Profiting From A Hospitality Focus

After more than 20 years in the business, point of sale (POS) VAR Chuck McDonald has seen many technological advancements. "I've seen the industry move from using cash registers to PC-based POS systems," says McDonald, president of Hospitality Control Systems, Inc. (HCS) (Charleston, SC). HCS specializes in PC-based POS systems for tableservice restaurants. "Hospitality is still, however, very under-automated." McDonald is out to change that.

"I was working for another company in the late 1980s selling POS terminals in the grocery, retail, and hospitality markets," explains McDonald. "One day in a meeting, we were asked to make a list of all the software packages we supported. We stopped counting at 100." For McDonald, this was an eye-opening exercise - and the impetus he needed to start his own company.

Starting Out In The Back Office
In 1991, McDonald and a partner opened HCS in Atlanta. Because he'd signed a non-compete contract with his former employer, McDonald could only sell back office solutions to restaurants. "I started out selling labor management and accounting software," says McDonald. "It was a profitable niche market, and it helped build our reputation in hospitality." After McDonald's non-compete agreement expired in 1994, he searched for a front-of-house POS software package to sell. "I attended the National Restaurant Association show in Chicago, looking for POS software," says McDonald. "I visited every booth listed in the program. Ibertech was there, but I didn't find the company's booth. It was a late entry into the show. Luckily, a friend pointed out Ibertech's booth to me." McDonald evaluated Ibertech's Aloha software and, soon after, signed on as an Aloha reseller. HCS opened a second office in Charleston, SC, to sell Aloha in that territory, as well. McDonald soon realized that it was inefficient to operate two offices and support customers in different geographic locations. McDonald and his business partner split the company, with McDonald taking the Charleston office. "I felt a loyalty to many of my restaurant customers in the Charleston area," says McDonald. "And the help desk was already operating out of the Charleston office."

Catching Up To Retail Automation
With total ownership of the Charleston office and an ongoing dedication to the hospitality market, McDonald set out to further automate his customers' POS systems. "Retail is very different from hospitality, in terms of technology," explains McDonald. "Every retail store you walk into has a computer on the counter. That's not true with restaurants. You can walk into restaurants and find the waitstaff using hard (paper) tickets and cash registers. While many restaurant owners use computers, they don't always realize how newer technology, such as the Internet, is impacting the hospitality industry."

McDonald's many years of experience exclusively in hospitality have helped him land more than 300 installations in the past five years. Today, he's trying to help his customers maximize their use of technology at the point of sale by incorporating the following:

• Frequent diner/customer loyalty - "Most restaurants don't track their customers because there is no easy way to capture customer information, such as names and addresses," notes McDonald. "But a frequent diner program can be a tremendous marketing tool for a restaurant. Restaurants spend money trying to attract new customers, using billboards and other forms of advertising. If a restaurant loses five customers, it has to gain five new customers. It's less expensive to maintain a customer base by rewarding customers with a frequent diner program than it is to attract new customers."
• Inventory control - "Restaurants are not taking advantage of inventory control because it's difficult," says McDonald. He likens food preparation in a restaurant to assembling cars in Detroit. "A restaurant is a manufacturing operation, to some degree. The restaurant owner buys the parts, or the ingredients, and puts them together to form an entree." The process of tracking tomatoes, for example, is more complex when the tomatoes are sliced and used in salads and sauces. "Inventory control is very doable, but it takes discipline and effort on the part of store managers or owners," admits McDonald.
• Gift certificates - "Many restaurants are automated only to the point that they accept credit cards. However, they can't successfully track and manage gift certificates," says McDonald. "Restaurants with two or more locations, for example, have difficulty tracking where the gift certificates were purchased and in which restaurant they were used." Pinpointing dollar amounts for unused gift certificates is a nightmare for restaurant accountants and bookkeepers, notes McDonald. He says the right POS software package can manage all these components - frequent diner, inventory, and gift certificates.

Profiting From The Internet
McDonald's goal for the year 2000 is to communicate electronically with all of his customers. "Within six months, I'd like to have all of my customers using e-mail," says McDonald. "It will facilitate sharing product information with customers. And, helping my customers with Internet access is a revenue stream for HCS. Many customers hesitate to go online while their computers are also running POS software."

Helping his existing customers maximize their POS software's capabilities has helped McDonald increase sales. "All of our sales and support employees have extensive knowledge of the software," explains McDonald. "Imagine trying to support five packages, which some VARs do. When we receive updates and changes to the software, they are big. How can you manage big changes with five different products?" McDonald meets with his staff every Monday at 9 a.m. to discuss service and support issues. "Every 60 days, we conduct our own in-house training," notes McDonald. He also encourages his staff to take advantage of vendor-sponsored training.

So far, McDonald's focus on the hospitality market and one POS software package is paying off. He admits, however, that other markets, such as retail, have been tempting. But McDonald has no plans of diverting his focus and offers a bit of simple wisdom to his fellow resellers. "It's amazing what experience and knowledge can do for you in this business."

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