WHY IS THE RESTAURANT TECHNOLOGY SO HOT RIGHT NOW?
Toast is likely to join a series of digital businesses set to go public this fall, in what is shaping up to be one of the busiest years for IPOs in recent memory. It was claimed in February that the company may be worth $20 billion. $20 billion! And this is just one of the many examples that we have seen, where restaurant technology has been seen raising millions and billions of dollars recently.
Have you ever thought about why this restaurant tech mania is sweeping the world? Well, we did a bit of research on this and came up with certain findings.
One thing is for sure that the restaurant industry is one of those industries which work at a very slim margin. It is not one of those where on every order restaurants can save a lot many dollars, they work on very small ones. Before we were struck by a severe world-wide pandemic, things were super smooth for restaurants.
Restaurateurs, especially owners of SMB’s did not actually want to invest into technology because they never saw a need to. They just did not want to disrupt things and wanted to let them be as they were.
Now that things have changed, and for a long while restaurants all over the world had to shut down, they saw a need to change their systems too. Seeing people’s need and interest to order food online, everyone understood that we actually have to use technology to survive now.
This being said, we now know that investors are pouring money into restaurant technology because of the need to modernize and benefit from it. This is something that the restaurant sector has excelled at.
The biggest example in this case is Toast. Toast has grown through acquisitions in addition to continuously innovating its products since its inception. It bought
xtraChef, a back-office technology provider for restaurants, in June, two years after it bought
StratEx, a provider of HR and payroll software. Due to lockdowns, Toast, which makes the majority of its money from fintech solutions, experienced a hard patch at the onset of the epidemic, and the firm was forced to slash its workforce in half through layoffs and furloughs.
It has since had a reversal of fortune as a result of the introduction of new items such as delivery networks and contactless payment.
Think of the family owned restaurants who have no or very little access to technology. Even if they have, they don’t know how to streamline it. They really don’t have any of the infrastructure required to grow at this point in time. At most, they'll be collaborating with a third-party aggregator like
DoorDash
or
UberEats, which comes with hefty costs and limited control over client data.
Due to the urgency during the pandemic, they might have gotten on onboard with them, but all of them are now rethinking their decisions. They are more interested with companies that provide them with the facility of first-party online orders, where they have a good amount of access to the customer insights and can actually grow from it.
“Food is the biggest industry,” said Greg Golkin, managing partner at the Kitchen Fund, which invests in restaurant brands like Sweetgreen and Cava. “Every human on earth needs to eat roughly three meals per day.”
The most interesting thing about technology is that technology is not a separate market, it is present somewhat everywhere, and the restaurant industry is not something out of the world. Big investors feel that the sheer size of the opportunity in restaurant technology is attractive and hence are ready to put their money on it.
