How Toast is Transforming the Restaurant Industry

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Toast is a leading SaaS provider for restaurant management, offering POS systems, integrated payment processing, and fintech services. Founded in 2011, it supports diverse restaurants with innovative ...

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Founded in 2011, it supports diverse restaurants with innovative ...</p>\n\n<a href=\"https://www.techbreakdowns.com/how-toast-is-transforming-the-restaurant-industry-a-deep-dive/\">Source Link</a>\n\n</div>\n","source":"lsy1731380374949","html":"<!DOCTYPE html>\n<html>\n<head>\n<meta http-equiv=\"Content-Type\" content=\"text/html; charset=utf-8\" />\n<meta name=\"viewport\" content=\"width=device-width,initial-scale=1.0,minimum-scale=1.0,maximum-scale=1.0,user-scalable=no\"/>\n<meta name=\"format-detection\" content=\"telephone=no,email=no,address=no\" />\n<title>How Toast is Transforming the Restaurant Industry</title>\n<style type=\"text/css\">\na,abbr,acronym,address,applet,article,aside,audio,b,big,blockquote,body,canvas,caption,center,cite,code,dd,del,details,dfn,div,dl,dt,\nem,embed,fieldset,figcaption,figure,footer,form,h1,h2,h3,h4,h5,h6,header,hgroup,html,i,iframe,img,ins,kbd,label,legend,li,mark,menu,nav,\nobject,ol,output,p,pre,q,ruby,s,samp,section,small,span,strike,strong,sub,summary,sup,table,tbody,td,tfoot,th,thead,time,tr,tt,u,ul,var,video{ font:inherit;margin:0;padding:0;vertical-align:baseline;border:0 }\nbody{ font-size:16px; line-height:1.5; color:#999; background:transparent; }\n.wrapper{ overflow:hidden;word-break:break-all;padding:10px; }\nh1,h2{ font-weight:normal; line-height:1.35; margin-bottom:.6em; }\nh3,h4,h5,h6{ line-height:1.35; margin-bottom:1em; }\nh1{ font-size:24px; }\nh2{ font-size:20px; }\nh3{ font-size:18px; }\nh4{ font-size:16px; }\nh5{ font-size:14px; }\nh6{ font-size:12px; }\np,ul,ol,blockquote,dl,table{ margin:1.2em 0; }\nul,ol{ margin-left:2em; }\nul{ list-style:disc; }\nol{ list-style:decimal; }\nli,li p{ margin:10px 0;}\nimg{ max-width:100%;display:block;margin:0 auto 1em; }\nblockquote{ color:#B5B2B1; border-left:3px solid #aaa; padding:1em; }\nstrong,b{font-weight:bold;}\nem,i{font-style:italic;}\ntable{ width:100%;border-collapse:collapse;border-spacing:1px;margin:1em 0;font-size:.9em; }\nth,td{ padding:5px;text-align:left;border:1px solid #aaa; }\nth{ font-weight:bold;background:#5d5d5d; }\n.symbol-link{font-weight:bold;}\n/* header{ border-bottom:1px solid #494756; } */\n.title{ margin:0 0 8px;line-height:1.3;color:#ddd; }\n.meta {color:#5e5c6d;font-size:13px;margin:0 0 .5em; }\na{text-decoration:none; color:#2a4b87;}\n.meta .head { display: inline-block; overflow: hidden}\n.head .h-thumb { width: 30px; height: 30px; margin: 0; padding: 0; border-radius: 50%; float: left;}\n.head .h-content { margin: 0; padding: 0 0 0 9px; float: left;}\n.head .h-name {font-size: 13px; color: #eee; margin: 0;}\n.head .h-time {font-size: 11px; color: #7E829C; margin: 0;line-height: 11px;}\n.small {font-size: 12.5px; display: inline-block; transform: scale(0.9); -webkit-transform: scale(0.9); transform-origin: left; -webkit-transform-origin: left;}\n.smaller {font-size: 12.5px; display: inline-block; transform: scale(0.8); -webkit-transform: scale(0.8); transform-origin: left; -webkit-transform-origin: left;}\n.bt-text {font-size: 12px;margin: 1.5em 0 0 0}\n.bt-text p {margin: 0}\n</style>\n</head>\n<body>\n<div class=\"wrapper\">\n<header>\n<h2 class=\"title\">\nHow Toast is Transforming the Restaurant Industry\n</h2>\n\n<h4 class=\"meta\">\n\n\n2024-11-12 11:05 GMT+8&nbsp;&nbsp;&nbsp;<a href=https://www.techbreakdowns.com/how-toast-is-transforming-the-restaurant-industry-a-deep-dive/><strong>TechBreakdowns</strong></a>\n\n\n</h4>\n\n</header>\n<article>\n<div>\n<p>Toast is a leading SaaS provider for restaurant management, offering POS systems, integrated payment processing, and fintech services. Founded in 2011, it supports diverse restaurants with innovative ...</p>\n\n<a href=\"https://www.techbreakdowns.com/how-toast-is-transforming-the-restaurant-industry-a-deep-dive/\">Source Link</a>\n\n</div>\n\n\n</article>\n</div>\n</body>\n</html>\n","isBrief":false,"type":0,"news_type":1,"symbol":"TOST","symbol_name":"Toast, Inc.","start_time":0,"source_url":"https://www.techbreakdowns.com/how-toast-is-transforming-the-restaurant-industry-a-deep-dive/","article_id":"1131238045","we_media_id":null,"thumbnails":[],"rights":null,"url":"https://stock-news.laohu8.com/highlight/detail?id=1131238045","pubTimestamp":1731380753,"sourceInfo":{"source_id":"lsy1731380374949","name":"TechBreakdowns"},"weMediaInfo":null,"summary":"Toast is a leading SaaS provider for restaurant management, offering POS systems, integrated payment processing, and fintech services. Founded in 2011, it supports diverse restaurants with innovative tools and solutions.Toast Inc.’s stock soared 19% in after-hours trade last Thursday, after the digital-payment platform for restaurants posted better-than-expected revenue for the third quarter, offsetting a profit miss. Boston-based Toast had net income of $56 million, or 7 cents a share, for the ","collect":0,"end_time":0,"defaultTopTitle":"techbreakdowns.com","property":[],"viewcount":null,"language":"en","relate_stocks":{"TOST":"Toast, Inc."},"translate_title":"吐司如何改变餐饮业","themeId":"","isJumpTheme":false,"ttsUrl":null,"symbols_score_info":{"TOST":1.1},"content_text":"Toast is a leading SaaS provider for restaurant management, offering POS systems, integrated payment processing, and fintech services. Founded in 2011, it supports diverse restaurants with innovative tools and solutions.Toast Inc.’s stock soared 19% in after-hours trade last Thursday, after the digital-payment platform for restaurants posted better-than-expected revenue for the third quarter, offsetting a profit miss. Boston-based Toast had net income of $56 million, or 7 cents a share, for the quarter, after a loss of $31 million, or 9 cents a share, in the year-earlier period. Revenue rose to $1.305 billion from $1.032 billion a year ago.In this article, we’ll answer:What does Toast do?Who are Toast’s customers?Who are Toast’s competitors?How is Toast doing financially?What does the future of Toast look like?What is Toast?Toast was founded in 2011. The company offers hardware and the necessary cloud-based software to help businesses in the foodservice industry operate.The company’s focus on user-friendly technology and a robust suite of features have made Toast a popular choice for restaurants of all sizes.A Toast point of sale systemA Toast point of sale systemThe foundation of the product offering starts with a point-of-sale system, pictured above. A standard cash register with big buttons and easy to modify placement so the restaurant can make things easier on their cashiers and employees.The Toast handheld systemThe Toast handheld systemToast also offers self-service kiosks and handheld devices so that wait staff can collect orders directly at tables (they can also collect payments there too).These systems all tie back to a kitchen display system (KDS). That allows the kitchen to see what’s been ordered and start making it.How Toast prices its product offerings - good, better, bestHow Toast prices its product offeringsPricing starts at, realistically, $69 a month. You’re not getting everything above for $69, but it’s a starting point. Going forward, Toast will be thinking about pricing in a “good, better, best” type mindset with “good” starting at $75/month and “best” yet to be priced.What we’ve spoken about so far, though, is really just surface level for Toast. It’s the bare bones restaurant POS. If we go deeper into the add-ons and integrations, you really start to see where Toast’s focus on the restaurant space begins to stand out.Inventory management, cost monitoring, and invoice processing are not specific to the food and beverage industry, but they do have specific ways of working that Toast helps manage. Things like food cost, staff cost, and highlights for when things drift out of line help management take control of their expenses.Online ordering, integrations with food delivery services (DoorDash, Uber Eats), and takeout support are also restaurant-specific things that a standard POS system might miss out on, but Toast covers.Finally, at least before we dive into the “fintech” aspects of this firm, are the customer toolsets. Toast supports marketing, gift cards, and reward programs. Bringing all of these things under one roof, with one app, makes running restaurants easier than ever.Toast CapitalAs the focal point of this month’s series’ is on the fintech elements of the business, I did want to dive in deeper to Toast Capital. Sure, accepting payments is cool, but gathering all of that payment data and then using it to underwrite loans is better.Toast Capital writes 90, 270, or 360 data loans to Toast customers in the amounts of $5,000-$300,000.As noted above, the business has proprietary underwriting data from the use of Toast as part of day-to-day business. This allows Toast to find lower risk loans and generate higher margins.The business has a number of strong funding partnerships and has grown Toast Capital to over $1 billion in annualized originations at the time of writing.Team ManagementTeam Management here is also getting a call out. Alongside all of the other restaurant management functionality, Toast allows businesses to schedule, facilitate tips, and pay out restaurant workers. The reason for the callout is the Toast Pay Card, something that we think could be big business in a Toast-y future.Today, the Toast Pay Card is a Mastercard backed card that restaurant owners can give to their staff. They can then pay their staff by the card instantly. The shift ends, payment goes out. All of this is free.Free because, as the issuer, Toast will make money on the use of the card.Where this starts to get interesting is when you consider the sheer distribution of the Toast platform. There are approximately 875,000 restaurants in the United States, and Toast has a 13% market share.A Toast Pay Card, or consumer wallet could allow Toast to bypass certain steps in the payment authorization workflow in order to keep a larger chunk of the take rate. Or, in order to facilitate adoption by providing customer rewards.Here is what a typical consumer transaction looks like today:How payments flow from a consumer to the merchantHow payments flow from a consumer to the merchantHere is what that could look like with a Toast Pay transaction:Toast without the card networks / issuing bankToast without the card networks / issuing bankRestaurants already support rewards programs. Toast could offer to double rewards when using Toast Pay and likely still come out on top given the broader fee savings. We’ll talk about this more in future of Toast section below.Customers of ToastToast’s customers range from small to large. You have your local single-location coffee shops, all the way up to brands like Marriott making use of the offerings. Toast is built to be size and restaurant type agnostic; if you sell food, Toast is for you.Toast TAM illustratedToast TAM illustratedAs mentioned earlier in the article, there are approximately 875,000 restaurants in the United States, and Toast is running in approximately 13% of them.This is just in the United States. The company is in the precess of expanding to Ireland, the United Kingdom, and Canada. So far, in those nations, the company has reported 2,000 restaurants using its services. In terms of the total addressable market, there are 15 million restaurants in the world (excluding China). There’s still lots to chase after.In established markets, Toast does quite well. In Austin, for example, Toast is the tool of choice for 70% of new restaurant openings.Competitors of ToastAt its core, Toast accepts payments. There is a multitude of companies that accept payments. Honing in, there are a number of tools that set Toast apart, but there are a handful of other companies with similar toolsets too.Square (via Block) is likely the most well known name that competes against Toast. Square offers a versatile POS system and a suite of tools that can be used in the restaurant space. It supports inventory management, employee management, and online ordering. You’ll frequently find it at farmer’s markets, in small stores, and in small to medium-sized restaurants.Shift4, another company we’ll talk about in the coming weeks also focuses on restaurants as one of its core markets. Dave & Busters, Wendy’s, Popeyes, TGI Friday’s, and Baja Fresh are among the names of companies that utilize Shift4’s SkyTab to manage operations.Clover, Lightspeed, and Revel are other large names in the space too. While we won’t dive deeper into them, they’re here to highlight the large amount of competition Toast faces in the space.While there can be multiple winners in the payments space, here’s what makes Toast stand out (note that others may check these boxes, but they don’t check them all like Toast):An industry-specific focusAll-in-one platformEasy to use, easy to implementScalable and flexibleCommunity, resources, customer support excellenceKPIs and Financial DataLet’s start out with Gross Payment Volume (GPV), a great metric by which to gauge these names in the payment space.Last week we spoke about Adyen and how it’ll cross €1T this year. Toast isn’t that big, but it’s still growing GPV at a decent rate.Toast GPV annuallyToast GPV annuallyAs of last report, GPV was $134.2B over the trailing twelve months. At the end of fiscal year 2023, the company was at $126.1B versus $91.7B the prior fiscal year - 37.5% growth.When it comes to the business, Toast breaks that up, financially, into three buckets:SubscriptionFintechHardware & Professional ServicesSubscription revenue covers the monthly (or annual) payments from customers for using Toast’s offerings. The POS, the employee management, the inventory tooling, that’s all here. It’s the highest margin, and the fastest growing segment of the business.Toast Revenue SplitToast Revenue SplitAt $545M trailing twelve month revenue and 67% gross margins, there’s still plenty of potential here for Toast to grow. We’ll talk about that growth in the next section, but for now it should be called out that software can hit 70-80% margins with ease, and it’s likely that Toast gets there one day.Fintech as a business segment includes the payment processing at POS systems, the aforementioned Toast Capital, and hardware purchase plans for Toast products.The margins here, given the low cost financing provided on Toast products, and the revenue splits at Toast Capital are considerably lower at ~21%.Finally, and not much to add here, are Hardware & Professional Services. This segment, ideally, would be run at cost as the goal is to get more restaurants on, and expanding within, the platform.The Future of ToastIn this section, we will touch on a few different future scenarios, starting with the company’s official guidance and roadmap, then pivoting to something a bit more “out there.”Official GuidanceToast provided some official guidance during its investment day which took place at the end of May. The guidance, for the next 2-3 years, called out 20% annualized growth in recurring gross profit streams.There’s also an expectation of 30-35% EBITDA margins. This includes international customer segments too, so no expected heavy losses from branching out around the globe.This guidance and growth come from a number of areas. First, there are the new geographies. Ireland, the United Kingdom, and Canada are still in their infancy as Toast markets, but could become behemoths over time. The company has also said it will expand further when and if the time is right.Another area of growth is new verticals. Toast is expanding into tangential markets with food & beverage retail offerings (i.e. grocery stores). This does start to hit against an earlier point where we spoke about “focus” as a key tenet, but as long as they stick close to the core, it appears to make some sense.Toast Sous Chef AIToast Sous Chef AIFinally, and there is unlikely to be a future article here on TechBreakdowns that skips it, AI. Toast has its own plans for AI that include a service called “Sous Chef.”For those not in the know, a sous chef is generally the second-in-command in the kitchen, so this is a very fitting name for Toast’s new AI ecosystem.Sous Chef will allow restaurant management to seek help using a language based prompting system. “How is my restaurant doing this week?” Or, “how can I improve our offerings?” Sous Chef will be able to tap into the wealth of Toast specific data to offer analysis and action plans that Ould help set a restaurant apart from competitors.The Closed-Loop WalletThere are a number of businesses that, at scale, could transform how things work - Toast could be one of them. We spoke earlier about market share, we also touched on the Toast Pay card. An extrapolation of these two could lead to a closed-loop wallet which could drive billions in incremental revenue at scale.How payments flowHow payments flowToday, payments flow through a rather complicated loop of intermediaries. It’s pictured above in a rather crude way. The consumer swipes the card and a number of parties communicate before getting to a ‘yes.’ There’s a world where, given the scale of Toast, all of these steps could be removed in favor of a Toast app or a consumer Toast Pay card.The payment type would only work at Toast, which is a significant drawback from a consumer perspective. That said, if a consumer could take advantage of more rewards and a more seamless checkout process then it might be worth it in the end.Toast would be able to transact by taking money from a consumer’s prepaid wallet, or perhaps even a credit card like account and running it through the existing POS with Toast able to settle cheaply because everything is in house.There are a number of drawbacks here including:Consumer adoptionConsumer desire to transact in this wayFees that remain on loading prepaid wallets, and/or risk of underwriting credit at restaurantsA successful product however could earn, easily, 2x the take rates of other transactions. Toast could encourage user adoption with additional rewards, which could also increase the downstream flywheel effects of Toast as an ecosystem with consumers looking for places to use their Toast rewards.This is likely an area we will revisit on TechBreakdowns as there’s a lot to discuss.Final Thoughts on ToastToast has tremendous potential and, at the time of writing, is down more than 10% in the last week. The business is trading with a market cap of around $12.5B, which is still around 3x sales.Still, many could consider 3x sales a good entry point for a business that has a lot of potential for expansion both in and outside of the United States.Should Toast reach a level of propagation where a consumer Toast Pay application becomes a realistic vision, we could see this name reaching much higher. There’s also good potential in similar verticals to the restaurant industry, although we’d prefer to see the company sticking to its roots a while longer.From a competition standpoint, there’s a lot out there. If Toast falters on any of their value props, it could be a fast path to collapse as restaurants might consider switching to a Shift4, Square, or Clover come renewal time.There’s also the downfall of restaurants to consider. We’ve seen the likes of Cracker Barrel and Red Lobster closing up shop as more people opt to eat at home. 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