Running a modern restaurant without the right tools is impossible. If you’ve never used one before, you might not know what to look for in a restaurant point of sale (POS) system.

Even if you’ve used one before, point of sale systems for restaurants can be confusing. It’s understandable. Technology changes quickly and unless you follow the industry, it’s hard to keep up.

If you’re in the market for a POS, or just want a refresher on how the technology has evolved, this guide is for you. We’ll show you a high-level look at the different types of POS systems, and give you a list of key capabilities you’ll want to ensure a restaurant point of sale system has before you consider using it in your business.

Cloud vs. On-Premise

The most significant distinction to understand is cloud-based software versus on-premise software. These two terms describe the underlying technology used to build these different types of software. That might sound complex, but it’s actually pretty straightforward.

On-premise POS software describes a POS system that’s installed on a server physically located within your restaurant. It’s literally on the premises of your business. This is a very outdated way of building and buying software, but some merchants do still prefer it.

Here are some more details about on-premise software:

  • Expensive – Software licenses range from several hundred dollars to over one thousand dollars. You’ll also need to buy each new version that comes out if you want access to the latest features.
  • Complex Updates – On-premise software typically lacks the usability of new software, which makes installing updates a complex process.
  • Technical Support Not Included – If you want customer support, expect to buy a package of support hours or pay a la carte for any help you need.

 
An alternative option is cloud-based software. This term describes point of sale software that’s housed in a series of servers in an offsite data center (run by the vendor or leased from another company like Amazon Web Services). When your software is hosted “in the cloud” aka an offsite data center, you can get to it at any time, on almost any device, as long as you have an internet connection.

Here are some of the specifics that pertain to cloud-based software:

  • Affordable – Typically you pay for cloud-based software as a monthly subscription. This is often called Software-as-a-Service (SaaS). A low monthly fee makes POS systems attainable by merchants who can’t afford the upfront cost of on-premise software.
  • Simple Updates – Since you pay for the software monthly, new versions are typically included in that cost, as well as things like data security. Plus, you don’t need to maintain your own server.
  • Technical Support Included – Another great benefit of cloud software is that it typically includes customer support as a part of the cost of subscribing to the software. So if you have questions, there’s someone who can help.

 
For most small business restaurant owners, the benefits and cost savings of a cloud-based POS solution far outweigh any marginal benefits that come from using on-premise software. For that reason, we consider “cloud-based” the first thing that you should look for in a restaurant POS.

SEE ALSO: Restaurant Startup Costs: A Breakdown for New Restaurateurs

Restaurant POS Hardware

Another great benefit or choosing a cloud-based point of sale is the hardware that it runs on, and you use alongside it. On-premise software typically runs on hardware that’s expensive and proprietary. The giant touchscreen POS terminals you see in chain restaurants are a great example. When you have an issue with this kind of hardware, you either need to call in a specific repair service or order new equipment, which could take several days to arrive. It’s hard to run a business if you don’t have a functional point of sale system.

On the flip side, cloud-based POS systems typically run on standard hardware that you can buy at Amazon or your local electronics store. The most common example is an iPad or Android tablet. Some solutions also run in your browser and can be used on a laptop or desktop computer. The benefit here is that new hardware is easy to get, it’s usually very affordable, and it tends to be more user-friendly and reliable.

Outside of a tablet or computer to act as your terminal (the area where waitstaff will enter orders and print checks), you’ll also want to get the following:

  • Credit Card Reader – You’ll want to choose an option that allows you to accept the widest variety of payment methods possible. For example, credit card (EMV) and debit card transactions, contactless payments, and gift cards. These typically have receipt printer functionality built in as well.
  • Kitchen Printer – This lets you send an order to your kitchen staff where it will print out for easy reference. This reduces the time it takes your team to start on an order and prevents any confusion caused by messy handwriting or typos.
  • Kitchen Display – This operates on the same principles as a kitchen printer. The difference is that instead of a paper order, the order is displayed on a screen like a computer monitor.

 
It’s important to note that you can likely get by with one kitchen printer or kitchen display, but you may want multiple POS terminals and card readers. If you have a large restaurant or separate bar and restaurant areas, this can make life easier for your team and can help you operate more efficiently.

Restaurant Point of Sale Features

Now that we’ve covered the overarching software and hardware components, it’s time to dive into the specific features that any high-quality restaurant POS system needs to have.

Easy Register Layout

Speed is everything in the hospitality industry. If you can’t offer fast and friendly service, then your guests are going to start looking elsewhere for their Friday nights out. The quicker your servers can enter orders, the faster your cooks can begin to prepare them. A vital tool for increasing order speed is a layout that’s clear and easy to read. Finding specific dishes and drinks should be quick, and if your point of sale system can support tableside ordering and table layout features, then your team can run even more efficiently.

Inventory Management That’s Made For Restaurants

One mistake that some new restaurant owners make is choosing a POS system that’s made more for retailers and as a result, lacks restaurant-specific features. Nowhere is this more apparent than in inventory management tools. You’ll want to ensure that your tools include features that help you manage dishes and drinks versus retail products, though there is some crossover.

Here are some things to look for:

  • “Raw Goods” Features – This feature allows you to manage inventory for your dishes, by tracking the individual ingredients used to make them. For example, a sandwich could be managed via the amount of meat, cheese, bread, vegetables, and other toppings used to make the sandwich.
  • Reorder Triggers – This allows you to set up alerts that remind you to reorder more stock when you’re running low. Perfect for ensuring you always have what you need to make your most popular dishes and drinks.
  • Bulk Updates – Instead of adding or updating inventory by individual item or ingredient, bulk updates let you make changes to multiple ingredients at once with a CSV file.

 

Reporting and Analytics

For today’s modern restaurateurs understanding your data and using it to improve performance or streamline your restaurant operations is a key way to build a long term business. To that end, it’s essential that your restaurant POS system has the right reporting tools. To help you make that determination, let’s take a look at a few of the types of reports that restaurateurs consider most useful.

Sales Reports

This is an obvious one, but staying on top of your sales volume and sales trends is an essential part of understanding your success or lack thereof. Some first-time restaurant owners stop at overall sales volume, but it’s far more helpful to go at least a level deeper to understand sales trends across your menu, different locations if you have them, and even date ranges.

SEE ALSO: The Simple Guide on Increasing Restaurant Sales

Inventory Reports

We’ve already discussed tracking inventory quantities with inventory management tools, but analytics play a part as well. Specifically, when you’re trying to understand your margins and inventory value. The hospitality industry has notoriously slim margins. Ensuring that you’re maintaining an appropriate profit margin across your entire inventory is absolutely essential. If you don’t have a positive margin, then your business isn’t making any money and you won’t be around for long.

Similarly, you’ll want to track your inventory value as well. This will tell you the amount of cash that you have tied up in inventory that hasn’t sold yet. It’s essential to understand this number because it directly relates to cash flow. If too much of your cash is tied up in inventory, then you may lack the liquidity you need to continue operating. For example, if your oven stops working,
you may find out you lack the capital to either repair it or buy a new one.

Employee Reports

Because most POS systems can also function as a time clock, you should have access to reports that help you track the basics as they relate to your team. For example, tracking hours worked is a no-brainer and helps you create work schedules and calculate payroll.

However, you can also use this information to track your labor cost when you compare it against the sales generated by each employee. Similarly, you can identify your best and worst performing employees based on their individual sales volume. This helps you figure out who to staff on busy Friday nights, and who needs some 1:1 coaching.

Marketing Tools

Let’s get this out of the way, a dedicated marketing platform is always going to offer more marketing tools than a POS system. But that doesn’t mean your system can’t offer at least some marketing tools.

Here are a few to look out for:

  • Email Collection – Building an email list is necessary to facilitate email marketing and collecting email addresses with your POS system is often a convenient and effective way to do this.
  • Email Marketing Integration – Some POS systems offer rudimentary email marketing capabilities, but you’ll likely want something more sophisticated like MailChimp. Those email addresses you collected can be seamlessly fed into the system via the integration.
  • Local SEO and Reviews Management – Some POS systems, like ShopKeep, offer tools to help you manage your business information on tools like Google My Business, and your reviews on Yelp. This gives you several powerful tools for attracting new customers.
  • Customer Loyalty – A loyalty program is a great way to encourage repeat business by rewarding customers for buying from you.
  • Online Ordering – While not a traditional marketing tool, offering online ordering makes it easier to order from you, which should increase revenue. Just make sure your staff are equipped to handle these types of orders.

 

Credit Card Processing

It’s outside the scope of this article to go into all of the ins and outs of payment processing, but we want to touch on the topic briefly.

There are two big takeaways:

  • Interchange-Plus Pricing – Make sure that your restaurant POS system works with a processor that offers interchange-plus pricing. This is the most transparent pricing model, ensuring you have a clear picture of your payment processing costs.
  • No Lock-In – You want to freedom to work with the processor of your own choosing. This allows you to seek out the best pricing and service. Some vendors require that you use their payment processing service if you want to use their software. We recommend avoiding this kind of lock-in if possible.

 

Customer Service

Unfortunately, it’s highly likely that you’ll run into an issue with your POS software or hardware at some point. That’s why it’s so important to consider the level of customer support offered by the POS vendor. The hospitality industry isn’t 9-5. So you need support that’s there when you have a problem, whether that’s at 2 in the morning or 2 in the afternoon.

Some vendors, like ShopKeep, offer customer service 24/7/365 through a variety of communication channels at no extra charge. Others don’t. It’s up to you to decide on the amount of support you need, but we always recommend playing it as safe as possible. Issues are never fun, and the peace of mind that great support can deliver is often hard to put a price on.

To wrap this up, there are dozens of restaurant POS systems available out there. We hope this article helps you to cut through the noise to focus on a shortlist of a few different options. From there, it’s just a matter of comparing features and analyzing the pros and cons until you can settle on the one that covers as many bases as possible. Good luck!

Ryan Gilmore is a writer at ShopKeep.

Ryan Gilmore

As Inbound Content Marketing Manager at ShopKeep, the #1-rated iPad Point of Sale System, Ryan Gilmore uses his extensive experience in small business technology to create educational content that helps merchants run and grow their businesses more effectively.