Even Free Was Not Enough to Make Restaurants Switch Registers
Toast runs ordering, payroll, and payments for kitchens, and owners say the system saves them too much money and hassle to give up.
Business Breakdowns · Toast: Sticky SaaS - [Business Breakdowns, EP.247]A colleague of Shawn Barrett, an investor at Counter Global who studies Toast, walked into a San Francisco restaurant, bought something to be a good customer, and then asked the staff whether they would give up Toast for a free register system from DoorDash.
He visited 30 or 40 restaurants that had both Toast and DoorDash enabled, and asked the same question in each one. None of the owners said they would switch, according to Barrett.
The answer is striking because free is usually hard to beat. A register system, known in the industry as a point of sale, is the screen and software that takes orders, processes cards, and tracks sales. In Barrett's account, not one restaurant in that test would trade its current system for a free one from a delivery rival.
Barrett compares Toast to Shopify, which runs online stores. Toast, in his description, is the full operating system for a restaurant, handling checkout, online orders, staff pay, stock tracking, and sales reports across locations, along with custom hardware. Customers use an average of seven modules, and surveys he cites put loyalty at a net promoter score of around 50, with 95% saying they would recommend it. A score of 25 is considered good, and 30 to 50 is considered exceptional.
Barrett said the delivery math helps explain why owners stay loyal to Toast. He argued that switching would be irrational on price, because a restaurant might save a tiny amount on card processing, about half a percentage point, but would tie itself more closely to a delivery service charging 13 to 15% on delivery orders. He pointed shoppers to their own test: carry a $40 DoorDash delivery order to the checkout page, and the same order will often cost $30 to $35 through the restaurant's Toast ordering page.
In that San Francisco test, the colleague left with his purchases and with the same answer every time. None said they would switch.
Questions people ask
What exactly does Toast sell to a restaurant?
Toast provides software and custom hardware for running a restaurant, including the point of sale, digital ordering, payroll, inventory management, and real-time reporting across locations. Barrett describes it as the full operating system for the business. He says customers use an average of seven modules, so it is used for much more than ringing up sales.
Why would DoorDash want to offer a register system?
DoorDash already handles delivery orders and has relationships with many of the same restaurants. Offering the in-store register could give it more of a restaurant's sales, data, and payment volume, and make it harder for restaurants to leave. The San Francisco test was hypothetical, asking what owners would do if that register were free.
How big is Toast in restaurants?
Toast is used in more than 160,000 locations, or about 20% of restaurants in the United States, according to Barrett. He says it wins roughly half of all new restaurant openings in the country. That flow of new openings is a big reason its share has grown.