A New Bet on Restaurant Tech—With Eyes Wide Open
Every so often, a company emerges that reminds me of one I’ve seen before—offering similar value, facing similar hurdles, and potentially riding a similar wave.
Toast feels a lot like that.
Back in 2017, I bought Square—now Block (SQ)—on the back of its elegant software, hardware integration, and ability to simplify financial infrastructure for small businesses. I sold in 2023 after a strong run and a shift in my capital allocation strategy. But the lessons stuck with me.
So when I came across a recent podcast by a tech journalist I’ve followed for years, Toast caught my attention. What stood out wasn’t just their pitch—but the deep integration and scope of their platform for one of the most notoriously difficult small business verticals: restaurants.
From Raw Ingredient to Receipt: A Full-Stack Restaurant OS
Toast offers a soup-to-nuts solution for restaurant operators.
What Square did for mobile merchants, Toast is doing for:
- Cafés,
- Diners,
- QSR chains,
- Fine dining,
- And everything in between.
Their stack includes:
- Point of Sale (POS)
- Menu & inventory management
- Order & table management
- Loyalty & marketing tools
- Payroll & HR
- Payments & lending infrastructure
In short: they’ve built an operating system for the hospitality sector.
What’s impressive is the level of integration. From the moment a café orders raw ingredients to when a meal hits the table and is paid for, Toast tracks it, optimizes it, and simplifies it.
The Network Effect Is Real—But Fragile
Toast’s flywheel is built on interconnectedness:
- The more restaurants join,
- The more data Toast gathers,
- The better it can optimize pricing, workflows, and service offerings,
- Which leads to greater customer stickiness and upsell potential.
For example:
- Toast Payroll integrates with Shift Management.
- Loyalty tools feed back into POS transaction data.
- Kitchen Display Systems improve throughput and reduce wait times.
- Real-time ingredient tracking supports dynamic menu pricing.
It’s elegant. It’s scalable. It’s clearly solving headache-level problems.
But…
The Risk: Churn and the Harsh Economics of Hospitality
Here’s where I pump the brakes a little.
The restaurant industry is notoriously fragile:
- Average lifespan of a new restaurant: 5–7 years
- High fixed costs, low margins
- Vulnerability to economic downturns and seasonal cycles
While Toast has expanded into mid-market and multi-site operations, a substantial portion of its customer base is still SMBs—and SMBs in food service are among the most volatile in the economy.
That translates to high churn risk.
I’ve followed the churn numbers closely over the past few quarters. While Toast has shown resilience, it still must constantly acquire new restaurants just to stay flat, let alone grow.
That’s a hard treadmill to run forever.
Why I’m Still Investing—Cautiously
Despite those headwinds, I’ve begun making small incremental purchases in Toast.
Why?
- The product is strong.
- The vertical is large and underserved.
- The company is improving operating leverage.
- I’ve seen this kind of early network-effect SaaS business before—and it often takes off before the broader market notices.
I’m positioning Toast in my G2 Fund (Future Leaders) bucket—recognizing its path to profitability isn’t guaranteed, but also that the upside is meaningful if they solve the churn puzzle and deepen their relationships with multi-location operators.
It’s not a core position yet. But it’s on my radar—and on my buy list when valuations are compelling.
Final Thought
Toast may not be the next Square.
But it doesn’t have to be.
If it continues to execute, manages churn intelligently, and grows with the digitization wave sweeping through food service, it could carve out a very profitable niche in one of the largest—and least digitized—consumer sectors in the world.
For now, I’m buying—eyes open, thesis in hand.
