In California, counter-service chains like Jamba and Nothing Bundt Cakes are turning to payment platform Toast to track take-away orders for their spoiled juices and candies. Across the country, full-service dining establishments run by celebrity restaurants like Danny Meyer and Jose Andrés are using Toast technology to save on food costs and for payment machines at the table.
“Our systems are broad and deep,” Toast CEO Chris Comparato told Insider. “And we want restaurants to put this architecture at the heart of their digital operations.”
After making an explosive debut on Wall Street last year that valued Toast at $16 billion, the food tech company is working on its aftermath with a post-IPO plan to take over the $55 billion restaurant tech space. By offering more than a dozen restaurant management solutions ranging from payment processing to rewards programs, Comparatu told Insider that Toast can compete in a player-packed space. The restaurant management software space includes companies with a variety of small business clients such as Square; and more niche players like Slice, who serves pizzerias; In addition to point of sale, or point of sale, giants such as Oracle-owned Micros and NCR Aloha.
“We feel like we keep innovating the rest of the competition because we’ve been in this for 10 years,” said Comparatu. “We have created a platform with a great deal of breadth and depth to support restaurants of all kinds at scale.”
Although he says retailers are asking Toast to bring their systems to other segments, Comparato said that won’t happen.
“We are focusing on the restaurant and hospitality business. We are just planning to go deeper and deeper,” he said. “We have a lot of fun in restaurants.”
However, Comparato admits that recent stock market headwinds, caused in part by record inflation rates, haven’t been much fun to watch.
At the time of Comparato’s interview with Insider in mid-June, the company’s valuation was at about $7 billion.
“It just fluctuates with the rest of the market, and we’re trying to ignore it,” said Comparatu.
This is also the advice he gives to investors.
“The markets are the market, right,” he said. “We can’t control the market.” “So when you look at our valuation, when you look at our stock pressure, and you look at the group of companies like Toast, we’ve all been pretty much squeezed.”
“So what I tell my team and what I tell the board of directors and what I say to our clients is, let’s control what we can control.”
Expand services beyond payment processing
Toast was launched in 2013 as a restaurant payment processing company. Its core POS systems include payment terminals at take-out restaurants and handheld ordering machines used by servers at full-service restaurants.
During the pandemic, the company cut 50% of its staff in April 2020, as many restaurant customers had to close dining rooms during the government-imposed lockdown.
To survive, Tost knew he couldn’t be a single pony.
It has accelerated the expansion of its tools to include affordable delivery solutions and contactless payment through QR codes.
When it filed the S-1 papers on August 27, 2021, the company said its goal was “to become the platform of choice for restaurants around the world.”
The company now offers restaurants more than two dozen products, including email marketing, a rewards program, a kitchen display system, payroll, and a tips distribution system. This allows them to compete with both legacy POS systems like Aloha, as well as dozens of food tech startups like loyalty providers Thanx and Punchh and online ordering solutions like Lunchbox and Olo.
“Toast replaces multi-vendors for loyalty, payroll, gift cards, and online ordering,” Comparato told investors On a fourth-quarter earnings call in February.
However, it is common for restaurants to have a tangled web of technology systems, so Toast works with 180 different technology partners who “intervene in our platform to allow restaurants to be successful,” Comparato said.
“If a restaurant doesn’t want to use our entire platform, and they want to use Lunchbox, who’s the great partner, guess what, Lunchbox is built right into Toast,” he said.
If it doesn’t have the software, Toast won’t be against buying the technology.
Last year, prior to its IPO, Toast bought inventory management company xtraCHEF, which helps clients such as Chef José Andrés’s restaurant group, ThinkFoodGroup, analyze food costs.
With inflation soaring, Compiato said the system can help budget cooks by analyzing the most profitable menu items.
‘93% of our growth is waiting for us’
Today, about 60% of Toast customers use at least four products.
That adds up, because Toast makes money from charging transaction fees on orders, as well as a monthly subscription fee for using its software. For example, for a $100 transaction, Toast collects a $2.69 processing fee, according to the fee form posted at website. Of that, 77 cents goes to Toast, and the rest covers network processing fees.
Toast closed in 2021 with $1.7 billion in revenuean increase of 107% over 2020.
Last quarter, Toast added 5,000 new restaurants to its platform, bringing the total to 62,000. That’s up from about 48,000 restaurants at the time of the IPO, and three times more than in 2019.
The nearly decade-old company now owns 7% of the US market of about 860,000 restaurants.
“I tell our team that 93% of our growth is waiting for us,” said Comparatu. “Let’s go grab this opportunity.”
However, like online ordering solutions and other food delivery apps, Toast has so far eluded profitability.
Toast reported a net loss of $23 million in the first quarter of 2022, compared to a net loss of $99 million for the same quarter last year.
Comperato is not worried. “You’ll see us on the path to profitability. We won’t be reaching out to the market or investors exactly when we break even for cash flow. But we’re on the right track.”
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