A Look At Restaurant POS Costs: In Either Language, ROI Is King

By Shannon Arnold, Posera

There are two languages of ROI, especially when it comes to restaurant POS. The first is the language of Cost Reduction: how much time, resources and cost of goods can be lowered. Second is the language of Revenue: how much new, incremental revenue you’ll earn when you move to a POS. For restaurants, both languages are important, but it’s the first — the language of savings — that should be your first language.

It’s not as enticing as revenue, and the time it takes to achieve ROI based on cost savings is significantly longer than the time it takes with new revenue. But costs savings is the more objective, predictable, and safer of the two, and safety in an investment is always critical. That’s true for operations that are switching POS systems, and it’s even more important for those transitioning from doing things manually or with a basic ECR. Now you’re entering unknown territory, and it’s always best to do it safely.

Cost savings includes areas such as accounting, inventory management, labor management — anything where you can determine a fixed or an average cost to serve as a baseline. These are mostly back office or management tasks. In some cases — for instance better forecasting of inventory — the savings comes from simply spending less money and wasting less inventory. In other cases, savings has to do with better time management (for instance, recording new inventory).

But beware: that savings in time is only meaningful if your staff will do other things with it that helps the operation. If the person who manages inventory doesn’t take on other tasks with that saved time, there’s no value in making that process happen more quickly. But if she can also handle marketing, or ordering, or expediting, or other useful processes, then the value is there. And remember: a good POS helps with the cross training that makes this possible.

Time savings applies to the floor as well. Add mobile technology to your POS investment to increase the amount of tables your staff handles on their shift. Through labor management and forecasting, you can reduce staffing levels. Those are clear cost savings — reliable and straightforward to quantify.

Think also of efficiencies: of waste, spillage, and pilfering control. It’s easy to determine the cost savings a liquor control system will have by determining your over pour amounts and then—essentially—eliminating that cost. And in all these operations — especially back-office tasks — factor in how eliminating manual errors will improve your bottom line.

When you deal with ROI from cost savings, the cost savings number is going to be relatively low and the timeframe relatively long. That’s fine. If you save 3 percent of your cost of operations in a year, it might take you three years to reach the return on your investment. That’s a reasonable and healthy time frame for you to reach your return.

But you also want to make money with your POS, if you can. That’s fine too, as long as your cost savings is enough to justify the POS, even if it never makes you an incremental penny — not every IT investment generates revenue.

Here’s where ROI moves into forecast; where your eye turns toward potential revenue. The operating principle is to be conservative. Forecasts always need a grain of salt. Things never work out perfectly. But if you’ve got a strong safety net of costs savings, you can begin to add increased revenue to the equation.

For instance, if you run a high-volume QSR, you might determine switching from an ECR to a POS with mobile capabilities for line busting will let you serve 10 more customers an hour during four peak periods each day. With an average ticket of $5, you’re growing revenue by $200 a day. That’s about $1,400 a week. If your POS costs — let’s pick an easy number to work with — $14,000, you’ll hit your ROI in ten weeks. That’s a lot better than three years.

Now take that same mobile system and double the cost to include a second workstation and more tablets for a fine dining operation. Here you focus on table turns and upsell. A mobile staff can increase both. Let’s say you can seat 10 more tables per night and increase the average ticket by $7. If that average ticket is $125, you can see the time to ROI is slashed to almost overnight. That’s a whole lot better than three years.

But what if you’re wrong? If your forecasts are off or your assumptions don’t pan out for earning money, that’s fine. You’ve built your ROI on the principle of savings. With POS forecasting and labor management, you’ve already figured out you’ll save conservatively 3% off your labor costs over the year—let’s say that’s $10,000. Your three-year ROI is still intact even if your serving staff never serves an additional table or an extra impulse desert.

A restaurant POS should let you speak the ROI languages of save money and make money. An ROI strategy based on cost savings and supplemented by revenue is the smartest and safest way to determine — and to ensure — your investment does the job you need it to.

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