The Pitfalls of the Free POS: When It's Too Good to Be True

5/26/20 8:00 AM

pitfalls-of-free-point-of-sale

The Downfall of the Free POS System Business Model 

There’s no doubt that a free POS system is attractive. Low-cost, or even no-cost, systems appeal to any business looking to save upfront costs and focus their resources on other business essentials. However, these deals are often a trap, especially for small or startup restaurants with limited initial cash flow.

Problems arise however, when a new business has outgrown the system but is locked into a long-term contract. That’s what makes the free POS model unsustainable. 

Free POS systems often attract businesses with a low-cost startup, but lock in customers for the long-term with contracts that contain higher fees over time. Escalating credit card processing fees are a good example. Unable to transition to a more complex system, businesses may find that their free POS actually costs more in the long run and offers less functionality and business benefit than a POS system with an upfront cost. The model really only works in a consistently-up economy—something that is impossible, as we know now during the COVID-19 pandemic. It’s a perfect example of when economies decline, businesses with free POS decline with it

Why “Free POS” Isn’t Really Free

As the saying goes: there’s no such thing as a free lunch. It isn’t possible to get something for nothing. While there may not be much of a cost up front, you will end up paying for a free system one way or another. A Free POS can actually end up costing you thousands more. Here’s how the model works:

Arduous Contracts

Some may require you to sign long, complex contracts that range from one to three years in length—often with hefty termination fees to discourage businesses from switching software providers. You may be required to pay for arbitrary services you may not want or use. And should your restaurant go out of business during the contract, you are still required to pay fees for not being able to fulfill the contract. 

High Merchant Account Rates

The pricing for your contract is often based on credit card processing volume. To offset the costs of a free system, providers charge a high annual percentage rate (APR). These providers will often get you in the fine print, including lines stating that they can raise the rates even more at any time. They can require certain volumes for credit card processing each month, and charge an additional fee if you don’t hit the threshold. 

Lack of Customer Support

To offer their service at such a competitive rate, quality is sacrificed for quantity. These companies are focused on one thing: volume. They want more sales, more businesses, and more contracts, which leaves little time or bandwidth to focus on each individual customer and their needs after the sale. They often employ third-party customer service reps that aren’t well-versed on your business or the technology you use, and are sometimes based outside of the United States. 

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What to Look for in a POS Solutions Provider

When times get tough, disaster strikes, and the chips are down, how is your POS provider stepping up to help your business transition or evolve? 

The restaurant industry heavily affected by COVID-19. Business owners need a provider that will help them revive through this time—not make it more difficult. Hear from Rick Smith, owner of Hometown Pizza & Grill how his HungerRush RMS has helped transform his business. View webinar recording now.

Here are some questions to consider regarding your provider during this pandemic and beyond: 

  • Do they offer install, support and training for online ordering, take-out and delivery modules?
  • Are they offering these modules for a discount?
  • Are they allowing you to shut off your SaaS subscription if your restaurant is closed?
  • Are they waiving any fees or penalties related to your POS systems contract?

A Partner You Can Trust

HungerRush goes beyond the point of sale. We offer a complete suite of technology solutions that are essential in helping our clients survive and thrive in today’s digital economy. Our solutions are offered through a fixed Software-as-a-Service (SaaS) and POS-as-a-Service (PaaS) model, and are payment-agnostic, which provides a greater return on investment in the long term. 

We equip you to own the customer experience with our integrated POS, online ordering, delivery, and loyalty solutions. These solutions are purpose-built to provide your business with maximized profitability for both on- and off-premises operations. We can keep your business operating and thriving, no matter the circumstances. 

The restaurant industry is all we do. We eat, sleep, and breathe the business. If anyone understands what it takes to overcome your biggest challenges when the going gets rough, or help your business grow when times are good, it’s HungerRush. 

For more information on our restaurant management systems, and how your business can overcome any disaster, check out our Restaurant Survival Guide ebook, or request a demo at HungerRush today! 



Topics: Point of Sale

Jamie Swartz

Written by Jamie Swartz

Director of Product Marketing. Technophile, marketer, traveler, foodie and love the unexpected and unknown.

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