Before paying for recurring service, know how they make money

I am in a position to evaluate different point of sale systems for a restaurant I’m invested in (I Privé).  There are 3 different business models I have seen.

  1. Take a percentage of every credit card transaction, give away the hardware
  2. Hosted software, charge a recurring monthly fee per hardware device
  3. Sell one time hardware, one time license fee per device and optional support control monthly.

Let’s assume the restaurant makes $1 million in revenue, needed 3 POS systems, 5 mobile devices.

For option #1, that comes to $20,000 in costs.

For option #2, it comes to about $300 / month, $3,600 / month

For option #3, it comes down to $7,000 in one time equipment and $600 / year.

Over 10 years, $200,000 vs $43,200 vs $7,200

A quick back of the envelope calculation, tells me to go for #3, assuming all things being equal. Of course #1, #2 do look like they have more functionality and more extensibility.  And #1 and #2 also look like they are heavily staff, with ambitions to go public.  I don’t blame them since the revenue growth would be very high, but at the cost of the restaurant business.

Tony Tam

Senior Principal Architect @ Splunk Founder of ImpactfulEngineer.org & SFBadminton.org