional luster.

Many outlets turn an added profit by charging a premium on top of the exchange rates. Though the peso has fluctuated this year from 11.50 to 10.79 pesos per dollar, Pizza Patron sticks to a flat exchange rate of 12 pesos per dollar.

Stores located along the northern border earn as much as 8 percent on currency transactions and southern border retailers make 3 percent, said Pisani.

A YEN FOR MORE BUSINESS

Retailers in popular vacation spots, have caught on to the trend, realizing that foreign currency may lure affluent international tourists.

At the Royal Hawaiian Shopping Center in Waikiki, luxury chains like Bulgari, Fendi, Cartier and Hermes accept the yen, and say it attracts Japanese travelers, especially when the currency's value is on the rise.

The Salvatore Ferragamo store in Waikiki's Royal Hawaiian Shopping Center averages about $12,700 in yen business transactions per month.

But the store factors in certain risks by trying to profit off the vagaries of the $2 trillion a day currency market.

With the yen's value sliding to a four year low in June, yen-toting tourists were skimping on their luxury purchases.

When the yen is down, shoppers spend less, said Gillis Asao, general manager at Salvator Ferragamo in Waikiki.

The vulnerability to an exchange rate's peaks and valleys keeps some U.S. retailers out of the currency trade.

If you are accepting foreign currency, you have to exchange it to U.S. dollars, and you associate yourself to currency fluctuations, explained Jack Kaiser, chief economist for the Los Angeles County Economic Development Corporation, explaining why foreign currency wasn't more popular in Los Angeles, despite thriving international immigrant and tourist population.

Finally, fears of counterfeiting keeps some companies slow to ditch the dollar as their sole currency.

It is hard enough to keep track of your own currency, let alone someone else's, said Richard Talbot, President and CEO of Talbot Consultants International Inc., an Ontario-based retail consulting firm.

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