The distinctive Silver Diner restaurant chain is serving up a nouveau classic to go with its tabletop jukeboxes and friendly neighborhood atmosphere. The Rockville, Md.-based company is using Wi-Fi to entice patrons to visit its chain of 20 nostalgia-fueled restaurants to surf the Internet, check e-mail or shop while they delight over a stack of hotcakes, sip coffee or devour a slice of lemon pie.

"We kind of look at it now almost as a must have," says Mike Snow, Silver Diner's director of information technology. "I think if we did not have it, we probably would not get some of the people in the door that we normally do."

Technology analysts put Wi-Fi — defined broadly as a wireless local area network using radio frequency protocols to support a variety of consumer applications and devices — on a growth fast track. ABI Research, a New York market research firm, forecast 40 percent year-over-year growth in the number of global Wi-Fi hotspots in 2008.

The growing prevalence of Wi-Fi can be traced to changes in retailers' business models. Largely gone is the Internet cafe model wherein establishments charged customers for the service. Instead, the service is being offered to customers without charge and being treated as a business expense rather than a profit center.

Major national chains like Starbucks and McDonald's have employed or announced plans to offer free Wi-Fi, and vendors increasingly see the value in setting up shop at locations "that people were coming to anyway," says Robert Goldstein, CEO and founding member of Single Digits, the Manchester, N.H.-based provider that launched and maintains Silver Diner's Wi-Fi service.

"We view the guest Internet function as a tool that, if done properly, will enable a business to strengthen its core competencies," he says. "The goal of Silver Diner is not to become an ISP but to sell more blue-plate specials."

Wi-Fi is being marketed to retail establishments as an opportunity to accommodate technology-savvy customers who need to be connected while shopping, traveling or working away from the office.

"Wi-Fi on its own as a hotspot is not a business model that makes a lot of sense," Goldstein says. "The true benefit is enhancing the current business. If you have to go to a place just to use the Internet, you are more likely to stay home or go to the office. But if you can get reliable, secure Internet services at the places where you want to spend time, then that is a win-win."

Some analysts believe that as free Wi-Fi becomes more commonplace, retailers will see opportunities for incremental revenue by encouraging users to pay for value-added downloads like music, video and movies. In airports, for instance, travelers could download movies before boarding their flights.

Turnkey managed service
Emerging operational models are helping to offset issues involving bandwidth, security and cost. Single Digits, for instance, provides a turnkey managed service — meaning all the software, networking monitoring, authentication, security and reporting emanates from one of the company's three U.S. data centers. For retailers, that operational scenario means they receive business-class service and support while maintaining a minimal technology footprint.

Single Digits staffs call centers 24/7 and answers the phone in the name of the retailer. About nine in 10 calls are from end users with easily solvable questions about misconfigured laptops, security settings or firewall issues, Goldstein says.

Reporting tools inform retailers how many users are logged in at a given time and/or have used the service and also offer insight into same-store sales and repeat business. Users at Silver Diner are given a user name and password that can be accessed at any location.

"When they get a business lunch of four people coming in there [buying] four steak sandwiches, it more than covers the cost of their Wi-Fi service for a month," Goldstein says. "If they are doing it once a week, then their return on investment is four or five times that."

Keep Wi-Fi separate
For improved security, Silver Diner keeps Wi-Fi traffic separate from store business functions by running additional DSL broadband lines. "That guarantees that the data is not going to cross," Snow says. "It's a little more expensive to do it that way, but it is worth it in the long run. You're also not worried that if you have five or six customers and they're all pulling down a big file, it's going to affect your point-of-sale transactions."

Beyond requiring them to log on, Silver Diner imposes no restrictions on customers' usage, and the service can be marketed to meet the needs of individual stores. For instance, locations likely to draw business customers may set aside dedicated meeting spaces for Wi-Fi users.

During piloting, Silver Diner had some concerns that Wi-Fi users would gobble up table space during peak periods, but that proved to be a minimal consideration. Usage varies, but stores typically accommodate 30 Wi-Fi patrons per day.

"We see an average usage time of about 47 minutes [per customer], Snow says. "The managers aren't complaining that people are sitting there and the servers aren't complaining. It seems that in our environment, most people are coming in and using it while eating their meals."