The pizza restaurateur's financial forecast? Mostly 'cloud-y' ... but in a good way

| by Christopher Sebes
The pizza restaurateur's financial forecast? Mostly 'cloud-y' ... but in a good way

There's a cloud hanging over the world's pizza restaurant, but in this case, that's a good thing because this is the kind of cloud that allows pizza restaurateurs to retrieve all those increasingly important technological resources needed to run businesses today through web-based tools and apps, rather than having to directly connect to servers for the same advantages. So what's the big deal about that? To put it plainly: Big savings on the tech you use every day. 

For big players, scaling your brand is the path to both survival and thriving. For instance, a brand with hundreds or thousands of stores is well-advised today to look at two approaches that shift cash flow and improve balance sheets. The best part is that you don’t need to sell even one more item than you do today to achieve this. But first, you must understand two large concepts you have to follow regarding this opportunity.  

First, the value of physical hardware has collapsed and innovation around it is constant. When something is cheap and constantly getting better, you just don’t want to own it. Many of us rent our cell phone from our carrier and don’t take a second to think about it. Every year or two you enjoy a whole new, even better, computer that fits in your pocket.

Second, cloud computing is killing the client–server model in business. Cloud computing is a computing utility that gets tapped by individual devices. Cloud platforms provide the central computing power that eliminates all the "stitched together" mini-networks you have running in every store.
What does that change?

Fundamentally, you’re paying a lot of money right now to maintain a lot of hardware that is rapidly becoming outdated. Likewise, you’re paying for complex and expensive licenses for local point-of-sale software that may improve marginally at best — and slowly.

But by switching to cloud in-store, you also switch your financial future for the following two reasons:

  1. You can easily eliminate your POS capital expenditure by switching to a rental model.In this model, the equipment you rent does not include an IT server and it allows you to use less expensive computer devices like tablets. Every three years or so, you get new equipment.
  2. You get to dump all the old models on point-of-sale software and consolidate vendors into the cloud. Just like your hardware, you rent cloud computing, so there is no perpetual licensing, while support is integrated and there is no more need for deployment labs or corporate data farms. In some cases, you can even eliminate per terminal licensing fees.

So here’s the shift

You eliminate cap-ex spending and shift it to a rental model and you reduce annual in-store POS spend, with savings that continue every single year. Lest you underestimate the effects of that, please know that there is evidence that the effects can be monumental. For instance, in a study we conducted for a 3,500-store franchise system with four point-of-sale terminals and four kitchen monitors per store, the in-store annual operating savings ranged from $4,912 - $12,712 per store. Plus, the franchise system would simultaneously eliminate cap-ex spending every three years of $22,000 –$25,000 per store. That amounts to a phenomenal change in both ongoing operational spending and a ton of capital freed up to re-invest in the business.

My bold prediction
You can challenge the level of savings, but you can’t deny that savings will happen.This is low-hanging fruit and once the first bold franchise systems step up to try this new model, then everyone will follow suit.

I believe that 50 percent of the top 250 franchise systems will convert to cloud POS and the related technologies in the next seven years.

Software that lives in your store only and “chats” back and forth with a small local network is expensive and slow to innovate. Cloud computing is the exact opposite. Instead of a bunch of small networks (in the store) all "stitched together" you get to tap into a utility of computing power.

Topics: Business Strategy and Profitability, Financial Management, Systems / Technology

Christopher Sebes

Christopher Sebes has spent his entire career in hospitality management and technology. He received a degree in Hotel and Restaurant Management in England and managed hotels and restaurants on three continents including multi-unit restaurant operations in Europe and the US. He created the first Microsoft Windows point-of-sale company, Twenty20 Visual Systems, which he sold to Radiant Systems. He went on to become the CEO of Progressive Software before founding XPIENT in 2004. XPIENT was sold to Heartland Payments Systems in 2015, and he was tapped to become the President of Heartland Commerce, a major player in restaurant and retail management technology. Today Christopher is the President of Xenial Inc., formerly known as Heartland Commerce.

View Christopher Sebes's profile on LinkedIn

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