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 The Point of “Point of Sale” Systems
By Michael L. Kasavana, Ph.D., CHTP, NAMA Professor in Hospitality Business, School of Hospitality Business, Michigan State University
There is probably no hospitality industry technology that has the potential for a higher return on investment than a point of sale (POS) system. Unfortunately, some operators resist implementation or updating of a POS system believing that there is little to be gained by further automating sales transactions. The fact is, POS systems are not centered on currency monitoring, instead the focus is on efficiency in order entry, coordination of production and service, effective promotional tracking, comprehensive sales and server analyses, deferred settlement options, data mining procedures, and important pricing controls.
POS systems provide the hospitality industry with internal control techniques that simply are not otherwise available.Advanced POS developments have led to a plethora of system options including color touch screen devices, handheld portable terminals, and wireless terminals. Properties lacking current POS technology can even consider turning to the latest innovation in remote data processing, the application service provider (ASP) point of sale model. Each of these options is discussed below.
POS Technology In general, hospitalityPOS technology can be segmented into two major groupings: proprietary POS and non-proprietary POS. A proprietary system, as its name implies, has characteristics specific to a distinct system vendor. Proprietary POS architecture tends to be inflexible, vendor-specific and typically available from a single source. Unfortunately, dependency on a single source vendor often renders operators at the mercy of the vendor. In other words, a proprietary POS system limits the hardware, software, and firmware options available to the operation. How can a manager determine if a POS system is proprietary? Simple. Whenever the system’s hardware and software are bundled together and only available from a single vendor, the system is proprietary. Non-proprietary systems, also called open systems, are different. When procuring a non-proprietary POS system, the business can opt to purchase the POS software independent of the hardware; thereby allowing the property to select its own hardware supplier. The true test of non-proprietary POS is the ability to purchase the software independent of the hardware.
For example, when purchasing a touch screen POS system, the firm may opt to purchase application software from one vendor and touch screen terminals from another. The concept being that so long as the software conforms to industry standards, it will operate on ordinary hardware. Similar to plug and play operations, open architecture facilitates the use of diverse hardware sources, support and maintenance providers, and spare/replacement part vendors. Since hardware investment represents a significant portion of POS system cost, serious consideration should be given to non-proprietary equipment and its ability to support future system expansion and/or increased functionality. The useful life of a hospitality POS system is often estimated at five years. Hospitality managers, however, should be mindful of the infamous POS hardware guideline that postulates that hardware that is more than three years old should not be used to support a newer system and needs to be replaced.
Historically, the hospitality industry has been faced with a majority of proprietary POS solutions. Fortunately, theadoption of open architecture signifies the beginning of the end for proprietary POS systems. Current POS systems feature personal computer (PC) platforms and innovative network topologies providing management with application software portability, improved transaction processing, and enhanced financial reporting. Hospitality managers now enjoy more options than ever. With a non-proprietary system, the same technology used to monitor and control transactions may also be capable of direct integration to hospitality accounting, inventory control, desktop publishing and electronic settlement software. Most POS vendors offer a variety of models and styles, each designed for a specific application, environment, or ambiance. Models range from color touch screen PC-based workstations, to handheld terminals, to wireless fixed terminals, to remote off-premises applications. Popular hospitality POS operating systems include Windows NT, UNIX, Java, and others.
POS Generations The first generation of cash registers, dated pre-1960, required manual operation. Register keys were very difficult to use, recording required some physical effort and machine controls were virtually nonexistent. The second generation (1960s) improved operations by replacing manual procedures with mechanical components that increased the speed of transaction completion. In addition, second generation machinery established an auditable control over the register operator (checker or cashier). This feature enabled management to review recorded transactions and determine the balance of cash expected to be in the cash drawer at the close of business. This improvement was perceived as a major enhancement to the development of cash register products.
As the hospitality industry began monitoring menu and meal patterns, the third generation (1970s) of registers evolved with electronic features. Preset recording, detailed tapes, improved control over drawer operations and electrical wiring to other devices became readily available. Management concerns centered on the menu, the register more closely tracked the day's transactions via specialized keyboards and peripheral devices.
The fourth generation (1980s) of machines exhibited both forward (customer-service) and backward (production) integration within the food service environment. Descriptive customer displays, automatic tendering functions, interfaces to beverage-dispensing equipment, automatic transfer to credit card settlement, and the development of processor-based technology reshaped the role of the ‘cash register’. POS devices became capable of generating aggregated, comprehensive operational reports and tracking employee time and attendance. POS systems began segmenting revenues by food groups within monthly, weekday, meal period, hourly, and fraction-of-an-hour time intervals. The fifth generation (1990s) was characterized by the prominence of personal computers (PCs). PCs were configured with a file server to form a local area network (LAN) thereby simplifying interfacing to an external system. Having a PC as a POS device also allows the workstation terminal to run other applications when POS traffic diminishes.
The current POS landscape features innovative user interfaces (e.g. hand held terminals, proximity chips, magnetic stripe readers) and system interfaces (e.g. flat panel screens, remote operations and storage, and data mining query software) that further enhance and expand system capabilities. POS technology, originally oriented toward monitoring cash balances, has evolved into sophisticated production scheduling, product expediting, transaction processing, report generating, and comprehensive analytical systems. POS technology is capable of trackingprices,inventory, sales, employees, tips, promotions, discounts, forecasts, trends, and the like. (See Table One.)
Table One. Kasavana’s POS Generations
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Time Frame
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Generation
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Orientation
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Technology
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Pre-1960s
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First
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Cash Transaction Reporting
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Manual
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1960s
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Second
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Cashier Reconciliation
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Mechanical
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1970s
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Third
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Menu and Meal Monitoring
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Electronic
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1980s
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Fourth
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Aggregated Report Management
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Automated
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1990s
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Fifth
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Enhanced Operational Controls
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Teleprocessing
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Post- 2000
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Sixth
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Remote Off-Premises Processing
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ASP: Application Service Provider
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User Interfaces
Traditionally, management has felt that instead of fitting a POS system to the hospitality environment, operational procedures had to be modified to adhere to inflexible POS system parameters. While it is true some of these dysfunctions may have been the result of application software design, some have been directly attributable to system hardware. There are perhaps no other POS user interface devices that received more attention during the past decade than touch input and hand held terminals. During this time a host of keyboard alternatives have been introduced, including: programmable touch pads, flat panel terminals, and color touch screens.
1) Touch pads, which extend the touch input concept by combining a keyboard and screen into a large keypad, are built from electronic membranes and template overlays. Dining room management designates the functions associated with each keypad membrane location. This information is programmed into the system memory and a template is designed that labels or illustrates (via icons) the function of each key. Citing resistance to traditional keyboards, system vendors claimed the major advantage of touch pads was ease in training. Touch pads have simply not been a popular choice for the hospitality environment.
2) Flat panel terminals occupy significantly less space than the traditional POS terminals they replace. Flat panel screens, which measure less than three inches thick, can be mounted from walls, counters, or shelving units. Vendors argue that flat screens offer unlimited flexibility in terminal location. So long as the screen is within reach of a server, it is accessible. Flat panel screens are just beginning to be selected by properties as a preferred data entry option. The installation of color touch screen appears to be the preferred hospitality POS user interface. Color touch screens containing more than 150 key membrane keyboards, are capable of leading the server through an order entry sequence while collecting transaction data necessary for settlement, including member number and if necessary, credit card information. Vendors claim that server order entry time can be significantly reduced with the implementation of color touch screens. (To date, food service establishments have not shown an interest in customer self-order entry. Additionally, there is evolving development in both handwriting recognition and automated speech recognition technology that may change the mode of operation.)
3) Hand held terminals (HHTs) rely on radio frequency for communicating tableside captured order entry data to a central processing unit for relay to the production area. At first blush, hand held terminals appear highly compatible with the hospitality environment as there appear to be several natural application areas (e.g. recreational settings, bars and lounges, and grill and gaming areas). While system reliability of hand held terminals has greatly improved, the reality of cost justification remains a hurdle. Comparing the average cost for a fixed terminal system ($3500 per terminal for each 30-40 seats) verses a hand held terminal for each server ($2000 per unit) often proves cost prohibitive. As costs become more equivalent, the decision point is likely to change. Hand held terminals clearly bridge user interfacing with component interfacing.
Component Interfaces The concept of POS open architecture is based upon distributed, networked processor-based devices. An open architecture system enables hospitality management to build as small or large a system as necessary. A variety of devices can be placed into the network and can be shared among system users.Not all devices need to be cabled to function effectively. Wireless connectivity is also possible.The two most significant developments related to POS systems are wireless applications and off-premises POS applications. Wireless applications are considered state-of-the-art for POS system components. Enhanced radio frequency devices can be used to facilitate efficient order entry (hand-held terminals), order processing (terminal linkage), and system wide monitoring (local area networking). Up until recently HHTs were the sole wireless POS option, but now wireless desktop terminals are available that provide unrestricted flexibility in dining room design and POS configuration. To date, there have been few installations of wireless POS systems, but this is expected to change as reliability and comfort levels with wireless components improve. Of much more immediate appeal is an application service provider POS model that involves off-premises transaction storage and analysis.
Historically, the hospitality industry has involved outside data processing agencies for some of its most basic services (e.g. payroll, accounting, financial reporting, etc.). The evolution from service bureau to outsourcing to application service provider really brings hospitality technology full circle. An application service provider is an entity designed to sell and distribute software and software services to disparate computing users. An ASP can dramatically reduce the costs of such software and software services. The concept of an ASP is analogous to many other conveniences, like the telephone system. Instead of building and supporting a complex communication system, a user merely buys an affordable telephone and then purchases phone units (access and cost per minute charges). The cost and complexity of owning and operating a fiber optic network is prohibitively high but paying the cost of a single phone call across a large-scale system can be shared feasibly among all users. It has been argued that this concept can be similarly applied to the hospitality POS system.
Restaurants that lack state-of-the-art POS technology or face scarce resource funding, may consider turning to the latest innovation in remote POS processing, the application service provider (ASP) model. From a vendor perspective the strength of an ASP POS, also referred to as web-based POS, lies in its ability to focus hospitality management on dining room operations, not technology. ASPs claim they provide a means for the hospitality to implement the latest POS technology without having to purchase, install, or upgrade in-house technology. Just as electricity is delivered to a wall outlet seamlessly and reliably, web-based POS providers strive to provide a similar level of comfort and convenience.
The appropriateness of an application service provider to the hospitality environment hinges on several critical factors, including frequency of use (subscriber payment model), reliability of connectivity, method of data entry, privacy of transactional data, system security, and database maintenance.
In June 2000, InfoGenesis and Compass Group combined to produce e-Revelation, an early entry ASP-based POS solution. E-Revelation is described as an enterprise version of Revelation, an existing POS system. As an ASP-based application, e-Revelation is hosted in data center facilities with WAN or Internet connectivity to POS terminals operating in remote client foodservice locations. Transactions can be processed online or offline and system configuration and menu modification can be processed centrally and deployed to individual sites. The sponsoring companies claim that the key ROI factor is that the ASP model offers a technology dividend from increased revenues and margins that would not normally exist for small to medium operations. Another advantage they cite is that all costs of installing and operation a POS system are reduced to a simple monthly fee. Hospitality management needs to exercise caution when reviewing ASP POS models. Specific areas of concern include fee structuring, propriety/security of hospitality transactional data, reliability and connectivity, training, and ability to link POS data with other hospitality applications (interoperability).
Summary POS systems are beginning to be configured as complete production/service networks. This is possible due to the implementation of open architecture hardware and network-ready software. As POS hardware continues to become more standardized, competing vendor systems will be differentiated by the strength of application software. Open architecture, network configurations, wireless components, increased functionality, and PC-based terminals have significantly altered the course of hospitality POS design. As operators renew their interest in POS systems it is imperative that system capabilities be known and matched to management needs.
Table 2. POS Suppliers
Table 3. POS Core Functionality
PLU (price lookup) – ability to assign a unique number to each menu item for data entry and/or transaction processing and monitoring
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MLU (modifier lookup) – ability to classify PLUs with mandatory modifiers so more complete information accompanies an order; some MLUs impact pricing
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TLU (taxable lookup) – ability to classify menu items as taxable or non-taxable and to associate an appropriate tax rating
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RLU (routing lookup) – ability to assign a primary and backup remote display or printer to each PLU for enterprise-wide communication
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Compatibility – ability to interface with a hospitality management and/or other system.
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Access Control – personal code number, key, or magnetic card used for greater system security and to identify current user
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Split Check – ability to separate items on a previously open check, or checks, from one member to another or from one waitperson to another.
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Split Tender – ability to settle an outstanding check to multiple forms of settlement (partially cash, credit card, debit card, etc.)
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Table 4. POS Popular Add-ons
Recipe/Food Costing – ability to create a menu item on an ingredient, measurement, and/or cost basis and to analyze corresponding expenses
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Promo Logic – ability to link item purchases for special bundled pricing, ‘happy hour’ pricing, or other promotional plans (e.g. buy entrée, get dessert free)
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Direct Posting – ability to transfer, post, search, and query (in whole or in part) transactional data to/from an external database
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Training Mode – ability to enable training on ‘live’ system without effecting real transaction activity or stored values; training without processing interference
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Table 5. Hospitality POS Needs
Functionality (capability)
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Reliability (integrity)
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Simplicity (ease of use)
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Scalability (system sizing)
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Redundancy (security)
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Flexibility (programmability)
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Economy (cost effectiveness)
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Non-proprietary (open architecture)
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