Guest Column | September 13, 2013

How To Explain ROI To Restaurant POS Customers

By Kris Harris, POS Nation

This summer, I had the pleasure of attending a Charlotte small business owner’s meeting.  I find most networking meetings somewhat dull, sometimes spending more time with a group of competitors than potential clients. This meeting, however, added extreme value to my current business.

After a brief meal, we had the pleasure of listening to the perspective of a local small business owner. This individual in particular owned a handful of restaurants in the Charlotte area. The topic was growing costs. Honestly, I was skeptical. I feared that this meeting would turn into another gripe session about how costs are rising, margins are shrinking, and the small business owner continues to lose.  However, I was pleasantly surprised.

“Costs are going up!” he began, like a southern Baptist preacher. I wholeheartedly expected him to ask the group for an “Amen.”

“With costs going up, you only have the option to raise prices, right?  These days,” he continued, “demand the small business owner to be adaptable. Rather than raising menu prices, in my case, I must constantly analyze costs, such as labor, inventory tracking, and other costs.” This individual had only spoken for about one minute, and he captured my attention.  The point that stuck with me was inventory.

If used correctly, a point of sale system can help restaurants save money two ways: 1.Tighter inventory control and 2. More accurate inventory forecasting.

Let’s examine tighter inventory control. In order to analyze inventory, a business owner must know where the inventory is going. Are all items sold? What happens to waste?  What causes the waste?  Once a business owner can begin to gather this data, they can devise a plan to minimize waste.  There could be an employee that is preparing a dish incorrectly. May an untrained server is selling items or educating customers in the wrong way.  A point of sale allows your customer to track waste rates and formulate a plan to minimize waste to turn inventory into bottom line dollars.

One key functionality businesses must perfect is accurate inventory forecasting. In the restaurant world, this goes beyond selling items before they spoil or go bad. It also involves making sure you are adequately stocked for the top-selling items.  How many of us have gone to a restaurant to hear, “Sorry, we are out of the prime rib.”  With detailed sales reporting by item, owners can determine their customers’ buying trends, and forecast to make sure they can meet the demand created within their market.

Most small business owners view a point of sale system as a necessary evil. A point of sale is necessary to capture sales, but there are costs associated with this function. I took it upon myself to re-contact my prospects who shared this view. Interestingly enough, most people I spoke with did not realize that there could be a calculable return on investment with using a point of sale.           

My business conversations drastically evolved.  I began getting to know my prospects’ business and needs. Some of my clients were able to recapture $1,000 per month — and upwards to $10,000. One specific customer once tracked inventory on a macroscopic level.  He viewed inventory at 30,000 feet.  He often times found that he was unable to satisfy orders at the end of the night on the weekends. He also discovered he was wasting ingredient-level inventory due to not selling certain items, and he had to trash ingredient-level inventory on a consistent basis.  Once he corrected his business practices, he was saving about $3,500 per month.

I wish there was a magic formula I could write about that could turn a point of sale into an investment that pays a customer back. However, I found that it is necessary to dive deep into the interworking of my customers to understand how they operate, draw out the frustrations, and offer a solution with a calculable return on investment.