Counting the cost of a pizza POS system

July 5, 2004

POS shoppers are a lot like new car shoppers: They typically look at the ride they want, but wind up buying the vehicle they need.

Their inner monologue is similar, too:

"I'd love a high-tech turnkey POS that does it all, but does my business really need such a machine?"

"I'd like to spend as little money as possible, but will cutting costs now leave me paying more later for upgrades?"

"What's the best bang for my buck?"

Simple questions. Complex answers.

Jeff Ward wrestled with these same issues several years ago when he bought a struggling pizzeria. He wanted a three-station POS system to streamline his operation, track sales and labor and help with marketing. The average price quote of $12,000 for such a system, however, shocked him.

"There was no way our pizzeria could justify that," said Ward, who also worked for a software company at the time. "Knowing what I knew about software and the cost of hardware, I couldn't see how they could charge that much."

Convinced operators shouldn't have to spend a fortune on a good POS system, Ward co-founded Inborne Technology Corp., a company that would go on to launch Point of Success POS software in 2003.

"We knew there was no reason operators couldn't buy POS software, get their own hardware and maybe, with a little

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help, get a POS system up and running for far less than what the traditional companies were charging," said Ward, CEO of the Mesa, Ariz., company.

Using Point of Success software ($1,049 for a three-user database license) and sourcing his own hardware (including one cash-drawer terminal and one printer), Ward said an operator can assemble a three-station POS system for about $3,400. Additional software/hardware add-ons, such as caller I.D. and an employee time clock cost extra, but on average, such a system (even if a computer tech is hired to hook up the network) costs about a third of the price of a system made by a turnkey POS maker.

But don't be wooed by low price alone, said Tom Bronson, president and CEO at Rockland Technology Group, which makes DiamondTouch POS systems in Lewisville, Texas. You only get what you pay for when purchasing "a la carte."

"There are no add-ons for our system. It's complete," said Bronson. The cost of a three-station DiamondTouch setup averages about $14,000. Within that cost, he said, is $2,200 for two days of onsite setup and staff training, new—not used or reconditioned—hardware with fully pre-configured software, multiple printers and touchscreens. "Having someone come onsite for installation and training does run up the cost, but the comfort level of knowing it's going to run right is priceless."

David Brekke, sales manager for Lynden, Wash.-based Speedline Solutions makes no apology for his company's average $15,000 tab for a three-station setup; he said, it's a serious system for serious operators.

"If they don't want a lot of stuff like back-office support or integration into QuickBooks ... all the stuff we've spent the last seven years building into our product, maybe we're not what they're looking for," Brekke said. "They have to look at what it's going to do for them rather than what it's going to cost them."

Should it cost so much? Not according to Ward, who said the $7,000-$8,000 software-only price tag charged by turnkey manufacturers is not justifiable. Unlike Microsoft, whose software prices remains affordable because millions of units are purchased, niche software developers, such as pizza POS makers, do have fewer buyers and must charge more for theirs to recoup their development costs. But the higher charges are necessary only to a point, he said.

"Conventional wisdom for a lot of specialized business software makers is to charge a lot because they can get a lot," he said. "But after a while, you're to the point where your only costs are in duplicating it, putting it in a box and shipping it."

Bronson said ongoing development of the DiamondTouch software justifies the product's high cost, but Ward said Point of Success gets the same ongoing refinements.

"We have three full-time programmers working on it all the time," he said. "But there comes a point when the costs don't keep adding up."

Do it yourselfer

When Tom Jans opened T.J.'s Take & Bake Pizza in Hilton Head Island, S.C., he didn't have a lot of money for a POS system, but his background in marketing convinced him he needed one.

The $15,000 quote he got for a turnkey system was a budget blaster, so he searched the Internet for other options. He downloaded the Point of Success demonstration software from the company's Web site and was impressed with the trial.

"When I talked to their salespeople, (the cost) almost seemed too good to be true," said Jans, who called himself "reasonably computer literate." "I took their recommendations for hardware, went on the Internet and found the prices on all of it, and then had someone install my network wire so I could jack it into the wall."

Including hardware and database licenses, Jans has three stations running for about $3,000.

Jans said customizing his menu and order input sequence in his system was simple but took "two solid days of dedicated work." He suspects a lot of operators might not want to put that kind of effort into their POS system, and Rockland's Bronson agreed with him.

"By and large our industry is still owned and operated by people who have a lot of pizza experience, but not a lot of computer experience," he said. "Tweaking a POS system isn't what they want to be doing."


What's Important

Pizza operators now have the opportunity to buy their own POS software, source their own hardware, assemble their own systems and shave thousands of dollars off the cost of a turkey system.

But not every operator is computer savvy, and some POS makers argue that a turnkey system is the do-it-all solution operators need.

Most agree, though, that the wise POS shopper purchases a solution best matched to his business and his budget.

operators want the system to work, period, said Lori Sims, vice president of sales and marketing for Indianapolis-based Custom Computing. Knowing that a pro has assembled, programmed and customized an operator's investment is why so many TouchExpress customers willingly pony up the $13,000 for a three-station setup, she said.

"It handles all their money, employees, food cost, inventory levels, purchasing—the business side of their businesses," she said. "So when you break it down over a two-year period of time, that's about $15 bucks a day to manage all of that. So is it worth it? I'd say it is."

Speedline's Brekke said he admires the do-it-yourselfer pizza operator who has the fortitude to set up his own system. Troubleshooting problems, however, is a hassle few anticipate or manage well.

"Does he know whether it's a hardware or a software problem?" Brekke asked. "You start calling all those companies, and that's where the finger-pointing begins; it's always the other company's problem." When trouble strikes a turnkey system, the user goes to one source, he added.

That's also where support kicks in—and the meter begins running. Every POS provider offers tech support (some free for the first few months to several months, and then pay for play thereafter) and for varying fees. On average, operators pay around $100 a month, and some offer a per-incident charge. All suggest operators purchase half- or full-year support plans, which include the cost of regular upgrades and patches.

Needs assessment

Both Bronson and Ward said making apples-to-apples comparisons between every pizza POS systems is difficult, if not impossible, because no two packages are alike in cost, function or support.

While sticking to his belief that a full-blown system is the best plan for most serious pizza operations, Brekke said a do-it-yourself package like Point of Success might better fit the needs of a small operation.

"It's a very limited package, and there's nothing wrong with that," he said. "But if you think that solution for is everyone, you're wrong."

Like the wise car shopper, Brekke said wise operators buy just what they need. If they want a system that delivers strong back-of-the-house support, plus detailed reports about a business's performance, they're probably going to spend a good chunk of change on a POS. If they want only a basic system, a pizza POS software-only solution might be a good idea.

"I don't blame operators for trying to save money where they can," Brekke said. "Next to their ovens, this is the second-highest cost they're going to face in their restaurants. What they need to think about is the payback for this investment. We have lots of operators tell us their systems paid for themselves in 18 months."

Even Ward agrees that a large operation may warrant a more technically advanced and expensive system.

"If you're running a multimillion dollar store or multiple locations with people who don't know about computers, it might not be a bad idea to spend $25,000 on four work stations," he said. "But if anything on that list isn't true, meaning you know about computers or have someone on staff who does, you have a big advantage because you know how to get our system going."

Topics: Marketing, Operations Management, POS

Companies: Touch Express by Custom Computing

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