Welcome to the first installment of Restaurant Tech Index, a series we hope will help individuals and companies selling to restaurants understand and act on technographic data, market intelligence, and some of our personal thoughts and opinions. Each quarter, we’ll dig into one of over 350 restaurant-specific software providers Restaurantology is able to uniquely detect when visiting a restaurant’s website.

First up: Toast

To say Toast disrupted the point-of-sale landscape is an understatement.

Background

Toast, Inc. was founded in 2012, and within a relatively short period of time, they seemed to claim ownership of the independent restaurant segment. In 2021, Toast went public and was valued at an incredible $20B. Today, Toast reports 79,000 installs worldwide, and with 40% YoY growth, they don’t seem to be slowing down.

Let’s pause here and appreciate what Toast has accomplished. I’m definitely a fan.

Why is Toast so successful?

Here’s my opinion: strategically, Toast is doing something that most companies either can’t figure out how to do, can’t afford to do, or have no interest in doing at all.

They’re selling products and services into the industry’s long-tail—that is, the portion of restaurants that operate between 1 and 2 units—better than anyone else in the game. I cannot stress how hard this is to do well. It makes me think of what Tom Hanks said about hard work, which is one of my favorite quotes:

If it wasn’t hard, everyone would do it. It’s the hard that makes it great.

Best estimate, there are currently 300k+ restaurants in the United States that could be considered long-tail. Any company hoping to outbound independents would need to invest in, and deploy, a sales team large enough to effectively cover the sheer size of this portion of the market.

Beyond headcount, sourcing transient location data and validating contact info is notoriously difficult to do this far down into the long-tail, and operationalizing and governing data across systems and teams takes a literal army.

Lastly, supporting single-unit operators isn’t easy. Site activations and location cancelations take human beings to process, meaning the ongoing cost of support often eats away at the overall CAC.

The list of challenges selling in the independent segment runs long (we touch on some of it here), but all of this is to say that Toast has tackled something most companies shy away from. And they should be applauded for it.

Q1 2023 Toast POS market intelligence, as verified by Restaurantology

• There are currently 2,485 multi-unit restaurant websites with Toast POS detections as of April 1st, 2023.*
• These 2,485 multi-unit websites equate to roughly 12.5k restaurant locations.*
• In Q1 2023, Toast added ~100 new multi-unit logos.*
• There’s a 17% chance a multi-unit restaurant concept will have Toast POS directly integrated into their website, most commonly for online ordering.**
• In the US, Toast has roughly 2x the number of website POS detections—and ~2x the unit reach—when compared to the next most commonly detectable point-of-sale: Square.***
• When a multi-unit restaurant website has a Toast POS detection, there’s a good chance they’re also using additional detectable Toast services: 46% have Toast gift cards, and 18% have Toast loyalty.

Notes:

*Verified unit counts in the 2+ space. US only.
**2,485 of 13,547 known 2+ unit chains in the US have a minimum of one (1) Toast detection
***1,148 to 2,485 website detections, Square to Toast (respectively) | 7,022 to 12,448 related units, Square to Toast (respectively).

What’s next for Toast?

In Q4 2022, Toast told their investors that they aim to position themself as the main software supplier to the restaurant industry, a vision they hope to achieve with new or strengthened add-on software modules that include marketing & loyalty, digital ordering, team management, and supply chain & accounting. The company just announced Toast Tables, an integrated reservation and waitlist management solution. With their recent acquisition of Delphi Display Systems, Toast can now target 400k LSRs with specific drive-thru capabilities. And finally, they announced an integration between their ordering system and Google Maps and a new reservation and waitlist management platform they’re calling Toast Tables.

Again, here are my personal opinions:

• Enterprise – When compared to incumbents like Aloha and Micros, Toast is noticeably light when it comes to customers with 100+ units. I suspect they know this. I’d imagine products and features built for the ENT space to surface sooner rather than later. I also agree with the sentiment that they’re likely to reconsider their payments strategy as they focus attention up-market, though I’m not an expert on the subject.
• International – Toast has expanded to the UK, which makes sense. Companies looking to increase SAM/SOM often turn to new markets with similar problems as a quick way to find new funnel.
• Competition – POS companies like SpotOn, Square, and Cake seem to have noticed that customers with multiple modules are less likely to switch to a different vendor. As Toast continues to build out or acquire additional add-ons, I expect the industry to take note and follow suit.
• Channel Partners – Anecdotally, it seems like there are a ton of restaurant industry software providers that are racing to become members in the Toast Partner Program. With an integration to Toast POS, companies can target 79k potential customers with hyper-targeted messaging. Also, with an app in the Toast ecosystem, software can be discovered without dedicated AEs targeting hard-to-reach operators one at a time.

Final thoughts

Toast is currently in the sweet spot, and they know it. They’re drastically outpacing their competitors, and they know that, too. The combination of brand recognition, robust product suite, and long-tail sales org are just three ingredients in what seems to be their special sauce.

I’ll continue to watch their growth. This company is shaping the future of the restaurant tech landscape, undoubtedly for the better.