A restaurant point-of-sale (POS) system is a combination of hardware and software that manages various aspects of restaurant operations. While restaurants primarily use POS systems to process transactions, these systems can help with other restaurant operations to improve efficiency and customer experience.

Below, we’ll explain how restaurant POS systems work, how to choose the right one, and the benefits of upgrading to a modern POS system.

What’s in this article?

• How restaurant POS systems work
  
• Types of restaurant POS systems
  
• How to choose a restaurant POS system
  
• Benefits of upgrading to a modern POS system
  
• How to improve restaurant operations with POS analytics
  
• Security and compliance for restaurant POS systems
  

How restaurant POS systems work

Restaurant POS systems serve the following key functions:

• Order management: Taking orders (dine-in, takeout, delivery), sending them to the kitchen or bar, tracking order status, and managing modifications or cancellations.
  
• Payment processing: Accepting payment (including various payment types), splitting bills, applying discounts or promotions, and generating receipts.
  
• Inventory management: Tracking stock levels of ingredients and supplies, setting reorder points, managing recipes and menu items, and generating reports on inventory usage and costs.
  
• Staff management: Managing employee schedules, tracking hours worked, calculating wages, assigning roles and permissions, and monitoring staff performance.
  
• Customer relationship management (CRM): Storing customer information, tracking purchase history, managing loyalty programs, and sending personalized marketing campaigns.
  
• Reporting and analytics: Generating detailed reports on sales, inventory, labor costs, customer behavior, and other key metrics to help restaurant owners make informed business decisions.
  

Types of restaurant POS systems

There are two main types of restaurant POS systems: legacy systems and cloud-based systems. The 2024 Restaurant Industry Trends report found that 76% of restaurants were using cloud-based POS systems in 2023, while 23% were still using legacy systems. Here’s an overview of each.

• Legacy systems: Traditional systems that store data locally on a server within the restaurant. These often require substantial up-front investment in hardware and might have limited flexibility for updates or remote access.
  
• Cloud-based systems: Systems that store data in the cloud, allowing for greater flexibility, scalability, and remote access from any device with an internet connection. These typically have lower up-front costs and offer automatic updates and data backups.
  

How to choose a restaurant POS system

Choosing a restaurant POS system involves several key considerations. Assess how well the POS system will fit into your operations, infrastructure, and budget by looking at the following factors:

• Ease of use: Choose a system with an intuitive interface that requires minimal staff training.
  
• Hardware compatibility: Choose a POS system that supports your existing hardware or consider purchasing compatible hardware from the vendor.
  
• Customer support: Choose a vendor that offers reliable customer support through phone, email, or live chat.
  
• Pricing structure: Consider the up-front costs, monthly fees, transaction fees, and any additional costs for hardware, software upgrades, or premium features.
  

Beyond these considerations, look for the following advanced features that might serve your specific business needs:

• Online ordering integration: Advanced systems will allow customers to order directly from your website or mobile app.
  
• Loyalty programs: Advanced systems can reward repeat customers with points, discounts, or personalized offers.
  
• Table management: Advanced systems can visualize and manage table layouts, track table status, and improve seating arrangements.
  
• Kitchen display system (KDS): Advanced systems can simplify communication between front-of-house and kitchen staff by displaying orders clearly on a screen.
  
• Customer relationship management (CRM): Advanced systems can store customer information, track purchase history, and send targeted marketing campaigns.
  
• Third-party integrations: Advanced systems can integrate with other systems such as accounting, payroll, reservation, and delivery platforms.
  
• Offline mode: Advanced systems can maintain business continuity even during internet outages by allowing offline transactions and data synchronization.
  
• Cloud-based system: Cloud-based systems can offer automatic updates, remote access, data backups, and scalability.
  
• Mobile POS: Advanced systems allow staff to take orders and payments tableside using tablets or smartphones for faster service.
  

Benefits of upgrading to a modern POS system

Restaurants can gain the following benefits from upgrading to a modern POS system:

• Automated tasks: Modern POS systems automate tasks including order taking, payment processing, and inventory management. This reduces manual effort, human error, and labor costs and creates faster, more accurate processes. Automated inventory tracking and forecasting can also prevent overstocking and reduce food waste.
  
• Faster service: Intuitive interfaces, mobile POS options, and integrated KDS systems enable faster order processing and delivery, creating shorter wait times and more table turnover.
  
• Personalized marketing: CRM capabilities allow you to store customer preferences and purchase history. You can use this information to offer personalized recommendations and promotions.
  
• Loyalty programs: Modern POS systems can integrate with loyalty programs to reward repeat customers and create long-term relationships.
  
• Convenient payment options: Modern POS systems can accept a wide range of payment methods including contactless and mobile payments, increasing convenience for customers.
  
• Reporting and analytics: POS systems have reporting and analytics features that can provide valuable insight into sales trends, popular menu items, peak hours, and staff performance.
  
• Optimized pricing: POS systems gather sales data that restaurants can analyze to set optimal prices for menu items.
  
• Scalability: Modern POS systems can easily adapt as the business grows, adding functionality as needed.
  
• Security: POS systems use advanced security measures to protect sensitive customer and financial data from breaches and fraud.
  
• Integration: Modern POS systems can integrate with other business systems such as accounting, payroll, and online ordering platforms.
  
• Cloud-based access: Modern POS systems often have cloud-based access, allowing you to manage your business from anywhere at any time.
  

How to improve restaurant operations with POS analytics

POS analytics can help restaurant owners increase profitability, improve customer experience, and boost operational efficiency. Here’s how to use these analytics to your advantage:

Menu engineering

• Top-selling items: Analyze sales data to pinpoint your most popular dishes and ensure they are consistently available.
  
• Low-performing items: Identify dishes that are not selling well and consider adjusting their pricing, portion size, or presentation.
  
• Pricing: Analyze sales and cost data to determine the ideal price points for your menu items.
  

Inventory management

• Usage and waste: Monitor inventory levels and identify trends to minimize food waste and maintain optimal stock levels.
  
• Reorder points: Use historical data to determine ideal reorder points for each ingredient.
  
• Future demand: Analyze past sales data to predict future demand so you’ll have the right ingredients in stock for peak periods.
  

Staff management

• Scheduling: Identify peak hours and days, allowing you to schedule the right number of staff to handle customer volume efficiently.
  
• Performance: Monitor individual sales, tables served, and average check sizes to identify top performers and areas for improvement.
  
• Payroll: Integrate your POS with payroll systems for automated time tracking and payroll processing.
  

Customer insights

• Customer loyalty: Recognize your most frequent customers and reward them with personalized offers and loyalty programs.
  
• Customer feedback: Use your POS system to collect customer feedback on their dining experience.
  

Sales and marketing

• Sales trends: Identify seasonal trends, peak hours, and popular payment methods to customize your marketing strategies.
  
• Promotions: Analyze sales data before, during, and after promotional campaigns to gauge their effectiveness.
  
• Personalized marketing: Use customer data to send personalized offers and promotions based on individual preferences and purchase history.
  

Operational efficiency

• Turnover: Analyze table turnover rates to identify bottlenecks in your service flow and optimize seating efficiency.
  
• Void rates: Monitor the number of voided orders to identify potential issues with order accuracy or staff training.
  
• Sales channels: Compare sales from different channels (e.g., dine-in, takeout, delivery) to refine your marketing and operational strategies.
  

Security and compliance for restaurant POS systems

Restaurant POS systems must have strong security measures in place to protect sensitive financial data and customer privacy. The Payment Card Industry Security Standard (PCI DSS) is the main security standard that governs POS system security measures, and common security measures include end-to-end encryption, strong user authentication, regular security updates, and data backup capabilities.

Below is an overview of PCI DSS requirements, common POS system security methods, and other compliance considerations:

PCI DSS

The PCI DSS is a set of security standards mandating that all companies that accept, process, store, or transmit credit card information maintain a secure environment. Noncompliance can lead to hefty fines, legal liability, and damage to your reputation.

Compliance with PCI DSS involves meeting the following standards:

• Working with a PCI-compliant POS system and payment processor

• Regularly updating software and security patches

• Encrypting all cardholder data

• Restricting access to cardholder data

• Implementing strong password policies and regularly changing passwords

• Maintaining a firewall and antivirus software

• Monitoring and testing networks regularly

Common security measures

• Encryption: Encrypt all data transmitted between your POS system and other devices to protect it from unauthorized access.
  
• Secure Wi-Fi: Use a strong password and encryption for your Wi-Fi network to prevent unauthorized access.
  
• Data backups: Regularly back up your POS data to a secure offsite location in case of hardware failure, natural disaster, or cyberattack.
  
• Employee training: Train your staff on security best practices such as how to identify and report suspicious activity and the importance of strong passwords.
  
• Access controls: Limit access to your POS system to authorized personnel and track all user activity.
  

Other compliance considerations

• Local regulations: Check local laws for additional requirements that might apply to your POS systems. These could include data breach notification requirements or restrictions on storing certain types of customer data.
  
• Privacy policies: Develop a clear, concise privacy policy that explains how you collect, use, and protect customer data.
  
• Data breach response plan: Create a plan to respond quickly and effectively in the event of a data breach.