Magazine Article | June 1, 2002

Capturing The Cafeteria POS Market

LunchByte Systems expects its new cafeteria POS software program to garner a 50% increase in sales this year.

Business Solutions, June 2002
Written by: Matt Pillar
Touch Dominates The Cafeteria

VARs know that in quick service installations, there's simply no better POS (point of sale) user interface than a touch screen. It's been proven at the nation's leading fast-food restaurants, and relative to keyboard input, it's easy to navigate and provides an abbreviated learning curve. These two factors lend touch screens to applications in business environments where employee turnover is high and workers are low on computer training.

These are two of the reasons Paul Moriarty, president of LunchByte Systems, Inc. (Rochester, NY), is so excited about his company's recent partnership with Ultimate Technology, a POS hardware vendor located in Victor, NY, a few miles down the road from LunchByte Systems. "This is the biggest business decision we've made recently. We're software experts, and we want to remain software experts," he says. "Having a local hardware expert will have a significant impact on our growth and drastically reduce our growing pains."

Beyond the geographic advantage of having a hardware partner in its backyard, LunchByte Systems chose Ultimate for the flexibility it demonstrated with its UltimaTouch 5500 touch screen. "We needed a different base for the unit than what was offered on the standard model, so Ultimate customized it for us in less than a month," says Moriarty.

The UltimaTouch 5500 chosen by LunchByte Systems is a 5-wire, resistive touch screen with a standard MSR (magnetic stripe reader), an imperative in today's school cafeterias where students have declining balance accounts from which the cost of lunch is debited when they swipe their student ID cards. Ultimate markets the unit to high-use restaurants, convenience stores, and specialty retail environments.

Government initiatives can be good for business. No matter what the issue, when Congress decides there's a problem and the government must intervene, it usually means funds will be made available to problem solvers. This creates business opportunity. But working in a niche prone to regulation can create business challenges in the form of ever-changing criteria and strict guidelines. Three hot buttons for government spending these days are technology, health, and education. A solution provider with a product that addresses all three is in a prime position to gain business. It's also in a prime position to have to work hard to earn it.

Recipe For Growth: Roll Up Your Sleeves
LunchByte Systems (Rochester, NY) has been developing school cafeteria management tools for K-12 schools nationwide since 1990. The company's NutriKids menu planning, nutrition analysis, and cafeteria management software dominates the market, serving 6,700 school districts in every state except Hawaii (though President Paul Moriarty is working to change that). But for all its growth, LunchByte's success didn't occur overnight. It was the company's work ethic that got it where it is today, a work ethic defined by Moriarty himself.

A certain week of infamy in 1992 set the pace the business keeps to this day. That week, you could find Moriarty speeding across the eastern seaboard in a rented Plymouth Neon, a trunk full of computing equipment bogging him down. He left Rochester on Monday morning, arriving in Ohio for a meeting with representatives from the Ohio State Education Department that afternoon. He was in Kentucky by Tuesday morning to meet with that state's education department. Thanks to a time zone change, he made it to a Tuesday afternoon meeting with the education department of Tennessee. On it went for the rest of the week, as Moriarty peddled his system through Mississippi and Louisiana before steering the little Neon back north to Rochester.

"It was as amateurish as you could get, but it was probably the most profitable week in our history," Moriarty says. Since then, LunchByte has refined its sales practices. Moriarty began to hold regional seminars, inviting an average of 20 potential clients to each meeting. There, he would demonstrate his software and take orders. Federal child nutrition initiatives and the low cost of his software, he says, helped make customers out of attendees. Business grew steadily, and by 1993, Moriarty was guiding a staff of three to profitability, servicing 450 school districts with its NutriKids cafeteria management, nutrition analysis, and menu planning software. Since 1996, the company has conservatively added two to three employees per year, bringing its 2002 totals to 26 employees and 6,700 school districts.

Pursuing A Regulated Niche
In 1999, LunchByte Systems began to develop a software product called the NutriKids POS (point of sale) system that complemented its other cafeteria solutions. Though it was a new venture, the company's domination in K-12 nutrition and menu planning software made cafeteria POS a logical next step for business expansion. LunchByte Systems installed its first POS system in the fall of 2000, and today its systems operate in close to 400 buildings. While this figure doesn't compare to the volume of menu planning clients the company serves, Moriarty expects his company's K-12 cafeteria POS business to triple by spring 2003. This will happen, he says, as school foodservice directors who have been running his menu planning software turn to LunchByte Systems to upgrade their POS systems.

There are unique challenges that come with integrating the POS with cafeteria operation applications like nutrition analysis and menu planning software, but the company has already begun to capitalize on being a one-stop shop. The first hurdle to clear is that the USDA (United States Department of Agriculture) must approve menu-planning software for schools, both public and private. LunchByte Systems is one of about a dozen software developers that are approved by the USDA to service the nearly 15,000 school districts in the United States. Next, there are government-funded free and reduced-price lunch programs that must be considered when creating POS software for schools, and with these programs come some sensitive issues. If a child's family meets a certain income criteria, the child is entitled to a free or lower-priced lunch. Students on free or reduced-price lunch programs are easily picked out when they cruise through the lunch line without opening their wallets.

Consequently, many students who are eligible for the reduced lunch program pay anyway to avoid ridicule. When this happens it's not only the student who loses. The federal government reimburses schools for each meal served. Typically, the government reimburses the school around 20 cents for fully paid meals, but up to $1.75 for free meals. When eligible students turn down their free meals, the school loses funding. For perspective, the New York City School District gets reimbursed an estimated $4 million per day for school lunch programs.

ID Cards, Biometric Recognition Provide The Solution
More often, schools are turning to card-based identification systems, not only for security and student tracking, but to eliminate stigmas like the aforementioned one, not to mention to speed up the transaction. If all a student has to do is swipe a card to pay for lunch from a declining balance, the cash transaction is a non-issue, the stigma problem is solved, and the transaction is expedited. Biometric recognition systems, such as fingerprint readers, are also being examined for this purpose, though integrators face the same, if not higher, barriers to implementation of biometric devices in schools as they do in any industry. Privacy issues have stalled several biometric recognition implementations in schools nationwide. Resellers interested in selling POS systems in academic environments must be sensitive to these issues, yet prepared to offer such services. The NutriKids POS system, for example, now operates on an Ultimate Technology (Victor, NY) touch screen POS terminal that features an integrated MSR (magnetic stripe reader), which ties into a student's declining balance account. Other modules that complement the school POS system include a calendar creation program that integrates with the menu planning module, recipe costing, inventory, and production planning.

Moriarty's expertise in the cafeteria and rapport with his huge customer base are paramount to his pursuit of the school lunch POS market. And with nearly 7,000 school districts in his portfolio already, he's got a captive audience.