OPERATIONS: POS system: Time saver, money maker

Nov. 19, 2005

Given Tom Cangemi's long history in the foodservice industry, it's not surprising he's so smitten with the power of his company's POS system. At 60, he recalls when inventory was counted by hand — one hot dog at a time — and how food orders were entered into point-of-sale terminals that printed out tickets for the kitchen, but didn't store even a digit of data. To have a device that integrates and streamlines both processes, stores mountains of customer information and sends it all back to the home office for collection and processing is a godsend, he said.

"There was so much paperwork with inventory in the old days," said Cangemi, chief executive of 22-unit Italian Pie in New Orleans. Three decades ago, when he oversaw airport concessions operations for Marriott, "We used 10-key adding machines trying to total it all. But today you push a button and it's gone."

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His POS system's ability to save him money through better food cost management easily justifies the investment, he said. But equally important to him are the time savings it provides. "It gives the manager the ability to spend 80 percent of his time on the floor or in the kitchen watching the quality of the product and service. That's where he should be."

In a generation already comfortable with computers, why an operator would forego using a POS is a mystery to Cangemi and others like him who said they wouldn't run their businesses without one. No doubt, the price tag scares some away, as outfitting a single delivery-carryout store with a sophisticated system costs at least $15,000 on average. Do-it-yourself systems cost considerably less at $3,000 to $5,000 for software and hardware. But even that kind of cash can seem like a lot to part with for a start-up venture.

Despite their ease of use, their technical complexity intimidates some to the point that they're viewed as electronic overkill in an industry that operated some 80 years without tech toys.

"We hear people call it a glorified cash register all the time," said Lori Sims, vice president of sales and marketing for Touch Express maker Custom Computing in Indianapolis. "It's really hard to explain the value of a POS system to people like that."

Despite the occasional frustrations of using a POS system, Ann Reichle said running her four-unit business without it wouldn't work. An admitted, "non-computer person," she said she's not the best person to have around for the rare but inevitable system crash. Still, "I don't think I'd be operating if I didn't have one," said Reichle, co-owner of Angelina's Pizza in Olmsted Falls, Ohio. "They're incredible machines, and you can do so much with them."

Like detailed reporting, rapid order input, targeted marketing plans, tight labor management — all things from which any operation benefits. But to be of real value really quickly, said Jennifer Wiebe, marketing manager for Speedline Systems, operators need a rapid return on investment, which comes initially through cost savings. One of her customers pocketed an unexpected $600 the first month he used the system because correctly assessed delivery charges on every order, something the staff struggled with in the past.

"They have a graduated delivery-fee system based on how far from the restaurant the customer is," Wiebe began. "It was a little complicated and the staff was not following it very well when they had to figure it out for themselves. So what they had were customers getting ticked off because they were getting charged $2 one time and $5 another time."

Ryan Bell, an 11-unit Hungry Howie's Pizza franchisee in Gainesville, Fla., expects his POS system will generate five-figure savings in 2006 by improving the way he's already cutting his worker's compensation insurance costs. By chronicling the time delivery drivers are on the road versus time spent in the store, Bell spends less on worker's comp. Currently, however, all that tabulation is done manually.

"When we have an audit, it's a four-day process that takes two people to do," said Bell, whose POS provider is installing a software upgrade this month that will make the calculations automatically. "With this, we'll be able to hit a button and the information is there." Annually, he expects the change will reduce his overall worker's comp costs 25 percent.



Brian Henry, a Mr. Gatti's franchisee in Houston, said his POS system's "blind cash-out" feature deters employee theft from the till when he's not watching. When cash drawers are changed,

What's Important

Despite their cost, POS systems typically pay for themselves quickly through cost savings alone.

Their ability to create custom marketing programs turns them into profit-makers.

POS systems also allow operators to focus more on growing their businesses because the machines manage important details automatically.

only he and the POS system know exactly how much cash should remain at closing.

"If we're short, I know who's responsible, and if we're over, they can't take the overage because they'd not be able to figure it out," he said. "In the first month we were open, I didn't use the blind cash-out, but since they did an upgrade to the software and turned it on, I've used it since. This is a very valuable piece of equipment."

Voiding transactions in order to pocket the cash is difficult with a POS system because of the detailed paper trail it creates. The manager at Reichle's store does day-after audits of all voids to determine where the problems occurred. If the void is attributed to a dissatisfied customer, the manager makes a call to investigate. "If she calls and the customer said everything was great, then we have a problem here," Reichle said.

To further protect against questionable voids, many POS systems can be synchronized with digital video security systems to record every void for review. Since every transaction is recorded digitally on both machines, an operator simply prompts the computer to list all voids and then proceeds instantly to the point in the video recording when the void was made. (Read also Caught on tape.) Armed with a visual record of the incident, as well as the manager's reason for voiding the transaction, the operator knows immediately whether the manager was righting a wrong or ripping him off.

If Leonard White wants to know his labor cost as a percentage of sales at any given moment, his POS system tells him with the push of a button. No more running around the store asking employees when they punched in and when they're scheduled to leave.

"I've got managers checking that on an hourly basis," said White, a two-unit Hungry Howie's franchisee in Scottsdale, Ariz. "It's especially good for new managers and young managers because it's easy for them to understand. (Reading the screen) is like looking at the dashboard of a truck."

Reichle agreed

start quoteI think there's that dividing line between people who get into pizza because they have a passion for cooking and those people who understand they have to have a point-of-sale system to be able to do business effectively.end quote

— Lori Sims, Custom Computing

that a POS's labor management features allow her to think about operations rather than who's headed for overtime. "You can set it up to tell you who's approaching overtime before they're actually there. You can say, 'Oh, you worked an hour longer than you were supposed to last night, so go home now.'"

Laura Gaudin, director of sales for Houston-based POS software developer Revention, said her company's system has a "delivery reminders" feature that ensures drivers leave the store with everything they're supposed to, saving time and fuel otherwise spent on repeat trips.

"If he forgets a side of ranch dressing or a 2-liter soda, he's basically wasted his time making that run," said Gaudin. "They're supposed to check off everything on their own, but that doesn't always happen. So when they're reminded by the POS of everything they need to get, the whole process is a lot more efficient."

Some systems even improve driver cash management by not allowing them to take any new orders until they deposit their cash from past orders. Not only does this reduce chances that cash is lost or misplaced, it increases driver safety by ensuring he's carrying only what he needs for change.

Return on investment

Several operators said their POS systems easily paid for themselves with cost savings alone. But where they actually turn a profit for their businesses is in their role of marketing manager. A POS system's ability to compile deep stores of customer data allows operators to grind out targeted campaigns tailored to multiple customer groups.

A few keystrokes reveal the last time customers ordered, what they ordered and how much they paid. Armed with such information, the operator can reward existing customers — who nearly always are responsible for 80 percent of a pizzeria's business anyway — with special deals customized to their established purchasing habits. Such targeted marketing campaigns reduce the need for area saturation approaches that not only are expensive, but sometimes yield little for the effort.

Custom Computing's Sims believes using only the marketing and food cost management features in a POS system will make the unit pay for itself within 12 months to 18 months. But even that kind of positive information occasionally falls on deaf ears of operators who don't understand the overall reason to be in business: to make a profitable, predictable living.

"I think there's that dividing line between people who get into pizza because they have a passion for cooking and those people who understand they have to have a point-of-sale system to be able to do business effectively," she said. "You can't seem to justify to them that having a system like this will allow them to keep their business a lot longer and allow them to make more money. It's always a challenge to get them to understand the balance."

Topics: Independent Operation, Operations Management, POS

Companies: Touch Express by Custom Computing

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