Handheld Wireless Point of Sale Systems in the Restaurant Industry Courtney Manion Fred J. DeMicco

Handheld Wireless Point of Sale Systems in the Restaurant Industry Courtney Manion Fred J. DeMicco

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Journal of Foodservice Business Research

ISSN: 1537-8020 (Print) 1537-8039 (Online) Journal homepage: http://www.tandfonline.com/loi/wfbr20

Handheld Wireless Point of Sale Systems in the Restaurant Industry

Courtney Manion & Fred J. Demicco PhD

To cite this article: Courtney Manion & Fred J. Demicco PhD (2005) Handheld Wireless Point of Sale Systems in the Restaurant Industry, Journal of Foodservice Business Research, 7:2, 103-111, DOI: 10.1300/J369v07n02_07

To link to this article: https://doi.org/10.1300/J369v07n02_07

Published online: 08 Sep 2008.

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Handheld Wireless Point of Sale Systems

in the Restaurant Industry Courtney Manion Fred J. DeMicco

ABSTRACT. As surprising as it may seem, handheld ordering systems have been around for over 20 years. The first handheld system that came on the market used numeric keypads to enter the PLU codes from items and infrared transmitter/receivers to relay the information between the handhelds and the point of sale (POS) system. Handheld wireless POS systems are a portable version of a POS system which is defined as the time and place in which a transaction is made. Point of sale computer systems include: cash registers, optical scanners, magnetic card readers, and special terminals. Handheld wireless POS systems used for hospital- ity, more specifically food service, will be the main focus for this paper. This includes events such as taking food orders and the inventory/order- ing process. Customers are the reasons restaurants are in business, and the time saved by using a handheld device (versus waiting in line to place an order on a traditional POS system that averages over four min- utes per order) can be used to better serve the guests. Those four minutes also lead to drinks and meals being ready quicker and, throughout an

Courtney Manion is a Graduate Student in Hospitality Information Management and Hotel, Restaurant, and Institutional Management, The University of Delaware, Newark, DE 19716 (E-mail: manion@ udel.edu).

Fred J. DeMicco, PhD, is Professor and ARAMARK Chair of Hotel and Restaurant Management, The University of Delaware, Raub Hall, Newark, DE 19716 (E-mail: FDeMicco@udel.edu).

Based on a project funded by IBM Retail Solutions, presented at the 2004 FS/TEC Conference in Orlando, FL.

Journal of Foodservice Business Research, Vol. 7(2) 2004 Available online at http://www.haworthpress.com/web/JFBR

© 2004 by The Haworth Press, Inc. All rights reserved. doi:10.1300/J369v07n02_07 103

evening, those minutes equate to greater table turnover and more profits. It is these benefits which lead to cost savings and return on investment for the purchase of a handheld POS system. [Article copies available for a fee from The Haworth Document Delivery Service: 1-800-HAWORTH. E-mail ad- dress: <docdelivery@haworthpress.com> Website: <http://www.HaworthPress.com> © 2004 by The Haworth Press, Inc. All rights reserved.]

KEYWORDS. POS systems, restaurants, revenues, technology

INTRODUCTION

Handheld wireless Point of Sale (POS) systems are a portable version of a POS system, which is defined as the time and place in which a transaction is made. Point of sale computer systems include cash registers, optical scanners, magnetic card readers, and special terminals. Reading product tags, updating inventory, and checking credit are some of the operations performed at the point of sale. The main focus of this paper will be handheld wireless POS systems used for hospital- ity and more specifically food service functions such as taking orders and inven- tory monitoring. There is a huge market of over 878,000 restaurants in the United States alone bringing in a forecasted $440.1 billion for 2004 (National Restaurant Association, 2004). This market provides a large opportunity for the handheld wireless POS system in today’s customer satisfaction driven industry, especially since the once costly systems are finally poised to make the transition from niche product to mainstream acceptance (Lucas, 2003).

History

As surprising as it may seem handheld ordering systems have been around for over 20 years. The first handheld system that came on the market used numeric keypads to enter the PLU codes from items and infrared transmit- ter/receivers to relay the information between the handhelds and the POS system. This system then evolved into using radio frequencies to transmit the data, thus improving the communications reliability. Even after 20 years, the market has yet to embrace this technology, instead relegating it to niche mar- kets such as stadiums and arenas where the distance between the customer and the preparation area is large (Malison, 2002).

Benefits of a Handheld Wireless POS System

While there are some differences between what make and model of handheld POS system one can purchase, they all share a similar set of benefits

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with some offering additional benefits. The core benefits are listed in Table 1 (Malison, 2002 & Germain, 2003).

These benefits lead to cost savings and return on investment for the pur- chase of a handheld POS system. Customers are the reasons restaurants are in business, and the time saved by using a handheld device, rather than waiting in line to place an order on a traditional POS system that averages over four min- utes per order, can be used to better serve the guests. Those four minutes also lead to drinks and meals being ready quicker. Throughout an evening those minutes equate to greater table turnover and more profits. Medieval Times es- timates that their new handheld system will pay for itself in less than a year if each night they serve one more round of drinks because of the increased speed (Germain, 2003).

Handhelds can also ensure accuracy by prompting servers with cooking temperatures and salad dressing choices and also offering up-selling sugges- tions. When servers have larger sections, each shift labor costs are reduced, while the servers are making more money in tips. Employee turnover is also reduced. This means less hiring and lower training costs for the restaurant.

Additional benefits are unit specific and can really add competitive advan- tage at this early stage of the handheld POS life cycle. One option for the handheld devices is a portable receipt printer that can allow servers to print out checks instantly without waiting in line at the POS station. Customers can also pay immediately if the handheld POS systems also offer credit card payment ca- pability with a swipe area built into the unit. Another POS links front-of-house and back office application in a real-time format and system changes may be made instantly even as the system is operating (“Hospitality,” 2004).

Other important features are the durability of the handheld units. TransAct Technologies Incorporated offers printers that are protected from spills, high

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TABLE 1

Core Benefits of a Handheld Wireless POS System • Staff can immediately communicate table status.

• Server can spend more time with the customer.

• Improved accuracy of order taking.

• More efficiency.

• Improved customer service.

• Eliminates bottleneck for sending orders.

• Each server can handle more tables.

• Possible reduction of wait-staff.

• Tables are turned faster.

heat, accidental bumps and other harsh environmental factors (“TransAct,” 2003). These same features are important for handheld POS interfaces as well. Hewlett-Packard has a new handheld product with a tough exterior, thermal monitoring, and temperature alerts (Wright, 2004).

A big way to get a payoff from IP-compatible terminals is the opportunity to add software applications to allow communication in real time with back- office databases and servers containing customer data and information about merchandise in stock (Lucas, 2003). This is a great way to enhance loyalty programs that instantly give servers information about their guests. This tech- nology can also be used to inform a server when an item has been 86’d (no lon- ger available) enabling the customer to make another selection immediately rather than finding out minutes later having the guest be even more disap- pointed. Guests can also look at pictures of menu items if they have a question or cannot decide between two items.

With technology changing rapidly, a key advantage to what handheld POS system a restaurant purchases will be what ports it has to hook up bar-code read- ers, cash drawers, voice-over IP capability, printers, fingerprint recognition and other emerging technologies (Lucas). These ports will help protect the point- of-sale technology investments because a restaurateur will not have to replace an entire system when a new technology becomes affordable (IBM, 2003). They will already have a compatible piece of hardware. Some handhelds can even be used for back office inventory control before the restaurant opens by de-cou- pling software applications onto the interface (On Technology, 2004). Other benefits will be handheld systems that are easy to upgrade and service.

Finally, the greatest benefit is the ability to recognize handwriting; this be- ing the most efficient way to take a customer’s order, while still focusing at- tention on the customer instead of on the POS system. These handhelds, developed by Action Systems, Inc., mimic the traditional way of taking an or- der with pen and paper and combine that with POS functions like prompting for cooking temperature and salad dressing choice. As the server starts to write, all possible items appear on the screen, and the server can quickly tap on the appropriate item, usually after only 1 or 2 letters. This system was truly de- signed for taking orders at the table (Malison, 2002).

Problems with a Handheld Wireless POS System

While many of the drawbacks and problems are only perceived or occur only in early models, some are still around today and just emerging. These problems include complicated screen designs that don’t allow the server to pay attention to the customer while taking their order and hardware problems

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such as a short battery life, large size, ease of use, and functionality (Malison, 2003).

However, the largest problem and reason that every restaurant doesn’t im- plement a handheld POS system is cost. Even though the costs are starting to come down, it is still a pricey investment especially for smaller restaurants. Although some companies advertise their price at around $500/unit, the aver- age cost has come down to between $850 and $950, which is still too high for most restaurants (Lucas, 2003). When choosing a POS System there are more than just unit costs involved. Restaurants need to budget for installation costs, training costs, printing materials, system supplies, electricity, power protec- tion devices, software upgrades, modifications and the costs of supporting the systems/improvements (Scavone, 2003). These costs add up quickly.

Another issue is security. Managers are hesitant to accept wireless technol- ogy for fear that the network will drop transmissions, which happens fre- quently on voice networks, and that data can be intercepted over the airwaves (Lucas, 2003). Also, needing complex and error-prone configuration actions, like configuring security settings, is another security drawback (On Technol- ogy, 2004).

Handhelds and RevPASH

RevPASH, or revenue per available seat-hour, is the mathematical way to see the value of purchasing a handheld wireless POS system. Kimes (2004) says that operators can increase their revenue, thus increasing their profits, if they remain aware that they are selling time as well as food and see a table as perishable inventory. RevPASH comes into play when looking at revenue management in place of revenue per square foot or tracking check averages.

To calculate RevPASH, divide revenue (or profit) for the desired time period by the number of seat-hours available during that interval. For example, a 200 seat restaurant makes $8,000 on Saturday between 6:00 and 8:00 PM. Its RevPASH would then equal $20 ($8,000/200 seats/2 hours) (Table 2). Rev- PASH can also be calculated by multiplying a restaurant’s seat occupancy with the average check per person (assuming one hour). The same restaurant in the above example was operating at 90% occupancy and averaging $22.22 per per- son for both hours and thus had a RevPASH of $20 ($22.22 * 90%) (Kimes, 2004).

Although restaurant problems such as reservation issues cannot be solved with easier more efficient POS systems, such issues of duration management can. Customers should not be rushed through the middle of their meals, but time can be saved at the beginning of the meal by placing the orders immedi- ately and at the end of the meal when the check has been presented. Kimes re-

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ports that operators could realize a 9% increase in revenue if managers “cut dining time from one hour to 55 minutes, without making customers feel rushed.” By eliminating waiting in line at a POS terminal and by speeding up the payment process with portable check printers and credit card payment ca- pabilities on the handheld POS system, the goal of dropping 5 minutes off of meal duration should be relatively easy to achieve.

The study Kimes reported on followed the revenue-management approach. Essentially there are five parts: establish a baseline, understand the causes, de- velop a revenue-management strategy, implement, and evaluate. RevPASH is one of many baseline indicators used in this approach. If the cause of a restau- rant’s long table time and low turnover is due to the time it takes servers to get the order from the guest to the kitchen and also the time is takes a guest to close out a check, then implementing handhelds would be a way to shorten the length of those times.

What the Future Holds

Picture this: Mr. Smith walks into a restaurant and instantly the hostess is notified who he is as well as his seating preference because of the radio fre- quency identification (RFID) device in his customer appreciation card. An- other hostess is walking around the floor and notifies the hostess stand with instant communication from her handheld that a window table has just been cleared and re-set. The hostess at the stand can then take Mr. Smith and his family to their preferred table.

After being sat at their favorite table Mike, their server, appears and his handheld wireless POS system is instantly updated with the guests’ names and preferences and possible drink and meal suggestions based on their previous ordering patterns. The table orders their drinks based on Mike’s suggestions and one minute later a runner from the bar places them on the table at the cor- rect seats.

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TABLE 2

Calculating RevPASH for the same Restaurant

• 200 seat restaurant

• $8,000 on Saturday between 6:00 and 8:00 PM

• RevPASH = $20 ($8,000/200 seats/2 hours)

• 90% occupancy

• Averaging $22.22 per person for both hours

• RevPASH = $20 ($22.22 * 90%)

When the Smiths are ready to order, Mike notices right away because he isn’t stuck in a line at the server station waiting to put their drink order into a tradi- tional POS system. Instead he’s able to walk around, check on his customers, and provide them better service. Mr. Smith has a question about the veal entrée, and Mike is able to look up what exactly goes into it to provide Mr. Smith with the most accurate answer. He then goes beyond that and shows Mr. Smith an ap- petizing picture of the veal, which tempts Mr. Smith enough to order it. As Mike is taking the family’s order, he is prompted with options like cooking tempera- ture and available sides so that he doesn’t forget menu options, make a mistake later or have to come back to the table to ask. Mrs. Smith orders the pork chop, but unfortunately the last one has just been sold and Mike was instantly notified that it had been 86’d. She then chooses the Chipotle Chicken instead, and Mike sends the order to the kitchen right from the table eliminating the usual 2-6 min- ute delay when using a traditional POS system.

It is important to point out here that Mike wasn’t staring down at his handheld the entire time the family was ordering, and he wasn’t navigating through many screens the way a traditional POS interface works. He was do- ing what any trained server would do, just writing down the order. The handheld POS was then bringing up choices based on what he wrote using handwriting recognition software so that Mike only had to press one item after he started to write the order. This allows him to make eye-contact with his guests and provide the Smiths with better service.

Mike then goes to the next table and sees that they are ready for their check. He prints out their receipt from his portable wireless printer and leaves it on the table. This couple was in a hurry so they place their credit card down right away, and Mike is able to swipe their card on his handheld POS and print out the credit card slips right at the table.

Another table is ready for a second round of drinks; with one button Mike places the order and in two minutes the bar runner appears with them. Since the restaurant has implemented this new handheld POS system, Mike has been able to have a larger section each night and more tables with the increased turnover. He’s making so much money now that he has no desire to leave and is one of the reasons turnover is lower in such an efficiently run operation.

Unfortunately, going handheld doesn’t solve all problems, and the kitchen overcooked a guest’s filet mignon. Mike handles the situation by apologizing and notifying the manager on his handheld wireless POS system. The manager, Sarah, rushes right over to apologize as well and is able to “comp” the entrée and put a free round of drinks on their tab without having to go back to the server sta- tion. Sarah is still smoothing over the situation as the drinks appear and then the table becomes very forgiving and goes back to enjoying their meal. Sarah then checks on the total sales and finds out the RevPASH calculation for the evening.

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She sees that with the extra round of drinks that most tables order now that the system is so quick and efficient, combined with the increased table turnover on busy weekend nights, that the handheld wireless POS system has just paid for it- self. She is also thrilled because she can use the same handheld device during the day but load it up as an inventory device and complete her inventory and or- dering in 1/3 the amount of time, thanks to the same radio frequency identifica- tion technology that lets the hostesses and servers know who is in the restaurant.

Sarah also knows that more people have been coming to the restaurant since they have outsourced a data mining company to develop their customer data- base and help them manage their inventory better. When a customer signs up for a customer appreciation card, all of their preferences are stored in the cus- tomer database. If they typically come in for burgers, then they are notified about promotions like 1/2 off burger Wednesdays or are sent cards where if they buy 6 burgers the 7th is free. Customers who have never ordered a burger are left out of this mailing so as not to be bothered unless they are truly inter- ested. These marketing attempts have helped bring in more business.

The restaurant is also saving money in ordering by controlling their inventory with the handheld system and installing automatic ordering when possible so when a manager takes inventory the system knows how much the restaurant wants on hand and then electronically orders what is needed. The menu is also more effective because data mining was used to determine what items bring in the most revenue, what items have the highest margin, and what less popular items are most popular with customers who bring in a large amount of business.

CONCLUSIONS

The use of handheld technology has been explored in this paper. There is a huge market of over 878,000 restaurants in the United States bringing in a forecasted $440.1 billion for 2004 (National Restaurant Association, 2004). This market provides a large opportunity for the handheld wireless POS sys- tem in today’s customer satisfaction driven industry, especially since the once costly systems are finally poised to make the transition from niche product to mainstream acceptance (Lucas, 2003).

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Germain, Arthur H. (2003). Hospitality Technology Trend: Symbol Technologies and Ameranth Wireless Provide Restaurants and Sports Venues with Tools to Improve Customer Service. Symbol Technologies, Inc. Retrieved March 15, 2004 from <http:// www.symbol.com/news/pressreleases/symbol_improves_customer_svc.html>.

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Hospitality Solutions International (2004, January). Hospitality Solutions Interna- tional Completes Point-of-Sale Implementation for Five Sheraton Hawaii Resorts. PR Newswire Association, Inc., 2004 (January 6).

IBM (2003, September). IBM Introduces Next Generation of Retail Point-of-Sale Sys- tems. Market Wire, Incorporated, 2003 (September 18).

Kimes, Sheryl E. (2004). Restaurant Revenue Management, CHR Reports, Cornell University, Vol. 4, No. 2.

Lucas, Peter (2003). Wireless Gets a New Lease on Life. Credit Card Management 16 (8), Pg 16.

Malison, Alex (2003). Benefits of Handheld Order Taking Systems in Full Service Restaurants. Action Systems, Inc. Retrieved March 15, 2004 from <http://www. actionsystems.com/>.

Malison, Alex (2002). Replacing Pencil & Pad in Full Service Restaurants. Action Sys- tems, Inc. Retrieved March 15, 2004 from <http://www.actionsystems.com/>.

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On Technology (2004). On Technology Announces New Handheld Device Capabili- ties at National Retail Federation Conference. PR Newswire Association, Inc., 2004 (January 13).

Scavone, Nick (2003). Examining the POS process and finding the system that is right for your organization. Strategic Solutions for Foodservice. Accuvia Publishing, Gaithersburg, MD, p. 3-4.

TransAct Technologies Incorporated (2003, October). Darden’s Seasons 52 Restau- rant Selects TransAct’s Wireless POS Printers. PR Newswire Association, Inc., 2003 (October 31).

Wright, Rob (2004). ScanSource’s POS Business Shines Brightly as It Signs on Its Newest Vendor Partner: HP. Business and Industry. Gale Group, Inc., 2004 (Janu- ary 12).

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