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Redefining the Point Of Point of Sale

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June 19, 2009
Point of Sale | Technology
Michael Kasavana, PH.D., NCE, CHTP - kasavana@msu.edu

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© 2009 Hospitality Upgrade. No reproduction without written permission.

There is probably no hospitality technology that has the potential for a higher return on investment than a point-of-sale (POS) system. Initially focused on currency monitoring, POS systems have expanded into efficient order entry, production to service coordinating, sales and promotion tracking, network-based information management tools. Sophisticated systems provide unique and unparalleled internal controls that have led to an expansion of software applications including innovative user interfaces, synchronization with digital media, data mining analysis, Web-centric remote services and data security protocols. As a result, POS technology has evolved into an assortment of highly reliable, flexible and productive solutions that have reshaped and redefined the point of point of sale.

POS Generations
The first generation of hospitality industry POS devices (i.e., cash registers) dated pre-1960, required manual operation. Register keys were very difficult to use, transaction recording required some physical effort, and machine controls were virtually nonexistent. The second POS 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 (server, 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 POS generation (1970s) of register devices evolved with electronic features. Preset recording, detailed tapes, improved control over drawer operations and electrical wiring to other devices became readily available. Management interests shifted to the menu as registers closely tracked the day’s transactions via specialized keyboards and peripheral devices. The fourth POS generation (1980s) machinery exhibited both forward (service) and backward (production) integration within a foodservice environment. Descriptive terminal displays, automatic tendering functionality, connectivity to beverage-dispensing equipment, automatic transfer to credit card settlement, and the development of processor-based technology redefined the role of the original cash register. Innovative POS devices, capable of generating aggregated, comprehensive operational reports and tracking employee time and attendance replaced legacy units. POS systems began segmenting revenues by food groups within monthly, weekday, meal period, hourly and fraction-of-an-hour (day part) intervals. The fifth POS generation (1990s) was characterized by the prominence of personal computers (PCs). Individual POS devices were built on a PC platform and configured with a file server to form a local area network (LAN) thereby enabling connectivity to an external system. Having a PC as a POS device also allowed workstations to support additional applications.
The current POS landscape, sixth generation, features user interfaces (e.g., hand-held terminals and contact and contactless payment options) and component interfaces (e.g., digital screens, remote operation and storage and data mining software) that further enhance and expand system capabilities.  POS technology, has evolved into production scheduling, product expediting, transaction processing, report generating and comprehensive analytical processing networks. Systems are capable of tracking prices, inventory, sales, employees, tips, promotions, discounts, forecasts, trends and the like. The near future, seventh generation, is expected to center on enhanced data security and video surveillance coordination with POS operations. [Figure One presents a summary of the POS generations.]

POS Operations
In the past few years, there have been numerous publications and field test surveys aimed at evaluating POS functionality. As a result, the following seven common POS control areas have been identified: order entry control, pre-check control, pricing control, inventory control, settlement control, menu control and data security control.
Order Entry Control
For some time POS systems have relied on the user entering a personal code number, inserting a key or swiping a magnetic card to establish order entry authorization. By knowing who has logged in, an audit trail can be created to ensure proper order entry with server accountability. In order to facilitate an efficient order entry process, POS terminals feature a series of specialty keys, graphic icons or touch-points, including preset keys, price look-up keys, function keys, settlement keys, modifier keys and numeric keys. As service items are entered into the system, they are automatically routed to pre-programmed kitchen display screens, various printers and/or other connected peripheral devices located throughout the operation. It is important to note that on-premise, self-service order entry as well as remote online order entry can also be routed directly to an inhouse POS system. Note: Given concerns over internal authorization and employee theft, biometric security at POS terminals has grown in popularity. Biometrics data relies on a personal, physical characteristic to establish authorized access.

Pre-check Control
The concept of prechecking predates automation and involves invoking an operational control that no product is placed into production or service until it is first entered into the POS system. In other words, to ensure that all products and services ordered and delivered are properly settled, the system requires all sales to be posted prior to entering production. Prechecking is an important control that correlates items ordered with production loads to guest check entries. Prechecking initiates creation of the guest check and helps ensure its completeness.

Pricing Control
Preset keys and price look-up keys are programmed to maintain the menu price, item descriptor, department, tax, optional gratuity and perpetual inventory status for an item or group of menu items. Basically, PLU keys perform the same functions as preset keys but require more keystrokes. By linking menu item prices to each key, the server does not need to be knowledgeable of the pricing or concerned when the menu changes with time of day or special promotions become effective. Automatic menu pricing speeds guest service, eliminates pricing errors, and permits greater menu flexibility. Such concerns as happy hour discounting, meal period menu offerings and other factors impacting menu item pricing are managed by the system’s internal time clock. Additionally, POS modifier keys can produce an item price change. For example, house wine by the carafe and half-carafe will sell at different prices. Instead of dedicating preset keys for each type and size of wine portion serving (one full-carafe and another half-carafe), a single preset key can be designated for house wine and then, in combination with a full-carafe or half-carafe modifier key, can be programmed to apply the proper price.
Inventory Control
Since preset keys and price look-up keys are tied to menu item order entry, a POS device is capable of maintaining a perpetual (running) inventory. The most common illustration of this control is the countdown feature found in most POS systems. A countdown feature provides a means for management to enter the number of portions available for service at a given meal period. As items are ordered and prepared, portions are subtracted from the count down number indicating the quantity available until an out-of-stock condition is reached. In addition, this data is helpful with forecasting sales in future periods, as intelligent preparation planning can help reduce waste while increasing profitability.

Settlement Control
Cash, credit card, debit card, gift card, house account and other forms of settlement can be applied in a POS environment. Settlement keys are used to record the method by which a guest check is settled. Outstanding checks can involve both split tendering and/or split checks. Split tendering is the term used to describe the situation in which an outstanding guest check is settled to multiple forms of payment (e.g., partial payment in cash with remainder charged to a credit card). Split checking is a more common occurrence and involves a currently open guest check being split among any number of guests.

Also, since it has been widely reported that experts estimate that 67 percent of all credit/debit card fraud takes place in restaurant settlement, procedures are of special significance. Since restaurant settlement typically involves the consumer handing control over a credit/debit card to a server for POS processing away from the table, there is an opportunity for sensitive data to be compromised. As a result, POS tableside settlement is a growing trend. The availability of tableside settlement and/or handheld POS devices provides reasonable protection by not requiring the guest’s card leave the table area. The server simply swipes the card tableside and hands the card and payment voucher to the guest for settlement.

Menu Control
There are two forms of menu control. In the first case, a POS system can be programmed with various menus correlated to specific meal periods based on time of day. Given the internal clock within the POS network, the menu can automatically change to limit offerings to only those items available during that part of the day. In a second form of menu control, POS modifier keys can be used to modify menu items on an available menu. Modifiers allow servers to relay preparation instructions (such as rare, medium or well done) to remote workstation printers or monitors located in production areas. Typically, a server enters the item ordered and then presses the appropriate preparation modifier.

Data Security Control
Since a POS system is responsible for processing, storing and transmitting or transferring settlement information to an external source it is subject to industry payment standards. POS systems are required to comply with Payment Card Industry Data Security Standards (PCI DSS). Under PCI DSS specifications credit/debit card data, account information and transaction detail must be kept confidential and safe from malicious intrusion or interference. This is especially important since accessible payment card information, in combination with accountholder information, can lead to identity theft. “The 2009 Identity Fraud Survey Report” by Javelin Research estimated the number of identity fraud victims in the United States at 9.9 million, an increase of 22 percent over the prior year.

There are two stages of transaction settlement prone to data theft: data at rest (stored) and data in transit (transported). Surprisingly, the majority of unauthorized data acquisition occurs in real time through the eavesdropping of a payment device and stealing transaction data as it passes to or through the network. It is important that a hospitality business accepting payment card settlement be in full compliance with PCI DSS guidelines. Non-compliance can lead to serious monetary penalties for the business and insurmountable financial difficulties for affected guests. The most frequently cited PCI DSS requirement that retailers fail to fulfill is: Requirement 10 – tracking and monitoring access to network resources. Hospitality operators must be mindful of the special vulnerability associated with wireless transaction processing and the need to safeguard data through complex encryption algorithms.

POS Sourcing
In general, in-house POS technology can be divided into two major branches: proprietary and nonproprietary. A proprietary system, as its name implies, has characteristics specific to a distinct system vendor. Proprietary POS architecture is vendor-dependent and typically available from a single or limited source. Dependency on a single-source supplier places industry practitioners at the mercy of the POS vendor. In other words, a proprietary POS system limits the hardware, software, firmware and netware options available to the user. How can an operator determine if a candidate in-house POS system is proprietary? The answer is relatively simple. When a POS system’s hardware and software are bundled together (inseparable) and only available from a select vendor, the system is considered proprietary.

Nonproprietary POS systems, often termed open systems, differ greatly from proprietary systems. When procuring a nonproprietary configuration, an operator can opt to purchase the POS software independent of the hardware (or netware); thereby allowing the purchaser to select its own equipment supplier. For example, when purchasing an in-house POS touchscreen system, a restaurateur could opt to purchase POS software from a popular industry vendor while processing touchscreen terminals from another source. As long as the software conforms to industry standards, it will operate on open-standard architecture (the term OPOS is often used to designate a nonproprietary, open point-of-sale configuration).

Historically, the hospitality industry has been faced with a majority of proprietary in-house POS solutions. Fortunately the growing adoption of open standards by technology developers is changing the POS landscape. Open architecture facilitates the identification of generic equipment sourcing, support and maintenance providers, and spare or replacement part vendors. Since hardware and netware investment represents a significant portion of total system cost, serious consideration should be given to a nonproprietary design.
Most POS vendors offer a variety of models and styles, each designed for a particular application, environment or ambiance. Models range from fixed-base workstations, to hand-held terminals, to remote off-premises applications. Popular POS operating systems include Windows XP, Vista® and NT®; Windows Embedded for POS (WEPOS); Microsoft .NET™, Linux, Java, XML, Mac OS X, and additional Web-based protocols.

Recent Developments
1 User Interfaces — There are four user interfaces capturing attention in the POS marketplace: flat-panel POS, hand-held POS, contactless POS, m-payment POS and iPhone POS.

Flat-Panel POS–No other POS user interface has received more attention during the past decade than touch input. During this time a host of keyboard alternatives have been introduced, including programmable flat- panel terminals. Flat-panel terminals occupy significantly less space than the traditional POS terminals they replace. Flat-panel screens, which measure less than 3-inches thick, can be mounted from walls, counters or shelving units. Vendors claim flat screens offer restaurants unlimited flexibility in terminal location since they can be flush-mounted nearly anywhere. So long as the screen is within reach of a server, it is accessible.

Hand-held POS–Hand-held terminals (HHTs) rely on radio frequency for communicating tableside order entry data to a network server to a production area. While system reliability of hand-held terminals has greatly improved, cost justification remains a hurdle. Comparing the average cost for a fixed terminal system ($3,000 per terminal for each 30-40 seats), a hand-held terminal for each server ($2,000 per unit) often proves cost prohibitive. Tableside settlement, or pay-at-the-table, speeds table turns by managing credit/debit card or gift card swipes right at the table. It also addresses the growing problem of credit card skimming by allowing the complete payment transaction to occur in front of the customer without the customer ever losing sight of his credit/debit card. Selection of a hand-held POS device should include the requirement that the mobile device fully integrates with an installed solution, thereby avoiding costly expenditures associated with in-seat standalone or manually prone complementary solutions. Hand-held POS is intended to enable service to more customers in less time.

Contactless Transactions–Contactless payment systems using embedded microchips and radio frequency identification (RFID) or near-field communication (NFC) technology to enable transaction settlement.

With contactless payments, also termed proximity payments, a cashless transaction is initiated and completed without physical contact between the payment media (card) and a POS device (reader). Purchase transactions are conducted with the wave or tap of a plastic card, flexible tag, minicard or keychain fob; not the swipe of a magnetic stripe. While contactless payment technology is new to the industry, it has been used in gasoline retailing (e.g., Mobil Speedpass) and toll road operations (e.g., EZ Pass) for more than 10 years. Contactless cashless payments accelerate the settlement process while ensuring the capture of comprehensive transactional data. The passive contactless component can be embedded into such nontraditional items as key fobs, watches and cell phones.

m-Payment POS—Recently, Blaze Mobile introduced the Blaze Mobile MasterCard PayPass m-payment sticker. The small m-payment sticker can be affixed to any mobile device enabling it to be used for Tap-and-Go purchasing. An m-payment sticker helps leverage the convenience of mobile devices with the simplification and acceleration of contactless transaction settlement. The m-payment sticker is tied to a prepaid account issued by MetaBank. The m-payment sticker is equipped with advanced radio frequency technology, offering the highest level of contactless payment security. The m-payment sticker transmits card information to the merchant’s POS terminal, via highly secure advanced radio frequency technology, allowing consumers to simply tap the sticker on a PayPass reader.  Last year USA Technologies (USAT) released a similar sticker program entitled PayDot. The USAT PayDot is a paper-thin, nickel-sized sticker with slightly different functionality. A PayDot sticker contains sufficient memory to enable both contactless transaction settlement as well direct payment from programmable, sticker-based stored value. The PayDot can be affixed to any convenient device, including cell phone, PDA, iPod, coffee cup or employee badge.

iPhone POS—Merchant Warehouse recently announced an innovative mobile application for the Apple iPhone™ and iPod touch® termed MerchantWare Mobile. Basically, MerchantWare Mobile is a POS application that allows a merchant to process credit and debit transactions in real time over a Wi-Fi, Edge or 3G network. Unlike similar solutions, MerchantWare Mobile is free, has no gateway fees, and does not require a third-party license. This application appears ideal for a mobile workforce where convenience and reliability are a necessity for off-premises operations (e.g., tradeshows, outdoor expositions, booking agents, etc.). Traditionally, off-premise operations were limited to accepting payments by check, cash or manually processed payment card information requiring subsequent electronic recordation. Such payment options are time consuming, non-secure, and may present risk exposure to bad checks and declined card payments. MerchantWare Mobile helps minimize such risks with secure and immediate processing of transactions. In addition to the iPhone and iPod® platform, BlackBerry®, Windows Mobile® and others are in development.

2 Software as a Service (SaaS) – Recently reintroduced, browser-based POS is arguably an effective means of order entry simplification, cash management, data aggregation, menu management and centralized data processing especially appealing to multiunit operators. Using Web protocol technology, POS components are placed in a retail outlet and communicate transactional data to a remote server via the Internet. Application software, positioned at the network server, performs comprehensive data analysis metrics, statistical evaluation and managerial reports. Using Internet protocol authorized personnel can access data stored at the remote site at any time from anywhere. In many cases the Web-based server can also be used as an online order entry station (i.e., unattended POS venue) with direct connectivity to store-level POS functionality. POS software as a service becomes cost effective as initial capital expenditures are reduced since there is no need to purchase robust POS terminals or other in-house component parts. SaaS suppliers may also offer innovative application modules including linage to digital media (e.g., text-messaging, TiVo and Facebook) for menu item sales, affinity programming and gift card management. Many providers offer highly intuitive navigation and search tools so that remotely stored POS data can be easily accessed and applied. Most SaaS sites do not require that the user become familiar with the software specifics, only how to utilize the streamlined output.

Benefits of SaaS modeling include: elimination of data backup routines as the system is continually communicating with the Web server data center, no in-house software to install as it is Web-based, no need to worry about upgrades as the software is auto-upgradable, no need for specialty equipment so long as devices are Internet accessible, and users can work anywhere there is Internet access. The new breed of software-as-a-service (SaaS) providers is considered, by some, the best bet for on-demand application hosting. The predecessor, application service provider (ASP) model offered application services in a hosted data center that proved to be an extremely costly approach that led to service-level difficulties, data accessibility problems, and eventual financial failure. Since so many customer-specific applications were requested under the legacy format, an ASP was not able to provide expertise in each application, as promised. Customers still had to have in-house expertise to make sure the applications were behaving correctly. Basically, the high cost of building and maintaining data centers and running customer-specific applications crippled many ASP ventures.

The typical SaaS provider offers applications specifically designed to be hosted and delivered over the Internet to a variety of clientele. As a result, the providers can create and offer value-added features, which would be expensive in the former ASP model. With SaaS, the customer doesn't have to buy the software and then pay for the provider to host it. Evaluating a SaaS provider's application is much simpler than the traditional model of putting a third-party application through acceptance testing. The provider simply gives the prospective customer access to the application via a Web interface.

The SaaS model works best for companies with geographically dispersed retail venues that have little or no need for in-house expertise. Since SaaS centralizes data onto a single server it is capable of automatically generating numerous operational reports. The POS SaaS model has been shown to have a quick deployment time, rapid return on investment (ROI), high reliability and low transaction cost. It is important to note that integration with POS technologies for centralizing order processing has played a large role in the tests and deployment of remote call centers for multiple restaurants.

3 Video Synchronization – A POS-linked video surveillance systems is an innovative and intriguing application that provides unparalleled coverage. Every POS entry can be viewed and reviewed to confirm appropriate order entry and cashiering functionality. Video synchronization presents and interesting dynamic to the hospitality industry; the ability to integrate POS data with video capture through this combination, users can quickly identify relevant video based on key operational data to provide a more detailed look into transactions without having to sift through hours of video. Users can access remote (live and recorded) video from multiple locations simultaneously via the Internet. Custom exception-based reports aggregate data and highlight suspicious trends and behaviors at the store and above-store levels providing significant visibility into every aspect of restaurant operations. When integrated with the POS, managed video as a service (MVAAS) enables managers to track user-specific business rules around transactions such as voids, returns, discounts and coupons. Reports and emergency alerts can also be programmed.

It is not uncommon for foodservice operators to employ video surveillance (e.g., camera or data recorder) devices to guard and secure perimeter and public access locations. The problem is that such video is time-intensive to review and analyze. As a result, an innovative application that integrates POS data with video capture renders more meaningful monitoring. Offered as a managed video-as-a-service application, this approach can be effective in deterring both internal (employee) and external (non-employee) criminal behavior. Given networking capabilities, video is available for review remotely and multiple locations can be viewed simultaneously. Additionally, some video surveillance providers feature PCI compliant, Web-based services that conform to current qualifications (PCI DSS Version 1.2 and newer). Managed video as a service is one example of an emerging technology that helps hospitality businesses drive operational efficiencies. When coupled with point-of-sale (POS) data, MVAAS offers operators a second security touch point that is not otherwise available.

4 Nutritional Analysis – The fact that POS systems print a single-sided receipt offers an opportunity for reverse side printing. One firm, Nutricate, has developed a POS application that combines the guest’s menu item purchases with a set of important nutrient components to produce a comprehensive, customized analysis of products purchased at the foodservice location. With the claim restaurants are better able to build meaningful relationships with customers, Nutricate provides a means for nutrient analysis (by food ingredient and meal total), promotional materials, interesting facts and additional content space. Citing that 88 percent of customers read a receipt most or every time, renders the receipt a valuable communication vehicle that is usually only half used. By printing nutritional analysis on the back side, the receipt can now serve as a valuable nutrient and marketing tool capable of complementing the guest’s personal wellness program. [Refer to Figure Two for a POS receipt with Nutricate data.]

5 Intelligent POS – The advent of intelligent POS involves adding both a build-to-order and customized menu item file for frequent clientele. Build to order (BTO) at a point of sale involves component pricing for construction of nonmenu item offerings. For example, a cheeseburger with bacon and a fried egg likely will involve a cheeseburger with bacon menu item plus addition of the fried egg as an add-on. By creating a database of price modifiers (i.e., add-ons that change the price of a standard menu item) operators are able to accommodate unusual requests on the fly without having to reprogram or reject specific requests. If the BTO is for a frequent customer, the customized item can be assigned a menu item price look up (PLU) code number that renders it akin to a standard menu item but without offering the item for wide distribution.

Intelligent POS, also referred to as auto-intelligent POS, can be focused on customer, or club membership, relationship management (CRM or MRM) through the creation of a highly personalized dining experience that streamlines order entry and provides a basis for customized, build-to-order menu ordering.

Most vendor POS systems are built on a Windows platform, incorporate touchscreen order entry, and rely on a relational database to deliver an effective and scalable transaction monitoring and reporting network. 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 POS design. As operators renew interest in POS systems, it is imperative that system capabilities be known and matched to management needs.

Michael Kasavana, PH.D., NCE, CHTP, is a NAMA Professor in Hospitality Business for the School of Hospitality Business at Michigan State University. He can be reached at kasavana@msu.edu.

Redefining the Point Of Point of Sale

PAR EverServe – ParTech, Inc. launched its sixth-generation POS hardware platform as the PAR EverServ Series 6000 POS. EverServ Series 6000 employs the latest Microsoft and Intel technologies to provide faster processing that's capable of handling even the most complex software applications. The terminal's advanced energy-saving features dramatically reduce overall power consumption for a lower total cost of ownership. EverServ Series 6000 is easily expandable, with advanced options such as RAID capability for real-time backup, biometric fingerprint and iButton security sign-in, expanded I/O connectivity and wireless capability.

MICROS myCentral – A Web-based application that allows businesses to take orders online, over the phone using a call center module, or using mobile technology such as SMS. myCentral allows customers to pre-order a sit-down meal for a specific time or place an order for pick-up or delivery. The myCentral Web edition can be seamlessly integrated into an organization's existing Web site. Once placed, the order is automatically transmitted to the selected restaurant via e-mail or fax, or can be sent directly to the in-store MICROS POS system. Using the myCentral call-center edition, an order is placed online by a call center agent and transmitted real time over the Internet or WAN to the selected store. The order instantly displays on either a MICROS kitchen display system or a kitchen printer ready for the order to be prepared. Orders can be placed up to 24 hours in advance, allowing customers to specify a pick-up or delivery time.

In January 2009, Subway restaurants announced a partnership with Torex to implement its Quick Service Restaurant POS solution globally. With a large network of franchisee operations, the chain felt it needed a single global solution to achieve a balance between the franchisees’ need for value and the corporate mission to support growth. Upon completion of the rollout the SUBWAY chain will have Torex software installed in over 30,000 of its restaurants in 87 countries. 

Torex QSR POS is the fastest growing international POS application for quick-service restaurants. Its complete, global point-of-service solution is designed specifically to meet the needs of the QSR industry, with over 75,000 terminal installations in more than 80 countries.

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