{"id":17821,"date":"2023-11-02T18:31:13","date_gmt":"2023-11-02T22:31:13","guid":{"rendered":"https:\/\/d3.harvard.edu\/platform-digit\/?post_type=hck-submission&p=17821"},"modified":"2023-11-02T18:31:13","modified_gmt":"2023-11-02T22:31:13","slug":"toast-inc-the-restaurant-pos-and-management-platform","status":"publish","type":"hck-submission","link":"https:\/\/d3.harvard.edu\/platform-digit\/submission\/toast-inc-the-restaurant-pos-and-management-platform\/","title":{"rendered":"Toast Inc, The Restaurant POS and Management Platform"},"content":{"rendered":"\n\n\n

Restaurant operations, and the systems\/processes to run them, have become immensely complex. The image<\/a> below highlights a few of these challenges that span POS, inventory management, payroll & HR, and payment processing.<\/p>\n\n\n\n

\"\"<\/a><\/figure>\n\n\n\n

National chains utilize tailor-made solutions to cover these processes. McDonalds developed their own in-house solution with NewPOS NP6 System<\/a>, while Burger King leveraged Oracle Micros<\/a> as an off the shelf solution with a layer of customization. In contrast, smaller restaurants tend to be behind on technology adoption. Many rely on pen and paper for tracking business critical processes or piece together solutions integrating multiple products from different suppliers. Enter Toast, the restaurant first platform that offers a full front-to-back solution. See how it works in the video below.<\/p>\n\n\n\t\t

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Toast adds value to the restaurant by improving their operational efficiency. Their POS systems transmit data between the server and the kitchen display system allowing for customization of orders and offering real time feedback from the kitchen. This increases revenue and check size by reducing comps and voids<\/a> for mistakes that eat into margins. By speeding up the ordering process, Toast helps combat labor shortages<\/a>, allowing each server to support more tables.<\/p>\n\n\n\n

By handling payment processing and invoicing, Toast can perform detailed inventory management and cost tracking<\/a>, allowing chefs to see cost breakdowns and margins by plate, informing sourcing strategies for ingredients. They also help restaurants generate additional revenue streams by diversifying their offerings including retail with SKU tracking<\/a> and catering<\/a>.<\/p>\n\n\n\n

Restaurants have unique requirements for back-office tasks. Since a large portion of staff compensation is based on tips, Toast’s payroll<\/a> tools are designed to easily manage tip pooling<\/a> by allowing managers to set rules across teams. Another time-consuming process is scheduling<\/a> and managing shift swaps. Normally, this would require multiple rounds of emails, calls, and texts; however, Toast built all of this into a seamless interface.<\/p>\n\n\n\n

\"\"<\/a><\/figure>\n\n\n\n

One platform extension is Toast Capital<\/a>, which provides restaurants with financing. Nearly 70% of small businesses that apply for funding are rejected for some or all of the money they apply for. Since Toast handles payment and invoicing, they’re better able to assess credit risk without a credit score or personal guarantee. Restaurants can get approved for $5-300K in loans, which are then collected as a percentage of daily sales. This works in the restaurant’s favor because their repayments scale with business rather than being a fixed amount each period.<\/p>\n\n\n\n

Toast is an extremely sticky platform because they cover so many use cases. If you wanted to transition to another product, you’d need to integrate multiple other companies to cover the same offering. Toast uses this to their advantage while onboarding. They start clients on an initial contract of 1-3 years<\/a>, selling them hardware and locking them in with payment processing. This allows Toast to recoup their costs with a 1.5-2 year payback window as they collect a cut of every transaction and subscription revenue. By the time the contract expires, the customer switching costs have accumulated and they’re unlikely to shift to a competitor.<\/p>\n\n\n\n

Several competitors exist in this space; however, Toast’s platform provides a competitive advantage through their all-in-one cloud-based solution and comprehensive capabilities. Square is a simplified offering that is general purpose, not restaurant specific, so it doesn’t boast as many tailored features as Toast. Some restaurants start by using Square, but eventually transition to Toast when they require those industry specific functions such as tip pooling. Lightspeed, TouchBistro, and Upserve all charge add-on fees for certain functionality while Toast includes those in their “all-in-one” package. Some, like TouchBistro, are also locally installed as opposed to cloud-based, so they aren’t as scalable. Clover more closely matches Toast; however, they require a third-party app to sync information between the front and back of the house.<\/p>\n\n\n\n

\"\"<\/a><\/figure>\n\n\n\n

Toast faces several challenges operating in this space. The restaurant industry has inherently high failure rates with 30% not surviving their first year<\/a>. This leads to significant customer churn, which has been exacerbated by COVID-19 lockdowns and social distancing causing many restaurants to close their doors. The market is also highly fragmented, especially since they’re targeting SMBs so overall customer acquisition is a concern. That said, I believe they have a sustainable and scalable business model due to the inherent stickiness of the platform once a customer is acquired and the defensive moat they’ve built by being a full front-to-back solution that’s hard to replicate.<\/p>\n","protected":false},"excerpt":{"rendered":"

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