Restaurant Management Systems: Everything You Need to Know

Restaurant management systems have evolved rapidly over the past couple of decades. Not long ago, this software ran only on bulky PCs in back offices or slow, awkward point-of-sale (POS) stations tucked along the edges of the dining room.

Now, restaurant staff can access everything they need on their smartphones. They can take orders on iPads and process transactions via handheld POS devices. And the backend software powering restaurant operations? In most cases, it no longer runs on a bulky PC (or any PC) — it’s in the cloud.

What is a restaurant management system?

A restaurant management system, or RMS, is software designed to streamline restaurant operations and simplify restaurant management. RMSes vary widely in terms of features and functions, but most include point of sale (POS), restaurant inventory management, staff management, restaurant payroll, employee scheduling, and more.

What sets an RMS apart from a general POS system or retail software is that RMS suites specifically serve the restaurant industry and are full of features that support how food service businesses work.

How does a restaurant management system work?

Most modern RMSes use a modular approach, allowing restaurant owners to pick and choose which areas they want to use. A good RMS gives restaurants a central hub for data collection, decision-making, and smoother business operations.

Types of restaurant management systems

Not every RMS works the same way. Some fall into different categories based on the hospitality segment they serve, configuration, or function.

On-premise RMS

An on-premise RMS operates fully on a restaurant’s physical premises, involving servers and systems located in the restaurant.

This on-premises approach has some appeal, especially to larger single-location (“destination dining”) establishments. On-premise RMS solutions are highly customizable and offer certain security capabilities that other methods may not be able to match.

However, if a multi-location restaurant wants any kind of real-time collaboration between locations, individual on-premise systems usually aren’t the best way to go.

Cloud RMS

You can access Cloud RMS solutions from any device with an internet connection and web browser. These solutions use cloud computing, which means the heavy lifting happens on a cloud provider’s server (located in a data center somewhere else), and every location can access the RMS through a web-based portal.

Cloud-based RMSes are highly scalable, enable easier cross-location functionality, and often have lower upfront costs (since you won’t pay to set up a server at every restaurant).

POS-integrated RMS

POS-integrated systems connect to a restaurant’s point of sale system or terminals (think Toast iPads at the checkout counter) and focus on order management and payment processing.

These systems offer a unified solution for sales, inventory, and customer management. However, many POS-integrated RMSes don’t typically function well as an employee scheduling or timekeeping system, for example.

The best POS-integrated RMSes not only help with employee scheduling and team management but can even support sales forecasting and predict your future revenue with machine learning.

Another way to think about a POS-integrated RMS is to look at a cloud RMS that can integrate with an existing POS service. In some ways, this is the best of both worlds: Customers can enjoy the user-friendly POS experience while management relies on a more robust system for the staff and back office operations.

Features to look for in a restaurant management system

Think about what you hope to get out of your RMS. Do you need a better system for tracking inventory so you can keep your most popular menu items in stock? Or maybe you want an accurate and consistent way to manage tips to avoid getting into hot water with your state’s Department of Labor. Considering your business’s unique goals helps narrow down your list of contenders.

Bonus tip: If you already use another solution for one or two of these categories, check to make sure the RMS can integrate with those other products.

People management

A restaurant is only as good as its people, so it pays to keep those people engaged and on target. An RMS can help with employee management by giving employees a digital connection point with restaurant leadership. It can also be a platform that keeps employees connected to each other, eliminating the patchwork of text threads, emails, and phone calls.

Monitoring and addressing employee performance is easier with an RMS, too. While a tool can never fully replace face-to-face engagement, it can offer a powerful alternate method for sharing feedback and measuring performance.

Workforce management

Workforce management is equally important, and handling everything from time clocks to tip pooling to employee scheduling is a massive job — especially when you do it all manually.

An RMS digitizes, streamlines, and even automates these workforce management tasks, saving you time. It also keeps track of details and records so that you can easily find the information you need whenever and wherever you need it.

Inventory management

Inventory management plays a huge role in a restaurant’s profitability, helping to reduce waste and control food costs. While some restaurants track inventory manually or use a separate system for this function, many modern RMS products include inventory management capabilities.

If this is a priority for you, look for features like stock-level tracking and supplier management.

Payroll management

Timely, accurate payroll processing is essential for your employees' morale and legal compliance. Many restaurants rely on separate or standalone payroll management systems — but these systems don’t always deliver (here are seven signs it’s time to move on from your current payroll company).

You can also roll payroll management into a broader restaurant management system. Explore features like time tracking, wage calculation, and tax reporting to determine whether a particular RMS will meet your needs.

Customer relationship management (CRM)

Without customers, you don’t have a restaurant. That means your customer relationships and guest experience are key to lasting success.

A CRM system helps restaurants understand their customer base, communicate more consistently and effectively, and target their marketing efforts to the right customers. CRM systems also help build customer loyalty (through an actual loyalty program, more consistent messaging, and targeted offers) and allow restaurants to personalize service and offerings at scale.

Not only that, but CRM systems also unlock powerful data-driven insights into your customers: You’ll see how various outreach attempts perform, helping you hone your approach over time.

Reporting and analytics

Data-driven decision-making matters in the restaurant industry, and an RMS is a smart way to collect that data. You can lean on historical sales data for sales forecasting and scheduling or analyze past performance to inform purchasing decisions and staff development initiatives.

The options here are nearly endless, limited only by imagination and the ability to collect and analyze data.

Corey Ginsburg (writing for Noble Desktop) explains:

“Restaurant analytics . . . can provide insights into the “why” certain meals aren’t selling as well as others, or why a particular neighborhood could use a Thai restaurant but not another pizza parlor.
By having a more robust understanding of the factors that make a restaurant profitable, as well as the variables that affect sales, owners can adjust operations, change inventories, revise menus, and offer employees more tailored training options.”

Tip management

To the uninitiated, tips sound simple: Servers take home whatever cash customers leave on the table for them at the end of their shift.

But tips are logistically complicated. At a minimum, restaurants must track tips paid via credit card and pay them out promptly. And setting up a tip pool means a whole new level of tracking and tip management.

Getting the details wrong in a tip pooling arrangement — even if entirely accidental — could expose you to labor complaints, lawsuits, and fines.

One New Hampshire restaurant paid managers out of the tip pool (which is illegal), and the Department of Labor recovered $61k in tips and liquidated damages. In Fort Wayne, Indiana, the DOL took a restaurant operator to court over $290,000 in back wages and damage, alleging multiple tip law violations.

The right RMS can be a lifesaver for accurate, legally compliant tip pooling and management.

Top benefits of using an RMS

Using a modern RMS delivers all sorts of benefits for restaurants, including better efficiency, lower costs, more effective customer service, and clearer business insights.

Increased efficiency and productivity

Automating and integrating repetitive tasks is a good idea in just about every context. Humans are great at a lot of things, but getting details right 100% of the time isn’t one of them.

An easy-to-use RMS like 7shifts never forgets that it’s time to submit timesheets (and it always reminds the people who forgot).

Plus, when your staff isn’t worried about forgetting or messing up these little details, they can devote more brain space to what humans are really good at: delighting other humans with great service and careful attention.

Reduced costs

Waste is everywhere in the restaurant industry. It can look like food scraps, discarded or spoiled food, schedule imbalances, and inventory problems.

Compared to manual processes, an RMS can drastically reduce waste. Setting the right inventory levels and order frequency reduces spoilage, and balancing schedules means you don’t pay staff to stand around (or ruin the customer experience due to overstaffing based on poor demand forecasting).

Over the long term, the savings from reducing waste (and associated costs) translate into major financial benefits for restaurants.

Improved customer service

Certain RMS capabilities, such as faster order processing, enhance the customer experience. So does a CRM, which helps restaurants build repeat business and customer loyalty.

Of course, your restaurant also deserves great customer service from its vendors, and that includes your RMS. An RMS with strong customer service, like 7shifts, will offer comprehensive support resources to help you make the most of your RMS’s capabilities.

Better insights into business performance

An RMS also unlocks new levels of analytics, which can help you better understand restaurant business trends and customer preferences. With better insights, you can make proactive, strategic decisions instead of waiting and reacting.

How to choose the best RMS for your restaurant

RMS solutions vary widely in terms of feature set, feel, and ease of use. But it’s important to note that these systems are highly individualized — what works well for a competitor may not work well for your team and vice versa. The right tool for you might not be the most expensive with the most bells and whistles.

As you weigh the options on the market, consider your budget, scalability needs, and must-have features.

Consider your restaurant's needs and budget

First, consider where you fall in the restaurant landscape. Are you a mom-and-pop diner with 10-20 employees? Do you represent a chain with 500 locations across 10 states? Or are you somewhere in the middle?

The reality is that those extremes don’t need the same things.

Remember that “RMS” is a broad term that covers many tools, and it’s not uncommon for these tools to come from different vendors. That’s why easy integration is so important. Restaurants need to integrate tools and build a system that works for them. For example, some restaurants have connected workforce management software like 7shifts to a POS like Toast to activate functions and tackle problems that neither solution could solve alone.

Evaluate different RMS features and pricing plans

With your list of needs and priorities, your next step is to evaluate different RMS solutions against that list. Compare features against your restaurant's operational needs.

You’ll also want to consider how scalable a solution is in terms of pricing. It needs to be right for your present situation and right for where you hope to be in five years.

Get a free trial or demo before you buy

It’s important to give these products a test drive before signing a lease. That’s because firsthand experience helps make well-informed decisions. Your system needs all the right features, but it must also be something your staff can use.

Give the software a trial run and expose as many relevant team members to it as possible. Ask them for feedback and keep an eye on potential issues that may not align with your workflows. These trials are a great way to see how your team will adopt your chosen system.

Embracing the future of restaurant management with the right system

The right RMS can improve restaurant operations and boost the customer experience, delivering improved outcomes in every area of your restaurant’s operations. Look for a solution that aligns well on features, price, and scalability, and consider whether it integrates well with the other software products you already use.

The future-oriented RMS should also prioritize security and compliance to protect your business’s data. As technology advances, it’s critical to stay on top of industry innovations and be adaptable. Embracing the right RMS positions your restaurant to maximize efficiency and deliver a better customer experience, keeping your business ahead of the competition.