Restaurant business seems to be lucrative to many and restaurant sales figures have been on an upward slope for quite some but the margin is less which averages only three to five percent per business. Hence the business owners are looking at newer and innovative ways to run the business in a smarter way. Taking a step in this direction is a startup called ‘Toast’ which has raised $250 million at a valuation of $2.7 billion, according to a report by TechCrunch.
According to the report, the company will use the money in building technology to help restaurants with marketing, recruitment and operational efficiency. It will also use the money to expand its business outside the U.S.
The latest funding round included some big names like TCV, Tiger Global Management, Bessemer Venture Partners and T. Rowe Price Associates funds among others. This latest Series E round of funding will provide a big impetus to the company which saw it valued at $1.4 billion in the last round in July 2018. While the company has not disclosed its revenue numbers, it is expected to be positive as the company serves a long list of businesses — covering a range of sizes, from independent venues to smaller chains.
While the restaurant business might seem lucrative to e-commerce companies, it has also been a story of failed ventures where it has failed to meet the expectations and has not been met with success. One such case that comes to mind is Groupon, which spent a long time acquiring and building a restaurant management business, first drastically cut down and then finally called it quits.
Tim Barash, CFO of Toast says that the reason Toast has been successful in this arena is the fact that over 70 percent of its workforce has worked in the foodservice industry.
“I was first a busboy, and then I worked in pizza delivery for years. Seventy percent of our employees at Toast have worked at restaurants, including those in our product leadership, and that helps us understand the problem,” he adds.
Barash goes on to emphasize the fact that the restaurant business is very different from other businesses and is a bit complicated. “They are essentially manufacturers and retailers at the same time, all in one small physical footprint and so the key to building products for them is to understand that and the challenges they face in building and running those businesses,” he notes.