Masterminds Of Hospitality POS

Editor to Bob Schellenbach: Define your target market.
Schellenbach: Hospitality.
Editor: Okay, but specifically, what market segment?
Schellenbach: All of them.
Editor: Bars? Fine dining? Quick service? Independent operators? Regional chains? National franchises?
Schellenbach: Yup.

All things hospitality - that's the name of the game for Retail Control Solutions (RCS). It doesn't matter if it's an independent bar, a giant quick-service chain, or a five-star sit-down restaurant. President Bob Schellenbach pursues them all. The Needham, MA-based POS (point of sale) VAR likes the diversity. But his desire for diversity doesn't come simply from a need to keep employees stimulated with challenges and new, different projects. Maintaining a diverse client base just makes business sense, says company Vice President Jim Symes.

Diversify For Financial Security
While Schellenbach admits large national chains are profitable installations, he warns of the long RFP (request for proposal) process and sales cycle they require. "Big chains have more people involved in the decision-making process," says Schellenbach. "They typically require input from several departments before making a purchasing decision." VARs can expect to present to departments including human resources, IT, financial, and general operations during the sales cycle. Also, big chains perform much more analysis because there are generally more VARs and software providers competing for their business. Independent restaurants, however, don't usually have the time or human resources to go through an RFP process. "Smaller operators usually make their decisions based mostly on where the VAR has worked in the past, what kind of system they have, and what kind of service they offer," says Schellenbach.

But the decision to maintain a diverse client base isn't due entirely to the duration of the sales cycle. "If we pursued only the really big chains, four clients might constitute our entire installation base of 2,000," says Symes. "If we lost one customer, we'd lose 25% of our business." Losing one independent customer, however, doesn't hurt so badly. In a hospitality industry that sees buyouts and consolidation going on all the time, big chain accounts come and go. Pursuing the big fish exclusively is a risky endeavor. "Independents are our bread and butter. They're good for day-in/day-out operations, because they're more predictable," says Schellenbach. At the same time, the VAR advises adding small regional players that will grow into bigger chains to your client portfolio. Then, he says, landing a few big chains is the icing on the cake.

Schellenbach maintains that national chains are typically less profitable per unit than independent operators, but the volume of business makes up for the difference. Regional chains tend to be the least profitable of all three market segments, he says, because it's harder for these businesses to pay the VAR for training and support. "A business with 5 to 15 stores needs an IT staff, but often can't afford it, because they don't have the revenue to support it," he says. Unfortunately, a business without the revenue to support an IT manager likely doesn't have the revenue to support outsourced service, either.

Market Forecast Looks Lucrative For Hospitality VARs
The near future of the restaurant industry looks promising, with close to 200,000 new locations and $200 billion of growth forecasted by 2010. RCS' philosophy of diversification is supported by the latest industry statistics, which indicate that 70% of the nation's 831,000 restaurants and bars are single-unit operators with 20 or fewer employees. While recent overall industry growth has been relatively slow (averaging just more than 4% per year since 2000), the National Restaurant Association expects the restaurant industry to hit $577 billion in sales and include more than 1 million locations by 2010. VARs with automated solutions that target the labor-intensive restaurant environment will fare well in this industry with its relatively low sales per full-time employee ratio ($55,351 in 2001).

Unplanned Market Expansion
When it was founded in 1990, RCS' goal was to be dominant in New England. In 1997, with 25 employees, RCS' sales were growing at 50% to 70% each year. Then POSitouch called with what Symes calls an offer his company couldn't refuse. The vendor gave RCS the opportunity to take over an existing POSitouch dealership that served the lucrative Chicago hospitality market. "We had never thought about branching out geographically," says Symes, but with a sound business model profiting from a solid New England client base, the time was right to capitalize on the invitation. The initial effort was a slight setback to the rapid growth the company knew in New England. "Anytime you go into a new market, you're the new guy, and it can be painful and expensive. You're in an area you don't know, with customers you don't know, and employees you don't know. There's not a real quick payback, but it comes around," says Symes. In 2001, the company mimicked its Chicago expansion by opening a full-service office in Atlanta. "Each office has its own service department to serve that geography. We simply staff each department in correlation with the number of installation sites we have in that market," says Symes. The key to managing growth at RCS and adding employees (now numbering 62) is to capitalize on service revenue. "The rate at which new systems are purchased is certainly affected by the economy, but service revenue is constant as long as your customers are staying in business," says Schellenbach. "While we're growing in terms of both sales and service, if we were to look at our mix of revenue, service and support is where the largest percentage of our growth is."

Meetings That Lead To Sales
RCS maintains active participation in the restaurant associations found in its various geographic markets and attends or exhibits at 14 restaurant industry trade shows per year. In addition, the VAR is a member of several hospitality-only "lead clubs" in each geographic market. "We don't do much trade publication advertising, and we don't see much business coming from the yellow pages," says Schellenbach. The lead club, however, has been a proven sales generator. The club is a monthly gathering of salespeople from various non-competing hospitality technology and equipment vendors. One member might be a refrigeration salesman, for instance, one a POS VAR, and one a bar stool salesman. Only one representative from each product area can participate. "We all get together and share leads in a very structured manner," explains Schellenbach. "You have to go to so many meetings per year and bring X number of leads to each meeting, or you're banished from the club. It's not for slackers," he says.

Targeting The Sales Pitch
When a lead is acted on, RCS' sales approach varies depending on the customer's market segment. The business owner is the pursued decision-maker when pitching an independent operator. Regional chains usually require the VAR to get to the owner through a chain of command, typically starting with a director or vice president, but the owner is still usually the ultimate decision-maker. In big chains, POS buying is an IT decision, so the goal is to reach the VP of technology or a similar title. In any case, the customer is expecting a 12- to 24-month payback period. To achieve that payback, VARs need to educate end users on the system controls like order ticketing, inventory management, labor scheduling, and administrative applications that are pervasive in today's POS systems, yet often overlooked by end users. Schellenbach sums up selling POS into hospitality best by offering some historic perspective. "When I first started in this business, POS was a luxury," he says. "Today, a restaurant needs it like it needs an oven. It's needed to succeed. Practically all restaurants have some type of POS system, and that's a testament to the savings and return they offer." Communicate that point effectively in your sales pitch, and perhaps you too will become a hospitality mastermind.