L 7-I

I

t--r ? f -\..--.. ~. ~

POINT-OF-SALE (POS) SYSTEM FOR

PIZZA HUT HONG KONG

by

NICHOLAS T. H. JIM

/'

, \ \1 •• -:.

2 I iUN 1994' MBA PROJECT REPORT , , "

Presented to j '\

The Graduate School

In Partial Fulfilment

of the Requirements for the Degree of

MASTER OF BUSINESS ADMINISTRATION

THREE-YEAR MBA PROGRAMME

THE CHINESE UNIVERSITY OF HONG KONG

May 1993

Adviso r

ABSTRACT

This study reviewed a real life problem of point­

of-sale system decision for Pizza Hut Hong Kong. The

ultimate objectives were to help the management in making

the right decision and suggest a cost effective

implementation plan.

The performance of the existing POS system was

examined in detail. All the weaknesses were highl ighted

~and formed a basis for improvement by making use of new POS

technology. The relevant departments of Pizza Hut Hong

Kong were interviewed and their expectations on the POS

system were

selection.

included as basic criteria for new POS

Four different alternatives namely, New Tech POS

System, Kontel POS System, Remanco Vision System and Micros

8700 POS System were identified and evaluated. The final

decision was to upgrade the existing Micros 4700 POS System

to Micros 8700 POS System in two years' time. Swopping of

new and old systems was suggested to maximize the potential

benefits of using new system.

Price negotiation tactics were suggested and if

handled properly, Pizza Hut Hong Kong would be able to ,get

good return on investment.

In conclusion, the key

improv'ing operation efficiency,

success

grasping

factors of

management

information, and , good internal control would be further

1 1

enhanced by making good use of new POS techno logy. By

f 0 1 1 ow i n g the re co mm end a t ion s 0 f t his rep 0 r t, P i z z a Hut

Hong Kong could derive both short term and long term

benefits from the advanced POS system.

iii TABLE OF CONTENTS

ABSTRACT

TABLE OF CONTENTS

LIST OF ILLUSTRATIONS

ACKNOWLEDGMENTS

Chapter

I . _ I NTRODUCT ION

C~mpany Background

Scope and Obj ect i ves ..................... .

Methodologies ............................ .

I I . EVALUATION OF EXISTING POS SYSTEM

Definition of POS System

Performance of Existing POS System

Ill. CRITERIA FOR POS SYSTEM SELECTION

Basic Criteria

Price

1

1 1

v

vi

1

1

2

4

5

5

7

12

12

16

Reputation of ~upplier and its Principal... 16

Technology of the POS System .............. 16

IV. IDENTIFICATION AND EVALUATION OF POS SYSTEM.. 18

Identification of POS Systems ............. 18

New Tech POS System ....................... 18

POS Sys tern ................................ 22

Remanco Vision System

Micros 8700 POS System

25

28

V. DECISION MAKING . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Second Phase Evaluation

Final Decision Making .................... .

Cost and Benefit Analysis ................. .

VI . IMPLEMENTATION PLAN

Swopping of POS Systems

Price Negotiation Tactics

Installation of New POS System

Review Meetings with Supplier

VII. CONCLUSION

BIBLIOGRAPHY

iv

33

33

37

38

40

40

42

44

44

45

47

Figure 1

Figure 2

Figure 3

Figure 4

Figure 5

Figure 6

Figure 7

Table

Table

Table

1

2

3

LIST OF ILLUSTRATIONS

Micros 4700 POS System

Illustration of Integrated System

Menu Levels

New Tech POS System

Kontel POS System

Remanco Vision POS System

Micros 8700 POS System

Price Comparison

Maintenance Costs Comparison

Sales Weighting Table

v

5

7

8

19

22

25

29

34

35

41

vi

ACKNOWLEDGMENTS

The author wishes to express his gratitude to Dr.

Y. T. Fung for the guidance on this research project.

The author also wishes to thank the management of

Pizza Hut Hong Kong for their granting of permISSIon to

conduct the study on their organization.

CHAPTER I

INTRODUCTION

Company Background

The original Pizza Hut concept was developed by

two university students in the United States in the 1958.

The concept provides a range of high quality (predominately

Pizza and pasta) products ' in a clean, friendly and

attractive full-service family-type environment. The

overall philosophy of Pizza Hut is to provide quality pizza

at prices which represent excellent value for money and

support with highest standard of customer services.

Like other franchise business, the franchisor

(PepsiCo, Inc) sells business concepts and operational

support to the franchisee. Jardines being - the franchisee

operates the Pizza Hut chain of restaurants in Hong Kong,

Taiwan, British Columbia, Hawaii, Guam and three states in

Australia. It is the largest independent franchisee

outs ide of 'the Uni ted States.

In Hong Kong, Pizza Hut is the market leader of

the pizza market in terms of turnover and number of outlets

(total 31 restaurants, 2 delivery units and one express

un it) . Apart from the traditional dine-in business, the

company IS expanding to other market sectors 1 ike slice

counter and pizza delivery. In terms of geographical

expansion, the company has formed joint-ventures In

2

expansion, the company has formed joint-ventures in

Southern China to operate Pizza Hut Restaurants.

Scope and Objectives

This project focuses on the management information

system of Pizza Hut Restaurant In Hong Kong. The term

"Management Information System" though widely used, there

is no common agreement to its meaning. For the purpose of

this study, the term is defined as "an information system

uSIng formal ised procedures to provide managers at all

levels in all functions with appropriate information from

all re levant sources (both internal and external to the

firm) to enable them to make timely and effective decisions

for planning, directing and controlling the activities for

which they are responsible."l

Al though the franchisor can provide reasonab ly

good support

of kit chen

in some areas like restaurant operation, use

equipment, restaurant design and marketing

strategies, they are quite weak in the area of management

information system. The hardware and software suggested by

the franchisor may not be readily available In the

franchisees' countries, even though they are available, the

price and the maintenance costs may be so high that makes

them not feasible to be used.

Pizza Hut Hong Kong uses the Micros 4700 point-of­

sale (POS) system in the restaurants and IBM AS400 / D20 in

1. T. Lucy Management Information Systems 4th

Edition, D.P. Publications, 1981.

3

the head office. It has been 4 years since the first set

of Micros 4700 point-of~sale system was installed. The

management team of Pizza Hut Hong Kong were not completely

sat isfied wi th the performance of the Micros 4700 POS

sys t em. As t he company

expand the business both

has a very aggressIve plan

in Hong Kong and in China,

to

the

the exist ing POS system may not

requirements of the company.

be able to cope wi th

The objectives of this study

are:-

(i) to evaluate the performance of the exist ing point­

of-sale system.

( i i )

( i i i )

( i v)

to ident ify the needs for improvement and the

criteria for POS system selection.

to generate and evaluate different alternatives.

to recommend decision and implementation plan.

Methodology

Collection of information was carried out mainly

through personal interviews with the sales representatives

of various POS vendors. As there are not many POS systems

for restaurant environment available in Hong Kong, it is

possible to explore in detail the features of each

alternative. In some cases, testing of products were

conducted In the show rooms of the vendors and also in the

Pizza Hut Head Office.

Internally, information collection was conducted

through meetings with the key personnel of various

functions, namely Finance Department, Operations

Department, Training Department, Marketing Department and

4

Supplies Department.

Apart from the interviews with key staff of

varIOUS functions, observations were made at restaurants to

understand how well the POS system could help the

restaurant staff to provide better service. All levels of

restaurant staff were then asked for their opinion on the

good things and bad things about the existing POS system.

In the evaluation process of POS systems, the same

exercise was repeated to ensure involvement of staff at

d i f fer en tIe vel san d the i r co mm en t s we re col 1 e c t e d . I n

most of the cases, the restaurant staff were invi ted to

have a hands-on experience on different new POS systems.

5

CHAPTER 11

EVALUATION OF EXISTING POS SYSTEM

Definition or Point-or-Sale System

Point-of-sale (POS) system refers to the computer

system used in retail stores that serves the function of a

cash register as well as collecting sales data and

performing other data processing functions. 2

In Pizza Hut Hong Kong, the brand of POS system

used is Micros 4700 supplied by a US company called MICROS

Systems Inc. The company was founded in 1977 as a front

office posting system supplier, it quickly identified a

niche in food and beverage systems. The Micros 4700 is a

PC-based system run on DOS. The structure of a POS system

is shown in figure 1.

An order can be entered through a waiter terminal

or cashier terminal, the kitchen printers will then print

the order for the kitchen staff to prepare the drinks and

food. At the same time, the information is stored in the

system for subsequent cash out at the cashier terminal.

2. James A O'Brien. Information Systems In

Business Management, IRWIN, fifth edition, 1988.

alone.

Slip Printer

Cashier Terminal

Roll Printer

MICROS 4700 POS SYSTEM

FIGURE 1

Waiter Terminal

Integration of POS system with the Head Office

Main frame systems

6

The POS system at the restaurants IS not working

Instead, it is linked to the Head Office mainframe

computer ("IBM AS400/D20) through telephone lines. At

night, information stored in the POS system can be polled

to the Head Office mainframe computer through telephone

lines. On the other hand, Head office can send down

message to the POS system using remote-Iock-on to update

the menu price or add a new menu item to the POS system.

The concept of fully integrated system can be demonstrated

in figure 2.

7 I

The sales information polled from the POS system

will be further analysed by the sales sub-system to

generate gross profit / food costs, sales comparison

against historical data and pre-set budget etc. Such

information will be used by the inventory sub-system for

inventory control purpose such as stock re-ordering. The

sales informat ion wi 11 also f low to the general ledger

system for Profit and Loss Account preparation.

POS POS POS

AS400

GL Inventory

AP Sales

ILLUSTRATION OF INTEGRATED SYSTEMS

FIGURE 2

The

Performance of existing POS System

system

Strengths

has a high degree

flexibility. The access rights of different

controlled by magnetic cards. Each staff can

different authority levels such as voiding

8

of device

staff are

be granted

items and

offering discounts. This can be easily done by the

restaurant managers at the restaurant level.

Ki tchen printers can be re-directed on-l ine in

case of malfunction. In the restaurant environment,

printers are usually the most vulnerable parts due to the

volume of printing and inhabiting of cockroaches inside the

warm and humid printer. For instance, if the printer at

the pizza make-table breaks down, the orders can be re-

directed to the printer at the bar, by doing so the problem

can be mitigated in short term.

The daily start-up and closing procedures are

quite simple and can be handled easily by restaurant staff.

Though it is quite difficult and complicated to

support, the system can maintain up to 7 menu levels. At

present, Pizza Hut Hong Kong is using only 4 menu levels.

For menu level illustration, please refer to figure 3.

Other useful features include real time display

of guest check which can help to process re-ordering and

checking of order; split check functions which are quite

useful to those restaurants with lots of tourist customers.

~ Pepsi

9

~rinky > Seven-up -

~ Orange

~ Supreme

~izzas/ > Seafood

~ Hawaiian

~ F ettucc Ine

~astay > Tetrazzinl

~ Anlericllld

~ Ice-cream

/nessery > Custard

.. MEMU LEVELS

FIGURE 3

Weaknesses

The in pu t de vi c e 0 f the POS term in all s s t ill

based on keyboard input technology. As a result of that

the number of hot keys is limited, and the number of look-

up-menu IS also restricted. As Pizza Hut Hong Kong

recruits a lot of part-time staff (about two third of total

restaurant staff are part-timers), it takes a long time for

the new staff to be familiar with the location of various

buttons.

10

The system, which is run on MS-DOS, has the

following limitations :-

( i )

( i i )

( i i i )

( i v)

During the POS system is in operation, no

other software can be run on the console (i.e.

single tasking). If the restaurant manager wants

to make use of the PC to perform some analysis, he

or she has to wait till the restaurant is closed

or before the restaurant opens.

Since MS-DOS is not designed for multi­

tasking, only a very I imi ted interfacing can be

done. It is quite difficult to interface the POS

system with other software system (e.g. inventory

system and customer data base system for pizza

del ivery).

From time to time, the console needs to

backup data from various terminals so that the

information in the hard disk IS kept updated.

However, by doing so, it will hold up all the

waiter terminals and cashier terminals for 10 to

30 seconds while the backup is In progress. This

c au s e s a lot 6 fin con v en i en c e tot her est a u ran t

staff, as they can do nothing but waiting in front

of the terminals.

As the data IS not on-line updated,

whenever there IS a major system failure it will

cause chaos In the restaurant. Even though the

system IS restored, not all informat ion can be

recovered; as a result, the restaur~nt staff have

(v)

(v i )

(v i i )

1 1

to re-take the orders manually. The cashiers have

to ask the customers what they have ordered and

eaten, and pay accordingly (assuming all the

customers are honest and of good memory). Such

kind of incidence wi 11 not only cause financial

loss to the company, even worse it will hurt the

image of Pizza Hut.

The self-developed E-mail system can only

send information to the restaurant during the time

the POS system is not in operation, which makes

communication between Head Office and restaurants

not so convenient.

Likewise, the data of POS system can only

be accessed by the Head Office computer when the

POS system is not in operation.

Should there be any major maintenance work

to be performed, the whole POS system has to be

shut down completely, which causes interruptions

to the restaurant operation.

Although ther~ are 100 help screens, each screen

can only hold 12 lines with 40 characters each. The screen

can only be retrieved by entering the screen number, which

is not practical to expect the staff to remember all the

code numbers. Therefore, the screen function is considered

to be not sufficient nor user friendly enough.

The standard reports that can be generated by the

sof tware are not use fu 1 and re 1 evan t enough to mee t the

requirement of · the Marketing Department. As the system is

12

not designed to generate tailor-made report, without good

report-writing facilities, it is quite difficult to add on

new reports.

13

·CHAPTER III

CRITERIA FOR POS SYSTEM SELECTION

The whole purposes of install ing POS system at

restaurants are to improve operational efficiency, provide

flexibility to market the products, and collect useful

information for decision making. After interviewing the

relevant departments (Operations Department, Marketing

Department, Suppl ies Department and Finance Department),

the following criteria have been identified as very

important.

( i )

( i i )

Basic Criteria

User Friendliness

As the staff turnover rate at Pizza Hut is

very high (well above 100% per year), the POS

system must be easy to learn and use. Otherwise,

enormous amount of money and time will have to be

spent on training. Ideally the training time of

basic operat ion for wai ter/wai tress and cashier

should not be more than an hour.

Software maintenance

From time to time, the Marketing

Department will add or delete some menu items or

introduce some promotional items such as set meal,

d i s co u n ,t, f r e e 0 f fer set c . The software of the

( i i i )

( i v)

14

POS system must be easily operated and flexible

enough. All the amendments should be centrally

done by the EDP Department at the Head Office and

the programme will then be down loaded to the POS

system at restaurants through telephone lines at

a pre-determined time.

Security Level

For internal control purpose, the system

should have high degree of securi ty. Different

grades of staff should be granted different access

rights. For some functions such as granting

discounts and voiding items, they should be

restricted to certain grades of staff. The

relevant records should be kept in the system and

the detai led audi t trai 1 can be accessed by the

Restaurant Manager and the staff from the Finance

Department.

Flexibility of Hardware Configuration

From time to time, some terminals or

printers may be added, replaced or deleted from

the POS system due to change in volume of business

or for hardware maintenance purpose. Such

addition or replacement of components must not

cause any interruptions to the operation of POS .

system. Ideally, the replacement of printers

should be simple enough for the restaurant staff

t 0 ha 11 die as fro m the pas t ex per ie n c e , pr i n t e r

(v)

(vi)

(v i i )

15

problems account for more than 90% of the problems

of the POS system.

Report Facilities

The standard reports that go wi th the

system must be relevant and useful to users.

Calling for the reports should be simple. Apart

from the standard reports, ad hoc reports and

tailor-made reports should not be too complicated

to programme (i.e. the in-house programmers should

be able to acquire the necessary skills to do the

programming work of the POS system).

Integration with other System

As the POS system IS only part of the

integrated system, it should be flexible enough to

be integrated with other systems. Al though all

the existing systems can be integrated through the

IBM AS400, for some systems such as customer data

base system for pizza delivery and inventory

control system, they should be interfaced direct

with the POS system at restaurant level. A POS

system with higher integration ability will

provide more flexibility for future system

development.

Historical data storage

The capacity of the POS system for

historical data storage is very important . for

report ,generation and analysis of key data . . As

(viii)

criteria

16

the reporting cycle for Pizza Hut Hong Kong is on

a Thirteen 4 - wee k per i 0 d s per year, i t is bet t er

to have a system that can store at least one

week's data.

Reliability of the system

Any failure of POS system will cause chaos

In the restaurants, the ideal system should have

a very low failure rate. The maintenance service

of the POS system IS also very critical, the

response time, quality of the technicians and

availability of spare parts will be used to

determine the quality of maintenance service. The

system should be designed to work

restaurant environment which is not

in the

a good

environment for computer system to operate

especially in the warm and humid kitchen area.

The above eight

for POS system

points

selection.

are the

They

fundamental

are from the

users' viewpoint and can be applied as an initial screening

process for different kinds of POS systems. However,

additional criteria are required before the final decision

on POS system can be made. They are to be used In the

final stage of selection (i.e. when the POS systems have

passed the eight fundamental selection criteria).

Price

The price of the POS system will only be

considered In th~ second stage of evaluation. The price of

17

a POS system refers not only to the hardware and software,

the maintenance cost should also be considered carefully.

The price and maintenance costs of the first purchase and

subsequent purchase should be specified in the contract so

as to avoid any unreasonable high prices being charged once

the system has been committed.

Reputation of th~ supplier and its principal.

References of the vendor and its principal have to

be checked to ensure they can fulfil all the terms of the

contract. The qual i ty of after sale service IS very

critical for decision making.

Technology of the POS system

Different POS systems may be in their different

phases of technology development. It is important to have

a POS system that can be easily upgraded and make full use

of advanced technology. In this respect, the trend of POS

technology should be studied so that the right kind of POS

system can be selected.

Compat ibi 1 i ty of the new POS system wi th the

existing POS system and the pros and cons for operating two

different ' systems at different restaurants should be

studied carefully. To scrap the existing system completely

and replace it with the new POS system is another key issue

to be considered.

Having identified the needs and the criteria for

POS systems selection, we can proceed with identification

and evaluation of different POS systems that are available

in Hong Kong.

18

CHAPTER IV

IDENTIFICATION AND EVALUATION OF POS SYSTEMS

Identification of Restaurant POS Systems

Through computer systems exhibi t ion and food &

beverage journal, four POS systems are identified for

evaluation. The are :-

(i) New Tech POS System

(ii) Kontel POS System

(iii) Remanco Vision POS System

(iv) Micros 8700 POS System

Based on the evaluat ion cri teria ment ioned in

chapter Ill, the four systems will be examined in detail 1n

the following sections.

New Tech POS System

New tech POS system is initially developed in USA

for some Chinese Restaurants. The system is run on SCO

Unix operating system using mainly PC as its hardware. A

simplified system configuration is shown in figure 4.

UNE PHINTER

WAITER TERMINAL

User Friendliness

19

KI TCIi[N HOLL PfHN TTH

MAIN UNIT

-----------------~

CASHIER PRINTER

\

\

WAITER TERMINAL

NEW TECH POS SYSTEM

FIGURE 4

CASHIER TERMINAL

The system, which IS able to display and print

Chinese characters, will be well received by the restaurant

staff whose mother language is Chinese. Training time will

be saved in reading instructions and reports. However, the

weak point of the system is that it runs on traditional PC

moni tor and keyboard terminal wi th only 80 keys, which

makes the order input not user friendly enough. Un 1 i ke

touch screen terminal which can have different sizes and

colours bf keys shown on the screen, the keyboard input

20

method is less user friendly and the restaurant staff have

to memorize the location of different keys for different

menu items. Whenever there is any change of menu items,

labels must be stickedon each key every time.

Software maintenance

As the system is a UNIX based system, maintenance

of software can be done any time even during the time the

POS system is in operation. The software package can be

modified to suit the requirement of Pizza Hut Hong Kong.

Security level

The sys t em has a hi gh degree of secur i ty 1 eve 1

which can keep tack of who enters the items, who authorizes

an void item or offers a discount offer. The timing of

each transaction can also be kept by this system to

facilitate checking.

Flexibility of Hardware Configuration

As the system is run on some pes, addition or

replacement of hardw~re can easily be done by the

restaurant managers with some basic training However, the

system does not have automatic re-direction of kitchen

tickets when one of th~ kitchen printers breaks down.

Report Facilities

The system can provide full range of sales

analysis reports which contain the information such as no.

of guests checks, no. of quest, average check amount,

average no. of customers per guest check, hourly sales and

sales mix etc. Food costs analysis reports such as recipe,

cost listing, and ideal food costs analysis can also be

21

provided by this system,. Audi t trai I reports showing

de t a i led v 0 i d i tern s, per son who v 0 i d s the i tern and / 0 r

offers discounts etc can also be produced.

Integration with bthersystem

As the system uses standard SCO UNIX operating

system, its ability to interface with other systems is very

high. Such kind of interface can be done real time as the

UNIX operating system allows multi-tasking facilities.

Historical Data Storage

Storage of data can be programmed depending on the

capacity of the hardware. To store a week's data using

ordinary PC should easily be accomplished if the capacity

of the hard disk is large enough.

Reliability of the system

Although the suppliers claimed the system to be

very popular in USA, in Hong Kong only a limited number of

users are using the system (Customers include the food

courts of Yaohan Department Store and Jusco Department

Store). The users should in fact be classified as fastfood

operation rather than full service restaurant. The real

performance of the sy'stem in restaurant environment is

quite uncertain.

In summary, the strengths of the system come from

its UNIX based system which provides high ability of

interfacing with other system, good internal control and

multi-tasking functions. The software can provide a wide

range of useful and relevant reports to the users. The

drawbacks of th~ system are its keyboard input technique

22

and uncertain performance In a restaurant environment.

Kontel POS System

The Kontel POS system IS In fact a tailor-made

s y s t emu SIn g MS - DO Sas 0 per a tin g s y s t e m and run n i n g 0 n

Nove 1 1 LAN. It applies colour touch-screen terminal (PC)

as its hardware. A simplified hardware configuration IS

shown In figure 5. It applies the latest PC newtwork

cabling connection technology called 10 Base-T, which

serves the function as a controller.

LINE PRINTER

10 BASE-T

PRINTER CASHIER TER.MINAl

\

MAJN UNIT (CAN BE ONE OF THE TERMINAL)

WAITER TERMINAL

KONTEL POS SYSTEM

FIGURE 5

KITCHEN R.Oll PRINTER

23

User friendliness

Terminals with colour display and touch screen

features can be easi ly learnt to use by the restaurant

staff. Pictures of some menu items can be displayed

instead of words which can help to improve operation

efficiency (less time is required to enter an order and the

accuracy of input can be improved)

Software Maintenance

Since the software is a tai lor-made system, it

really depends on the quality of the software designed for

the Pizza Hut environment.

Security levels

Can

requirement.

be developed according

Flexibility of Hardware Configuration

to the users'

Touch screen PCs wi 11 be used and are qui te

flexible to be replaced.

Report Facilities

It is quite difficult to access the reporting

facilities as the system is not yet developed. The vendor

claims they are in fa'ct a professional software house,

which earn their bread and butter from writing programmes.

It may take a very long time to develop the system to meet

the requirements of Pizza Hut Hong Kong.

Integration with other system

As the system is run on MS-DOS environment,

interfacing with other system may be a problem. The data

base cannot be accessed eas i ly dur ing the time the POS

system is In operation.

Historical data storage

24

Historical data can be stored in the POS system

de pen din g on t he cap ac i t Y 0 f t he ha r d war e . I t c an be

determined during the detailed programming stage.

Reliability of the system

The reliability of the system is rather uncertain

as there are no well known useres using the system.

In summary, the strengths of the system is its

touch screen terminal with colour display. The system is

supposed to be a tailor-made system for Pizza Hut

Restaurants such that the requirements can be better taken

care of. All good features of other systems, in theory,

can be built in the tailor-made system. However, the weak

points are associated wi th its MS-DOS operat ing system,

which is not capable of handl ing simul taneous front-and

back-of-house applications. The system gets around this by

either queuing various functions, which often results in

possible degradation of response time, or by requiring a

second PC to run simultaneous back-of-house functions. The

vendor is actually se 11 ing a promise which is some what

difficult to be evaluated. The time required to develop

the system may be very long and lots of system enhancements

are expected in the early stage of live run.

Remanco Vision System

The hardware components of the Remanco Vision

System consist of a .Motorola MC68030 Processor, Epson

25

pr inters, Pressure Sens it i ve Touchscreen Terminals. The

system is basically run on AT&T Unix Operating System. A

simplified hardware configuration is shown in figure 6.

UHE PRINTER

MAIN UNIT

WAITER TERMINAL

KITCHEN HOLL PHIN lEA

CASHIER TeRMINAl

CASHIER PRINTER

REMANCO VISION POS SYSTEM

FIGURE 6

User Friendliness

The system IS designed for fast learning and ease

of use In the restaurant environment. Wi th touch screen

function, the average training time for restaurant staff

can be reduced to around 25 minutes. The size of the input

keys can be programmed to facilitate easier input. Orders

26

may be entered through alpha, numeric, or preset menus.

Prompting function forces restaurant staff to enter all

menu choice and preparation information (e.g. no. of

guests) needed for a complete order. Priority printing

allows entry of items in any order, but print items can be

grouped by menu category. Orders wi 11 be sorted by the

system to print in designated preparation areas.

Menu item Maintenance

Adding, deleting, and re-grouping of menu items

can be done in the Head office through remote

communication. Automatic activation or inactivation of

menu items can be set at a specific time, it is useful in

t he case of pr ice increase (i. e. new menu pr ice can be

entered in advance, and set to take effect at a later

da t e ) . An unlimited number of items may be maintained,

along with provision for multiple pricing and menu item

choices, which makes menu setting very flexible. A single

key can be defined for " multiple items (e.g. use a single

key for set meal).

Security levels

Different levels of access rights can be created

to cater for different staff with different

responsibilities. The system can keep track of the details

of who enters the initial order, who makes the re-order and

who voids an item etc.

Flexibility of Hardware configuration

The main unit of the system consists of a Motorola

MC68030 processor, which is a proprietor hardware. It is

27

not possible to replace the main unit by other non-Motorola

processor.

Report facilities

Pre-form~tted reports are available for total and

menu category revenue activity by server, by time-of-day,

by meal, and by service area. These reports may be

generated for any period of time desired, current day,

week, month, year-to-date, etc), and may be compared to any

corresponding historical period selected. The system was

designed to allow reports to be formatted to analyse any

aspect of the data stored in the relational data base.

Integration with other systems

As the POS system is run on the UNIX operating

system, which has a good acceptance wi thin the computer

industry, integration with other systems is made relatively

flexible.

Historical Data Storage

Instead of clearing the data after each day-end

process, the system can store data up to a pre-defined cut­

off date depending on the capacity of the hardware.

Reliability of the System

The system has been launched for several years

with major users like The Royal Hong Kong Jockey Club and

some hotel chains. The supplier of the system is a 14-

year-old US-based company dedicated In food and beverage

systems.

On the whole, the touchscreen POS system IS quite

suitable for the Pizza Hut environment. It can help to

28

speed up the order entry, improve the accuracy level, and

make the training as well as learning easier. The

report ing features are qui te flexible and powerful which

can produce up-to~the-minute reporting and the system can

be accessed by the head office computer system at any time.

Micros 8700 POS System

The Micros 8700 POS system is actually a new

generation of the Micros 4700 POS system. It is designed

for multi user and multi-tasking operating system which can

run mUltiple applications simultaneously. I t allows

communication with local and remote users. It focuses on

open system architecture (ie no os architectural

limitations).

The system is run on SCO UNIX wi th PC hardware

platform - 386SX, 386DX, 486SX, 486DX, Pentium 5 or Pentium

6. The terminals are specially made touchscreen terminals.

A simplified hardware configuration is shown in figure 7.

MAIN UNlf

I.IHI·. 1~IHrfH

CA S III[H r CHMINAL

/ \ WAITER

CAStllCH TERM r NA L 1~INrT. n

MICROS 8700 POS SYSTEM

J:.lfCtt [ N HUll PnIHf[f~

-.~

29

User Friendliness

The terminals are fully touchscreen wi th very

flexible screen display. Each menu key can be linked with

a look-up menu which makes the order entry quite easy. The

restaurant staff don't have to memorize the location of the

keys as there will be no limit of look-up menu by using the

touchscreen terminal.

reduced.

Software Maintenance

Staff training time can be greatly

Data upload and down load can be processed at any

time, which makes the data maintenance much flexible. Data

set-up time is shortened by using the software, X-window.

Security Level

Electronic audi t trai I tracks all procedures and

operations,

processor.

including management functions at system

All i terns entered and voided can be recorded

wi th detai Is of the responsible staff and timing of the

relevant transactions. Privilege codes can be assigned by

revenue or profit centre restricting supervisors from

performing management functions at other outlets.

Flexibility of Hardware Configuration

The main unit of the POS system can be either a

386 PC or 486 PC which can be easily replaced or upgraded.

The new PO S t e r m i n a 1 s can be use din par a I I e I wit h the

Micros 4700 POS terminals.

Report Facilities

Report facilities are similar to Remanco Vision

System, on-line reports can be generated form the data

30

base. It allows separate , sales tracking by each day of the

week, period-to-date totals by week, month, year, etc.

Integration with other systems

The system is designed to run on open system

architecture. Integration with other system is quite

simple and flexible. such kind of interface can be done

real time as the UNIX operating system allows multi-tasking

and multi-user functions.

Historical Data Storage

Pre-defined cut-off date can be set to control the

amount of data to be stored in the POS system .

Reliability of the system

Although the vendor is a specialist in producing

POS system for food & beverage industry, the MICROS ' 8700

POS system is a new model which is due to release

officially in April 93. Up to the moment of writing this

report, several hotel chains (Mandarin and Shangri-La) have

already placed orders with the vendor.

In summary, the Micros 8700 POS system is an

improved new version of the existing 4700 POS system. It

aims at addressing all the weaknesses of the old version.

As it IS the latest version of its kind, the technology

used IS more advanced than the competitors' models.

Another advantage of using the system is that it provides

migration path from the existing 4700 POS system. The new

touchscreen terminals and the tradi t ional keyboard input

terminals can be used together in the new 8700 POS system.

The only drawpack of the system IS the uncertain

31

performance level due to lacking of any proven track

record.

32

CHAPTER V

DECISION MAKING

Second phase evaluation

The four alternatives mentioned in the previous

chapter were evaluated against some basic criteria. The

first alternative, New Tech POS system, can help to improve

the report facilities and on-line access of data base.

However, its keyboard input technology cannot help to solve

the staff training problem nor can it improve operat ion

efficiency. Therefore, the system IS considered not

suitable for Pizza Hut Hong Kong.

The second alternative, Kontel POS system, has a

very good touchscreen colour display feature, however the

system is run on MS-DOS and is not designed for mul t i­

tasking purpose. Furthermore, it is a tailor-made system

which is still not yet developed. The development time may

be very long and the iriitial error rates may be at a very

high level that can affect the restaurant operation.

The third alternative and the fourth alternative,

Remanco and Micros 8700, are qui te simi lar in terms of

system design and functions. They are selected to undergo

a second phase evaluation.

ultimate users of the

As the restaurant staff are the

system, representatives of

restaurant staff (waiters, waitresses, supervisors,

33

managers) were invited to attend product demonstrations and

have a hands-on experience with both systems. All of them

agreed that touch screen terminals could help to Improve

efficiency and reduce training time. When they were asked

which system they preferred, majority of them believed that

both systems were quite similar and could show a

significant improvement over the existing system. They did

not have a significant preference over anyone system.

From the market ing department's point of VIew,

they are qui te concerned about the report faci lit ies and

the flexibility of setting up menu items, set meal, special

discounts and some special offers. Both systems can In

fact meet the requirements set by the marketing department.

As the features of the two systems are qui te

similar, we have to look for other criteria such as prIce,

maintenance service and reputation of the supplier and its

principal to make the final decision.

Price

Price IS one of the key factors for decision

making. A price comparison table is shown in table 1.

For a typical 200 seats restaurants

lvfICROS 4700 NlICROS 8700 IREMANCO ! -

20, 794 1 MAINUNlT 6,330 8,075! --

\

LINE PRINTER 2301 230 ! 205 ------_.

4,2341 I

2 x W AlTER TERl\1IN AL 4,700 i 6,148 (TOUCH SCREEN) I t

I t I

3 x CASHIER TERMINAL 9,546 1 \0,1701 12,372 (TOUCH SCREEN) I t

I i 4 x ROLL PRINTER 3,110! 3,110! 4,060

NfISCEL. 1,0001 1,000

FREIGHT & INSURANCE 1,600 1,8001

INST All A nON & TRAINING I ---

TOTAL IN US$ 25,050 29,085 44 ,579

TOTALINHK$ 195)90 226,863 347,716.2

PRICE COMPARISION

TABLE 1

34

Apart from the costs of the system, the cost of

subsequent maintenance fee is also very important, the

maintenance fee is listed In table 2.

Micros 4700 Micros 8700 Remanco

Free Warranty 6 Months 6 Months one year Period

Annual Fee ( i ) % on system 10% 10% 8%

costs

( i i ) in $ value HK$19,539 HK$22,686 HK$27,817

MAINTENANCE COSTS COMPARISON

TABLE 2

The prIce of the new 8700 POS system is about 16%

more expensive then the existing 4700 POS system, however

it is 35% cheaper than the Remanco Vision System. The most

expensive part of the Remanco vision system is the Motorola

MC68030 Processor, which accounts for 47% of the total

costs for the whole system. The prices quoted are for

reference only as both vendors are quite willing to further

negotiate their prices with Pizza Hut Hong Kong.

Reputation of the supplier and its principal

The suppl ier of the system plays a key role in

providing the after sales service (i.e. the maintenance

support). The suppl ier of the Micros system is a local

firm called V-Tech Pacific, which is the sole distributor

oft heM i c r 0 s Sy s t ems i nth e As i a M ark et. The level of

sup po r t pro v i de d tot he ex i s tin g Mic r 0 s 4 7 0 0 S Y stem i s

considered by Pizza Hut Hong Kong as satisfactory. The

35

Principal of Micros is a listed company in the US and has

achieved strong growth over the past few years.

The supplier of the Remanco Vision System IS

called Craftech, ~hichis responsible for distributing and

supporting the product in Asia. The EDP manager of The

Royal Hong Kong Jockey Club, the major Remanco User in Hong

Kong, has been contacted to express his view on the service

standard of Craftech. The overall response time and

service standard were reported to be satisfactory. The

pr i nc i pa I of Remanco is a 14-year-o I d US-based company

mainly concentrated on POS system for restaurant and

fastfood industry. The company is in fact a very close

competitor of the Micros in the US market.

Technology Development

Al though the performance of the two systems are

quite similar, the Remanco system adopts the ATXT UNIX

operating system and Motorola MC68030 processor which are

uncommon software and hardware to most of the users.

Whereas for Micros 8700 POS system, it applies the SCO UNIX

operating system and 386

software and hardware.

or 486 PC which are very common

The hardware and software

configurations of Micros 8700 system are considered to be

more appropriate as they are readily upgradable.

Both systems have the option of using handheld

terminals. However, the environment of Pizza Hut Hong Kong

is not suitable for using handheld terminals to take order

due to the following reasons :-

(i) The cost per handhe Id terminal is over

( i i )

( i i i )

( i v)

36

HK$20,OOO and is very expensive to equip such

terminal to all waiters and waitresses.

To carry a heavy and bulky equipment may

cause inconvenience to the restaurant staff.

The small screen size of the handhe Id

terminal may lead to high error rates in order

entering.

The handheld terminals are easier to be

broken than the traditional terminals.

Final Decision Making

The supplier and principal of Remanco was quite

aggressive in competing with Micros, they offered a trade­

in price of all Micros equipment irrespective of their

conditions. The price of the system after trading-in the

Micros 4700 system is HK$230,000 which is more or less at

the same price as a new set of Micros 8700 POS system.

Based on the above information, Pizza Hut Hong Kong has the

following four options. The financial implication of each

option is indicated for reference.

(i) Replacing the Micros 4700 POS System by

Remanco Vision System

Total costs for the 31 Pizza Hut

Restaurants will amount to HK$7.1 million (31 x

HK$230K) .

(ii) Replacing the Micros 4700 POS sys.tem by

Micros 8700 System

To install a new set of Micros 8700 POS

( i i i )

( i v)

37

System to a new restaurant will cost HK$226,863.

However, if we want to upgrade the existing 4700

System to 8700 System, the costs will be less as

some of the equipment like printers can be used in

the new system and one of the cashier terminals

can also be kept (as the cashier doesn't need to

have touchscreen funct ions) . The rest of the

cashier terminals need to be replaced by

touchscreen terminals as they have to perform both

the cashier and waiter functions. By keeping some

of the components, the addi t ional costs wi 11 be

reduced to HK$175K. The total costs for all 31

restaurants will equal to HK$5.4 million (31 x

HK$l 7 5K) .

Keeping the existing system but adding

Remenco to new restaurants

By doing so, two different systems will be

run at di fferent restaurants. The addi t ional

costs for each new restaurant will be HK$347K.

Keeping the existing system but adding

Micros' 8700 to new restaurants

Although the Micros 8700 system IS a new

version of 4700 system, in fact they are running

in different operating systems (MS-DOS VS UNIX)

and different hardware (Keyboard input terminal VS

touchscreen terminal), which should In fact be

cons i de red as two d if f e ren t POS sys terns. The

level of inconvenience caused by maintaining two

38

systems should not be less than running Micros

4700 and Remanco together.

In summary, both options (i) and (ii) are

very costly as they are involving HK$7.1 million

and HK$5.4 million respectively. However, they

can avoid the inconvenience of running two

different systems at the same time.

and (iv) are not ideal solutions,

Options (iii)

howeve r , the

inconvenience caused cannot

millions of dollar at one go.

(iv) is the best solutions

justify spending

Therefore, opt ion

amongst the four

options as it is the cheapest option and the

advantages of using Micros 8700 POS System IS

worth the additional investment.

Other Technical Issues

Several technical issues relating to using the

Micros 8700 POS System are addressed as follows .-

Using the 4700 and 8700 POS Systems in parallel

Only one software system (run on MS-DOS or Unix)

is used in- one restaurant. However, the hardware may

consist of new touchscreen waiter terminals and traditional

4700 keyboard input cashier terminals. A PC acting as an

interface platform between the restaurant POS Systems and

the IBM AS400 will be used to poll data from the restaurant

POS Systems. Conversion programmes will be used to

reorganise data from different sources before they are

uploaded to the IBM AS400 mainframe. The EDP team of Pizza

39

Hut Hong Kong has conducted the test using real data, and

the results were satisfactory.

Using a totally new release POS System

The EDP team of Pizza Hut Hong Kong has done a lot

of extensive product tests uSIng simulated data and real

menu of Pizza Hut. All day end and period closing

pro c e s s e s we r e t est e d . Eve nth 0 u g h nom a J 0 reI' r 0 r s we r e

found during the tests, the installation of such a new

release should be proceeded with great caution. The first

set of 8700 POS System will be installed In a new

restaurant wi th not very high turnover. The vendor was

requested to arrange a standby set of Micros 4700 POS

System so that they can be used to replace the new system

should there be any major system failure happens.

Cost and Benefit Analysis

The cost per set of new Micros 8700 POS System is

HK$226,863 (please refer to table 1 for detai Is), which

accounts for only 4% of the total capi tal investment

(around HK$5. 5M) of a 200-seat restaurant. The annual

maintenance fee is 10% of the system costs i.e. HK$22,686

per year. Such costs were considered to be reasonable by

the management team of Pizza Hut Hong Kong as they were

only slightly higher then the costs of using Micros 4700

POS System.

The benefits derived from uSIng the new system can

justify paying the additional costs. Such benefits are

summarised as follows .-

Mar~eting information can be collected much

better and faster.

Internal control can be enhanced through

tracking of detailed transactions such as

disc6unt, void items etc.

40

Staff training time can be reduced by uSIng the

touchscreen terminal and thus labour costs can

be saved.

Improvement in the speed and accuracy of order

input means higher customer satisfaction and

better operation efficiency.

41

CHAPTER VI

IMPLEMENTATION PLAN

As discussed in previous chapter, the overall

direction is to have Micros 8700 POS system run In parallel

with the existing Micros 4700 POS system. In order to get

the maximum benefits for Pizza Hut Hong Kong, the following

strategies should be adopted :-

Swopping of POS System

The idea of USIng new POS system for new

restaurants and keeping the existing POS system for the

existing restaurants is not the best solution. Only the

restaurants with high turnover should be equipped with the

Micros 8700 POS system. In other words, the new POS system

of a new restaurant may be swopped with the 4700 System of

an existing restaurant with higher sales. For a new

restaurant, its turnover may not be so high as an existing

restaurant -at good lo'cat ion and wi th higher awareness,

therefore, the full benefits of new system cannot be fully

uti I ised. The sales weight ing of all the exist ing pizza

Hut Restaurants are summarized in table 3.

42

Ranking of Store sales as Cumulative Sales Stores % on Total Sales weighting

1 5.8% 5.82% 2 5.5% 11.33% 3 5.4% 16.70% 4 4.8% 21.47% 5 4.6% 26.03% 6 4.1% 30 . 11 % 7 4.0% 34.13% 8 3.9% 38.00% 9 3.7% 41.72% 10 3.6% 45.32% 1 1 3.5% 48.82% 12 3.4% 52.21% 13 3.4% 55.59% 14 3 .1 % 58.71% 15 3 . 1 % 61.80% 16 3 .1 % 64.88% 17 3.0% 67.87% 18 2.8% 70.72% 19 2.8% 73.51% 20 2.7% 76.19% 21 2.7% 78.85% 22 2.6% 81 .49% 23 2.6% 84.09% 24 2.4% 86.46% 25 2.3% 88.81% 26 2.3% 91.15% 27 2.3% 93.46% 28 2.1% 95.56% 29 1.9% 97.50% 30 1.4% 98.93% 31 1 .1% 100.00%

-------- ---------100% 100%

SALES WEIGHTING TABLE

Table 3

The 5 highest turnover restaurants accounted

for 26% of total sales.

They should have a higher priority of USIng new

POS system. The decision is not to purchase any Micros

4700 POS equipment, for every restaurants opened, they may

be equipped with new POS system or swopping the existing

systems from other restaurants depending on the sales

43

projection of the new restaurant.

On the other hand, the complete replacement of

Micros 4700 P~S system should be worth pursuing with the

target of replacing al ·l the Micros 4700 system within two

years' time.

Price Negotiation Tactics

Before committing to any P~S system, the prices

should be further negotiated so as to get the maximum

return on investment. Although the best option is to run

the 4700 P~S System together with the new 8700 P~S System

and phase out all the 4700 P~S System in two years' time,

the idea of replacing all the existing 4700 POS system by

Remanco VISIon system should not be ruled out. The

objective is to encourage the two suppliers entering into

price war, so that Pizza Hut Hong Kong can be assured of

purchasing the 8700 P~S System at a very competitive price.

Before negotiating the price with the suppliers, the

bargaining posi t ion of every party should be carefully

evaluated.

Pizza Hut Hong Kong has 31 restaurants at present,

it IS planning to open 4 restaurants in Hong Kong and 4

restaurants in South China every year. In 2 years' time,

the number of restaurant outlets will increase to 47. Such

growth rate is the highest amongst all the Asian Pizza Hut

Franchises. In terms of application of POS technology,

Pizza Hut Hong Kong is taking the lead and a few Asian

Pizza Hut Franchisees have visited Pizza Hut Hong Kong to

study the appl ,ication of POS systems. The decision of

44

Pizza Hut Hong Kong will definitely have some influence on

other Asia Franchisees.

Pizza Hut Hong Kong is only a division of the

Jardine Restaurant Group, which operate in other countries

Pizza Hut, Sizzler and Taco Bell. Gaining the Pizza Hut

Hong Kong market may mean a foothold for a even bigger

market outside Hong Kong.

From the viewpoint of Remanco, they have not

secured any major contract since the last order from Royal

Hong Kong Jockey Club in 1990. The brand name Remanco is

less popular than Micros especially In the South-East Asia

food & beverage market. Remanco is qui te desperate in

getting the contract of Pizza Hut Hong Kong so as to boost

up the sales In the Asia market. They are willing to

trade-in all Micros 4700 POS system irrespective of their

condition and compete directly with the Micros 8700 POS

System. For a single customer with an order of 47 sets of

POS Systems in two years' time cannot be ignored, as the US

economy is yet to recover, such SIze of order is not

expected to be secured easily even in their home market.

From the viewpoint of Micros, the launching of

8700 POS system is a strategy of defending their market

share as there are large number of unsatisfied users. The

official launching date of the 8700 system is around April

93, the real performance of the system is yet to be tested

by the users. The successful launching of the new product

will have a very high impact on its future development.

The objectives of the price negotiation will be as

45

follows :-(i) The price of the 8700 POS System has

to be further reduced by at least 10%.

( i i ) The free warranty period should be

extended from 6 months to one year.

( i i i ) The annual maintenance fee of the

system should be reduced from 10% on

cost of the system to 8%.

Installation of New POS System

Subject to a satisfactory price negotiation, the

new 8700 POS System will be first installed in the Training

Centre of Pizza Hut Hong Kong. Staff training wi 11 be

conducted in-house and different courses will be designed

for waiters/waitresses, supervisors and managers. Once the

training work is completed, swopping of old systems with

new system can be arranged. The POS supplier has to assign

their technicians to stand by during the initial stage of

new system operations at restaurants. A standby set of

4700 POS System should also be arranged by the supplier so

as to avoid any interruptions to the restaurant operation

during major system failure.

Review meetings with Supplier

The performance of new POS system will be

monitored closely, The statistics of incidence of software

and hardware fai lure, the response time of maintenance

technician will also be recorded. Regular meetings will be

held to discuss the problems and agree on possible

solutions.

46

CHAPTER VII

CONCLUSION

The restaurant industry in Hong Kong is becoming

more competitive especially in the sector of fastfood and

quick service restaurants. In order to sustain the

leadership position In the pizza market, Pizza Hut Hong

Kong has to provide the best products and best service to

their customers. Fast and accurate order processing is

extreme ly important for the Pizza Hut operat ion as it

represents the most basic expectation from the customers.

By improving operation efficiency, it means more sales as

the restaurant can turn the table faster and serve more

customers.

The taste of Hong Kong people IS not static, the

company has to understand the changing customer needs and

respond to them. The Marketing Department has to collect

and analyse the management informat ion so that they know

where to spend their limited advertising funds.

The last but not least successful factor is to

have a good internal control at the restaurant level. As

the restaurant staff handle a lot of cash, any weaknesses

in internal control can be easily exploited by some

experienced restaurant staff.

By making use of POS technology, the above three

success factors can be enhanced to a great extent. Making

47

the Jright decision on PO~ system and bargaining for the i

most reasonable price together with a reliable maintenance

support, the company will definitely gain its competitive

edge in the long run.

BIBLIOGRAPHY

Books

T Lucy. Management Information System.

4th Edition D.P. Publications, 1981

48

James O'Brien. Information System in Business Management.

5th Edition Irwin, 1988

•

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