Meet The Needs Of Hospitality SMBs

How does a local IT VAR based in a largely rural area remain profitable for more than 22 years? If you ask Marty Krebs, the answer is diversity. Marty began his business, Krebs Business Machines, Inc., back in 1984 in Stevens Point, WI after years of working for large corporate service departments. Krebs Business Machines was established strictly as a service business for office equipment such as copiers, printers, and fax machines. Realizing that much of the equipment it was servicing was aging and ready to be replaced, Krebs Business Machines began to resell and install several lines of office equipment in the late 80s to ensure it didn’t lose customers to competitors. Approximately 10 years ago, Marty broadened his product portfolio even further by branching out of the office equipment space to sell, service, and support POS and ECR (electronic cash register) equipment. Up until three years ago, POS sales made up only a modest 20% of Marty’s business. However, recently, these sales have increased to account for more than 40% of Krebs Business Machines’ overall revenue. The primary reason for this surge is Marty’s ability to tap into the POS needs of independent restaurants in his region.

Capitalize On Touch Screen Status

A few years ago, Stevens Point and surrounding Wisconsin towns were infiltrated by an influx of large restaurant franchises (e.g. The Olive Garden, Hudson Grill, etc.). While one might think that these new business entrants would offer fresh POS sales opportunities to Krebs Business Machines, Marty points out the difficulty in working with large restaurant chains.

“Most restaurant franchises are headquartered in much larger market areas and have preset buying arrangements for the POS equipment for all their stores established with larger suppliers,” he says. “This purchasing structure makes it nearly impossible for a local VAR like us to compete for this business. We can’t gain audience with the franchise managers that are the primary decision makers for these buys, and we probably aren’t appealing to these entities in terms of size and scope.”

While Krebs Business Machines didn’t gain direct sales from these new restaurant chains, their presence did open the VAR’s eyes to a related emerging opportunity in its region. The new restaurant chains were a threat to the locally owned fine dining establishments that already existed in the area, and many of these independent restaurants looked to technology as a way to compete with the opposition.

“Many local restaurants in our area began to call us and inquire about POS touch screens,” says Krebs. “They saw these devices in use at the larger restaurant chains and view them as a status symbol. They wanted to install them to prove to local clientele that they had the latest technology,  too.”

Unfortunately, at the time the inquiries first started to pour in, Krebs Business Machines didn’t carry a touch screen POS device as part of its product portfolio. The VAR quickly contacted CRS, its primary ECR and POS vendor, to ask if Krebs Business Machines could become a pilot dealer for the new SAM4s SPS-2000 touch screen the vendor was developing (see sidebar on this page).

Local Restaurants Need To See Touch Screen Payback

CRS agreed to make Krebs Business Machines a pilot dealer of its touch screen product, and the VAR immediately embarked on a mission to show local restaurants that touch screen POS terminals were not only a status symbol, but a valuable business resource. In 90% of cases, Krebs Business Machines deals directly with the restaurant owner on a touch screen project, and Marty has employed some innovative tactics to gain audience with these decision makers.

For example, Marty and his wife Jan, also a principal of the company, once frequented a local restaurant as customers and, while dining, observed several weaknesses in employee accuracy and accountability that could be positively affected by implementing touch screen technology. After their meal, Marty approached the business owner, revealed his findings, and explained how his touch screen hardware could help. A few months later, the restaurant owner called and placed an order for two SAM4s SPS-2000 touch screens networked with a kitchen printer. Within two months of installing the hardware, the owner told Marty that the solution helped raise his guest checks an average of 50 cents. This increase was largely attributed to the touch screen technology’s ability to minimize employee errors, such as forgetting to charge a client for extras. While a 50-cent increase per check may not sound like much, this particular restaurant averaged 150 guest checks a day, which resulted in overall savings of $450 a week. These savings allowed the restaurant to receive a full payback on the $3,000 system in only two months. Krebs Business Machines now frequently uses this customer example as a way to explain the payback of touch screen POS technology to new prospects.

While payback proof may entice a customer to buy, it may take a bit of financial finagling on your part to actually close the sale. “Many independent restaurants aren’t necessarily financially stable,” says Krebs. “$3,000 is a big investment for many of them,  and you have to be sure you can offer financing for the POS hardware. You may also have to adjust your terms and deposit structure to appeal to the independent restaurant market.”

The good news is once your financing terms line up with independent restaurant expectations, the sales cycle is relatively quick. Marty says the average sales cycle for a local restaurant touch screen implementation is one month. “The shortest turnaround time we could do for a touch screen installation is three to four weeks,” says Krebs. “You need to coordinate the payment processing and program the terminal to reflect their menu on a demo unit first. Typically, several rounds of adjustments are made to this program before our team and the customer is comfortable enough to install the entire system.”

Target POS Marketing Messages

While the opportunities for independent restaurant business are definitely out there, it is often difficult for a small rural VAR like Krebs Business Machines to generate qualified business leads for its solutions using traditional marketing methods. “It doesn’t make sense for us to advertise in the local newspaper or on local television because our services don’t have a broad enough appeal,” says Krebs. “We need to send a targeted message, and it’s not like there are trade shows for local restaurants.”

While this may be the case, Marty has become aware of a new organization called the Independent Restaurant Association that is being formed to unite local restaurant owners and provide them with the same buying power that many of the larger chains have. Marty has identified members of that organization as hot prospects to which to send targeted direct mail pieces.

Even without a heavy marketing push, Krebs Business Machines has been successful in gaining new local restaurant business through word of mouth. Targeting this market with touch screen POS technology is expected to be the primary contributor to the VAR’s 17% overall revenue growth this year. Furthermore, the word of mouth being generated has even helped Krebs Business Machines penetrate the larger restaurant chain market, earning it business with a regional KFC franchisee. As for independent local restaurants, Marty feels he has not yet even scratched the surface of the business opportunity that exists. “We’re just starting to move outside the town of Stevens Point and into outlying towns such as Wisconsin Rapids,” says Krebs. “There are a lot of local restaurants in these areas, and we feel we can ensure our growth for years to come by selling touch screen POS solutions to these customers.”