iPad POS System for Restaurants ROI Review

By |2018-09-25T23:31:04+00:00August 25th, 2018|Blog|

Why get a Mobile, Tablet or iPad POS System For Your Restaurant?

Get a Great ROI – an iPad POS System Study and Review

One of the biggest competitive advantages an iPad POS system has over the competition is the flexibility of a mobile POS solution. While we typically refer to them as handhelds, mobile wireless terminals are more accurate. Over the last few years, the rapid advent of Tablet PCs led by the iPad has resulted in decreased popularity of traditional PDAs. The size and weight of the tablets can be problematic; however, many prefer them because of the screen size, and now the iPad Mini may well become the most popular mobile terminal with near availability of card readers. The iPod Touch, iPad Mini, and the iPhone that have card readers are also familiar with those who still prefer the small size and weight.

For ROI calculations the type of device used doesn’t matter. The benefits are the same. This is a detailed look at the many advantages of mobile terminals compared to fixed terminals. The most efficient ROI calculations are based on accurate statistics from your prospect about his or her restaurant. Those numbers should always be used. Here I will include an example in each section for illustration purposes only.

iPad POS System – Mobile ROI Numbers

These are the number from my sample ROI. Below are the explanation and steps on how to calculate them.

Mobile POS for iPad ROI Items Savings
1. Elimination of free beverages $459.33 per month
2. Suggestive Selling $918.67 per month
3. Increased Table Turns
$1,083.33 per month
Total Additional Net Profit
$2,461.33 per month

One area that will almost certainly result in a reduction of costs is labor. However, the amount of the savings will vary significantly with different restaurants because of the type of restaurant, whether the local laws allow a tip credit from minimum wage, and the method of compensating food and beverage runners. That makes it difficult to project in advance, so I will not include it in this study. However, you should be sure to point out that we get consistent feedback from users of iPad POS systems that their labor costs have declined. Here are a few areas that we can detail the cost savings and increase in net profits.

  1. Elimination of “free beverages.” Perhaps the biggest single loss in every restaurant’s dining room is the soft drinks that are not charged for. In every demonstration of iPad POS systems, you should educate the customer on the most common way beverages are given away in his or her restaurant. Anytime a non-alcoholic beverage is ordered after the initial beverage order, and without food or alcoholic drinks, the beverage is rarely charged for. In fact, I recommend that when possible have dinner in the restaurant before the demo and test this. Order an alcoholic beverage or only a glass of water when the server first takes your order. Then when your server comes back to check on the preparation of your entrée, order a non-alcoholic beverage. When your check arrives, the odds are high that the beverage will not be on it. Don’t tell the server, pay the check, and make sure you take a copy of the check with you. When you meet with the customer, say you owe them for the beverage that was not charged and show them the guest check. Of course offer to pay for it. Be sure to explain how it happened and that it almost always occurs in that situation because the server is not required to go to a terminal before serving the beverage and it’s almost always forgotten by the time the server prints the check. When that happens, the restaurant lost the full price of the beverage from their net profit because 100% of the cost was still incurred. I like to ask the customer how frequent they might guess that happens in their restaurant. Since they won’t know, I then ask them if they believe it reasonable to expect that at least one beverage is given away per server shift. I have never had anyone disagree with that, and in fact, they almost always agree that it likely happens more often than that. However, since to be effective, a mobile, tablet or iPad POS system ROI summary should always be very conservative use the one beverage per server shift number.

From there it is a simple calculation. Ask them for the number of server shifts per week. Add the number for each lunch and each dinner. Then ask the price they charge for beverages.

The calculation is:

Server shifts per week X the drink price = Lost Profit per Week

Example:

Lunch: 3 servers per day or 21 per week

Dinner: 4 servers Sunday-Thursday, 6 servers Friday-Saturday or 32 per week

53 total server shifts per week.

$2.00 beverages

53 shifts X $2.00 = $106.00 Lost Profit per Week X 4.33 weeks = $459.33 Lost Profit per Month.

  1. Suggestive Selling. Suggestive selling has been successfully used in quick service restaurants for many years resulting in higher sales and profits. I read a recent online story that said McDonald’s has a 30% “hit” with their suggestive selling. In other words, 3 of every 10 times a McDonald’s cashier asks, “would you like fries?” or “would you like a beverage?” the customer says yes.

For this calculation, we will assume only one suggested selling prompt is used and that it will prompt the server to ask the customer “would you like an appetizer?” anytime the customer has not ordered at least one appetizer for the table. Again to keep the calculation very conservative and make it difficult for your customer to ignore. Ask them if they believe it reasonable to believe that if their servers were always prompted to upsell appetizers, it would result in just one additional appetizer sale per server shift. Again, it’s unlikely anyone will disagree with that. Then ask what the average price of an appetizer on their menu is. Also, ask them the average food cost of their appetizers is.

For example, we will assume the average price is $6.00, and the average cost is 33.33% or $2.00. This means that the restaurant will make an additional net profit of $4.00 per appetizer. Using the same 53 server shifts per week the increased net profit from suggestive selling is:

53 X $4.00 = $212 per week Additional Net Profit X 4.33 weeks per month = $918.67 Additional Net Profit per month.

While this might seem high, a good case can be made that it is too conservative. If a server was prompted only ten times per shift and only had a “hit rate” of 10% that would result in the one additional appetizer sold per shift. Not only does that sound very reasonable there might be times when more than one appetizer is ordered at the table. Remember McDonald’s gets a “hit rate” of 30%, so we are only assuming 1/3 of that for this example.

  1. Increased Table Turns. There is no doubt that mobile terminals will result in faster table turns in any restaurant. The amount of turn time reduction will vary though the results I have seen are always in the 7-15 minutes range. The exact amount for any particular restaurant will vary based on several factors. Here are some of the factors leading to faster table turns.
    1. Without mobile terminals servers often take orders from two or three tables before going to a fixed terminal and entering the orders. This not only results in a delay in the first orders reaching the prep areas it also results in jam-ups in the kitchen and bar during peak periods. With an iPad POS system as soon as the server receives the drink order it is sent to the bar and likewise for the food order. This results in orders being prepared earlier and orders reaching the various prep areas in an orderly fashion.
    2. With the servers always on the floor the customers don’t wait as long to place their orders.
    3. When customers ask menu item questions of their server the answer is almost always available with the touch of a button. This eliminates time lost when a server has to find someone with the answer. Typical questions include asking it the item includes an ingredient the customer is allergic to.
    4. As long as the “Item Out List” is properly maintained when a customer orders an 86d item the server knows immediately. This eliminates the long delays that typically occur when an order for the 86d item is taken, and then later the server must come back to the table to inform the customer and take the replacement order.
    5. Pay at the table with an iPad POS system eliminates long waits for the customer to receive their guest check and credit card back from the server. This is consistently ranked as the number one annoyance of restaurant customers.

For our ROI calculation from increased table turns a few things must be determined. What the current average table turn time is, how many hours per week the dining room is running at capacity with an active wait list, the number of tables in the restaurant, the average covers per table, and the average dinner check per person. By turning the tables faster when there is a wait for a table there will be fewer walkouts because of the wait time being too long.

For our example, I will assume we will gain ½ additional table turn on Friday and Saturday nights only. This will keep the estimate conservative and believable.

25 tables with an average of 3 covers and an average check per cover of $15.00.

We will use the same average food cost of 33.33%

25 tables X 3 covers X 15.00 X ½ additional turn X 2 nights per week = $375.00 additional revenue X 66.67% (100% – 33.33%) = $250.00

Additional Net Profit per week X 4.33 weeks per month = $1,083.33 Additional Net Profit per month.

Again, here is the Tablet POS System ROI Summary

Mobile POS for iPad ROI Items Savings
1. Elimination of free beverages $459.33 per month
2. Suggestive Selling $918.67 per month
3. Increased Table Turns
$1,083.33 per month
Total Additional Net Profit
$2,461.33 per month

X .5 (see below) $1,230.62 per month

To make the ROI number even more conservative and more believable by the customer we will cut it in half to be sure we are not overstating the advantages of an iPad POS system. This will more than cover the monthly lease expense on any system without even considering all the other ROI from a mobile, tablet or iPad POS system. This is approximate $20,000 per year so if the customer is buying rather than leasing the mobile terminals alone will pay for the system in approximately 18 months.

When discussing the benefits and potential ROI from an iPad POS system, there are several additional benefits that will accrue. However, they are harder to determine a definite increase in profits.

However, those other benefits should be included in any mobile terminal presentation. They include:

  1. Link suggested wine pairings to entrees as a modifier window that includes all suggestions in addition to a “no wine” button. This will result in greater wine sales because the servers will not forget to upsell. Since wine is the most profitable item in a restaurant, this is a great benefit.
  2. On-the-fly prep printer routing for those restaurants with more than one service bar. Our direct competitors do not offer this feature.
  3. Suggested alternative menu items for 86d items. Again this is an exclusive feature of some iPad POS systems.
  4. Elimination of dual training for fixed and mobile terminal server training required for many competitive systems that do not run the same application on both types of terminals.
  5. All server functions available on the iPad POS system negating the requirement that some functions to be performed on a fixed terminal as it is on some competitive systems especially when using mobile units.
  6. Reduction of front-end labor costs. As previously stated these are difficult to accurately project in advance though there is no doubt fewer servers are needed using mobile terminals. Even adding food and beverage runners will almost always still result in lower overall labor costs.
  7. Fewer “lost opportunity sales” because the servers are always on the floor. This makes it more likely that a server will be available to take an order for an additional drink or a dessert that customers often decide to have on impulse.
  8. Other alcoholic beverage sales are resulting from the initial drink order being delivered to the table so much quicker. This will often cause the customer to order another round because there is time before their entrees arrive.
  9. Restaurateurs benefit from using the most advanced technology that results in an enhanced dining experience for their guests. Restaurant customers love the technology, and it enhances their image of the restaurant.
  10. By using Register Extensions, the mobile terminal can also be used for taking customer surveys or other purposes.
  11. If the restaurant uses Inventory software, the mobile terminals can be used to take inventory.

When selling the concept of mobile terminals and explaining how their tables will turn faster, it is important to not give your customer the wrong impression of what this means, especially in fine-dining restaurants. It is easy for your client to get the idea that mobile terminals mean rushing the restaurant customers in and out of the restaurant thereby lessening their dining experience. This is not what reducing table-turn times means.

Explain that there are three segments to a customer time in the restaurant. The first segment is from the time they arrive until their server approaches them to take their initial drink order. This is true whether the customer is immediately seated or is added to the wait list. Because tables turn faster wait times will also be shorter. The second segment is from the time the customer receives their entrée until they are ready for their check. The final part is the time between being ready for their check and completing the payment process and leaving the restaurant.

The second segment will not be negatively impacted by the use of an iPad POS system. In fact, their dining experience will be enhanced because the first and third segments will be significantly shortened. This means they will receive their food sooner and will be able to leave shortly after finishing their meal.

Finally, those customers who are paying by credit or debit card will not have to be concerned about handing their card to a stranger and having the stranger take the card out of their sight. This gives them peace of mind.

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