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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