Today's announcement by Toast is a clear victory for the guest. In a battle that they never knew was being fought in their honor. For now it is also a win for the restaurant brands that use Toast as their POS solution.
In as unceremoniously of fashion as the 99 cent online surcharge was imposed, it has been deemed (within days) to be bad for business.
The letter sent out to Toast merchants this morning was from CEO, Chris Comparato and it has what i consider to be a foreboding undertone.
From the letter...
Each and every day at Toast we wake up focused on a single mission — to empower the restaurant community to delight your guests, do what you love, and thrive. Similar to how you run your restaurant, sometimes this involves making difficult decisions on whether to pass rising costs onto our community.
We hear you Toast. As restaurant operators we are the face of those decisions. Our guests ARE our community. Without upstream reform and legislative support, the rising costs that are pushed downstream to the restaurant will continue to cripple this industry.
The supply chain is guilty of being opportunistic, but thats another topic.
Interchange Fees for processing is complete crap and in need of greater scrutiny. **If you dont audit your CC statements monthly then you are not doing yourself any justice.
Toast was attractive because of the cloud based OS and the API. Now they have shifted to gateway fees and do their best to be an all-in-one SaaS. You pay the Gateway then pay for the 3rd party program you want to integrate.
The letter goes on to speak to those who have been with Toast for 'a long time' and suggests that Toast has not imposed broad price increases. That is likely true and one reason they were attractive. However, as my friend John Bailey pointed out in a conversation on the topic, things have changed since the IPO back in Q3 of '21.
Which brings me back to the foreboding sense i get from this letter. These costs will surface somewhere and it is most certainly going to appear on the P&L of the restaurants that are celebrating a perceived victory today. At the end of the day, I care most about the people. Those who we serve either as guests, or teammates. Owners continue to absorb the costs of doing business to protect the guest and stay staffed.
Toast Central...
The range for restaurant profit margins typically spans anywhere from 0 – 15 percent, but the average restaurant profit margin usually falls between 3 – 5 percent. As anyone in the foodservice industry will attest to, getting a restaurant off the ground — and keeping it running — is no simple task.
Seeking Alpha...
Summary. Toast is expected to grow its top line by approximately 100% y/y in Q4. However, more than 80% of its underlying business comes from point of sale products which carry approximately 20% gross profit margins.
Thank you to the gentleman from MO. Mark Alford for speaking out, in opposition of the surcharge.
Sr Director, FP&A
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