Score Profits In Hospitality

When the bottom dropped out of the oil market in the late 1980s, many businesses were adversely affected. Residents had less money to spend. Downtown Houston became a ghost town after 5 p.m. People fled the area after work, retreating to the suburbs. With the exception of theater, there wasn't much to do downtown. Only a handful of restaurants remained in the area, but many of them closed after lunch. Between 1987 and 1996, downtown Houston property values decreased by 40%, representing a loss of $1.7 billion. VAR Brian Choate started his company Texas P.O.S. in 1992, when downtown Houston was in the midst of decline.

Focus On One Market
Choate started his company knowing that he would be a small fish in a big pond. "I was going up against much bigger competition - dealers that were number one resellers of certain brands of POS hardware and software," said Choate. His plan was to focus on one market that he knew well - hospitality. Choate had worked in restaurants throughout school and enjoyed the atmosphere and the people. He also felt the potential for success was not as great in retail and grocery markets. Those markets are very competitive, due to large chains and mergers. Today, Choate looks for employees who have been in the trenches, working as restaurant managers. Unlike some of his competitors, Choate looks for computer experience second. "We can teach someone POS computers and software because many people already use computers, which are somewhat similar," explains Choate. "It's more difficult to teach someone the restaurant business. People who have worked in restaurants, especially as managers, understand the business. You can't appreciate the urgency of a support call from a restaurant owner at 8 p.m. on a Friday night unless you've been there. Restaurateurs don't see us as computer geeks, but as operational experts. They look to Texas P.O.S. not only for POS terminals, but also for guidance on food and labor cost issues, operational streamlining, and customer satisfaction."

Capitalize On Past Installations
Today, like downtown Houston, Texas P.O.S. is growing. Choate expects this year's sales to top $2.5 million. He recently opened another office in New Orleans (Louisiana P.O.S.). Sales from it should top $1 million next year.

Approximately 80% of Choate's customers are independent restaurateurs with only one restaurant. Ten percent have two to five restaurants, while another 10% operate more than five restaurants.

While much of his business at this point comes through word-of-mouth referrals, Choate also relies on direct mail advertisements. Trade shows have proven to be a good source of leads. Because industry networking is critical, Choate belongs to both the Texas Restaurant Association and the Louisiana Restaurant Association.

As Houston's economy became more diversified (and less oil dependent), the downtown was reborn. By 1999, 38 new restaurants and clubs had opened, with 16 more in development. More than $1 billion of renovation/building projects were completed or underway. An additional $1.2 billion of projects are in development. Choate, like many Houston residents, is thrilled to see the downtown come alive. He's especially happy to see a resurgence of clubs and restaurants in the area.

Staying on top of new downtown developments, such as Enron Field, has paid off. The newly constructed, $251 million Enron Field opened earlier this year at the edge of downtown Houston. Home to the Houston Astros, the new stadium seats more than 42,000 fans and boasts a retractable roof. A locomotive engine rolls across tracks on the left field wall whenever a home run is hit. Enron Field features fine dining with a view of center field in the new restaurant, Ruggles at Enron Field. Texas P.O.S. had already installed the POS system for a Ruggles restaurant that opened previously in Houston. That install helped Choate land the deal at Enron Field.

Know Your Competition
Choate advises VARs to know what their competition is doing both right and wrong. "I've learned more about what to do wrong from my competitors," admits Choate. Many of his competitors were installing large numbers of systems at a lower cost than Texas P.O.S. Choate focused on quality installations and kept his prices higher.

"I committed to long-term stability," he says. "In 1998, approximately 5% of our installations were replacements of competitors' systems. Now, about 25% of our installations are competitor replacements. We are almost into a second-generation POS market. People are buying their second, and even third, POS system."

Choate finds satisfaction in helping restaurants succeed using technology. "The POS system makes a huge impact on the profitability and success of a restaurant," he notes. Despite the onslaught of chain restaurants, Choate says there is still a large market of independent restaurants out there. "People forget that the whole computer age really took off only in the last five years," explains Choate.

"There are still many people running their restaurants using a manual system," adds Choate. "These are the people who didn't use computers in school. You can see the fear in their eyes when you bring in the POS terminal. Once they see how the POS system impacts their bottom line, they embrace it. Six months after the installation, you couldn't take it away from them."

"I don't take success for granted," adds Choate. "I think our success is due, in part, to hands-on management. Our customers must sign off on everything, from taking equipment out of a box and wiring the system to training their employees. Since I can't be at every installation, I want to be sure everything was done properly."

Move Cautiously With New Technology
Choate himself treads lightly when it comes to adding new technology to his product mix. "I get excited about technology, like wireless and Internet-related solutions," says Choate. "But, I need to analyze the market and determine if the technology will help me make more money. Just because someone has a slick idea, doesn't mean it will be profitable. The explosion of dot.com companies is a good example. Take the emotion out of it and find out if it is marketable and if people will buy it."

Benevolence Pays Off
A gift to his alma mater may also land Choate future business. "We donated nine complete POS terminals to the Conrad Hilton School of Hotel and Restaurant Management at the University of Houston," explains Choate. "Thousands of students will train on the Javelin and IBM terminals and Aloha software. The students will spend four years learning how to run a restaurant with this system. In the future, these students will be in positions to influence the purchase of POS hardware and software. Hopefully, they will go with what they know (the Aloha system) and remember where it came from." The University of Houston has already given Texas A & M University a strong recommendation to work with Choate as a result of the donation.