Networking Profits Make The Connection

Okay, so Arkansas isn't known as the taco capital of the United States. But, it is home to one of the top Taco Bell franchisees in the nation, KMAC Enterprises, Inc. KMAC (Fort Smith, AR) owns a total of 144 Taco Bell, KFC, and Golden Corral restaurants in Arkansas, Oklahoma, Missouri, and Texas. Running three different concept restaurants in four states makes for an interesting mix of point of sale (POS) hardware and software, to say the least. Two years ago, KMAC's business took an unexpected, profitable turn, according to Roger Morris, who heads the company's in-house IT department. KMAC formed its own systems integration/software development company, Positive Solutions, LLC. The new spin-off reported annual revenues of $1.5 million in 1999, and projects 2000 revenues to reach $3 million.

Will Software Sell As Well As Tacos?
"About five years ago, we wanted to upgrade the POS software used in all of our different restaurants," Morris explained. "There were software features like transaction-level detail that we needed, but didn't have in the software we were using." Morris' search of the POS software market at that time didn't turn up what he needed. He did find a software tool that enabled him to build a DOS-based POS system. "For the first time, KMAC had the transaction-level detail it needed to help make the restaurants operate more efficiently," said Morris. The "new" POS system attracted the attention of fellow Taco Bell franchisees who wanted it for their restaurants. "The problem was, the software wasn't ours to sell," admitted Morris. "So we had to make a decision. We knew we could sell tacos, but could we develop and sell our own software?"

KMAC decided to take the plunge. Within 90 days, Positive Solutions, LLC was born. Morris became MIS director/owner of Positive Solutions, in addition to his responsibilities at KMAC. He and Gary Butler, senior analyst/owner, "drive the train" when it comes to Positive Solutions' day-to-day operations. KMAC owners Brent McGruder, Jon Dyer, and Sam Fiori also own Positive Solutions.

"Community" Support Boosts Software Sales
"The Taco Bell community (fellow franchisees) really pushed us to develop what would become our POS "ONE" software," stated Morris. "There was some nervous excitement on our part." Positive Solutions attracted the attention of IBM by ordering $500,000 worth of IBM 4695 POS terminals. "As a result, IBM paid for our booth at the national Taco Bell convention. That was our initial outside sales and marketing effort." The Taco Bell franchisees reacted positively to the buzz about POS "ONE." "One of our first sales was to a Taco Bell franchisee in Los Angeles," explained Morris. "He owns five restaurants and bought our software – sight unseen. He told me, ‘If it's good enough for KMAC, it's good enough for me.'"

Positive Solutions is starting to bring its POS "ONE" software to the larger hospitality market. What sets this product apart from other POS software for hospitality? "Our product is built by restaurant operators for restaurant operators, including multi-concept restaurants," explained Morris. "Multi-concept restaurants are gaining popularity, with a big push from TRICON." TRICON Global Restaurants, Inc. owns the KFC, Pizza Hut, and Taco Bell franchises. It has 30,000 restaurants in 100 countries.

Multi-Concept Restaurants Are A Growing Trend
A multi-concept restaurant incorporates two or more restaurants, typically chains, under one roof. Doubling up cuts costs on both real estate and labor. The multiconcept restaurants typically offer a limited menu, compared to the full-size, stand-alone restaurants. KMAC operates a combination KFC/Taco Bell restaurant. The food preparation areas are separate, while orders are taken at shared POS stations. POS "ONE" is networked to route orders to the appropriate food prep area from the POS station (see related sidebar, page 72). Morris gives an example. "A family of four goes out to eat. Mom and Dad want KFC, while the kids want Taco Bell. They can now drive to one restaurant, instead of two. The food orders are placed at one POS station. The food is prepared in separate areas of the kitchen and picked up by a runner who puts all the food on a tray and serves it to the family."

Outsource Installations, Keep Training In-House
To maximize its 13-person staff, Positive Solutions outsources installations and service to Spartan Computer Services (Greer, SC). "Spartan has 300 employees across the country," noted Morris. Customers pay an annual service fee for upgrades and support. To get its own best hardware deals, KMAC purchased a Computerland store. The company recently built an 18,000-square-foot building to house both the Computerland store and Positive Solutions. Also included in the building is a state-of-the-art training room. Classes vary from a half-day demo class to more in-depth, manager-level training.

POS Investment Includes Supply Chain
Morris has noticed a trend when it comes to selling POS systems to the hospitality market. "Second-generation restaurant owners are more willing to invest $25,000 in a new POS system," said Morris. "The POS system is viewed as an asset, rather than an expense. Scheduling one less employee at each of our 144 restaurants pays for a new system very quickly." To capture this second-generation market, Positive Solutions added features such as EDI (electronic data interchange) to its product. "Many of the chain restaurants work with large food suppliers," noted Morris. "POS "ONE" allows restaurants to send invoices and receive inventory records electronically." Positive Solutions plans to release a corporate-level solution in the future. "We are working with another company to incorporate more statistical reports. Instead of polling sales data, the information will be posted to a Web site." Corporate headquarters will have online access to data from all of its restaurants.

Transitioning from an end user and integrator to a software developer has been a wild ride for Morris. "It has been overwhelming," said Morris. "Life is more complex now. I used to focus only on KMAC restaurants. Now I have broadened my scope to include other restaurants using our POS "ONE" software."

Morris offers advice to others who want to add software development to their business. "Knowing the restaurant market is key," Morris stated. "Each restaurant does things a little differently, even within a chain, so you have to be adaptable. Stay away from customized software. Say no to requests that are not a fit for your business." About the only thing Morris says no to these days is sleep and time off. But that's okay for now. "We want to get to the point where we are just developing software code and selling licenses," Morris explained. "Everything else – marketing, training, installations, configuring, and even financing of the systems – will be outsourced."

Questions about this article? E-mail the author at LisaK@corrypub.com.