The U.S. restaurant industry is expected to surpass $1 trillion in sales for the first time this year, despite further economic pressures on consumers. Now Restaurant365, a startup building technology to manage these businesses, has raised his hefty $175 million in funding to capitalize on that growth.
The funding was led by ICONIQ Growth, with participation from the company's existing backers KKR and L Catterton. Restaurant365 did not disclose the valuation it received for this round, but co-founder and CEO Tony Smith confirmed to TechCrunch that it was an uplifting round.
“We're excited about it [the business] We continue to grow and I am confident that we have very supportive investors who will support us,” he said. For context, last year, when this startup raised his $135 million, he revealed that the company's valuation exceeded $1 billion.
The company also did not disclose the new usage amount. Last year, we reported that our software was used in 40,000 of his locations, and that number is still being shared today. The company reportedly plans to generate $100 million in revenue in 2023 based on per-location pricing starting at $469 per month per location.
Based in Irvine, California, Restaurant365 provides restaurants with an all-in-one platform for managing accounting, inventory, and employees, as well as an analytics suite that helps understand trends within the business (basically everything except point-of-sale transactions). Masu.
Smith said he plans to use the new funding to continue expanding the startup's product suite and customer base after acquiring restaurant training platform ExpandShare in April. “We are also earmarking funds for future acquisitions,” he added.
While Restaurant365 is used by both independent restaurants and large chains, Smith said another big focus is building tools that work with “major hospitality brands.”
Unlike many people who seek to solve problems in the industry they are familiar with, the founders of Restaurant365 have little connection to the food service world. “By the time I graduated from college, I had 12 jobs. [only] One of them was at a pizza restaurant. So I can't say my restaurant experience was fulfilling,” Smith said.
Rather, he was an engineer who saw an opportunity to address an obvious problem. “My first job out of college was in technology, and I was excited to see a future in which software could play a role in all types of businesses.”
He founded the startup in 2011 with John Moody (chief strategist) and Morgan Harris (chief community officer) to address a pretty serious problem for restaurateurs. That's because restaurateurs operate on razor-thin profit margins (one of the reasons many restaurants eventually fail). And you have to use a patchwork of software to get things done.
The co-founders may not have known much about restaurants in the early days, but they knew they needed to transfer that knowledge to solve problems. “We immediately surrounded ourselves with restaurant people and completely understood the issues they were facing,” Smith said. That included an unlikely going-native market study, he said.
“We went to the restaurant and waited until it closed for the night to talk to the manager. The manager must have been a little worried that we were being stalked,” he said. “I remember asking for a clipboard so we could count inventory with them. They probably thought we were crazy to participate in their work for free. [But] I was shocked to learn how complex running a restaurant can be: reducing food waste, controlling costs, and managing the workforce. ”
It certainly looked like a strong match. “The problems restaurants were struggling to solve matched our skills perfectly. When we looked at what was available on the market, we decided to create a more complete solution to help restaurants thrive. “I found out it can be done,” he said. “The people in our restaurants are very hardworking and we are honored to work with them and help solve their problems.”
That said, Restaurant365's market is very crowded with everything from point solutions to all-in-one approaches. Some of the big names include Toast, Lightspeed, and Crunchtime (not affiliated with TechCrunch!).
Smith claims his startup is the only one that bundles the functionality his company does. In fact, many other companies targeting the restaurant industry started with point-of-sale and workforce management solutions rather than the combination that Restaurant365 offers.
“Our main differentiator is that we are all-in-one and specialized in restaurants,” he added.
Will Griffiths, founding partner at investment firm ICONIQ Growth, said the startup's attack is more appealing because it bundles important features together in an easy-to-use way.
“Restaurant365's suite combines critical functions such as accounting, inventory management, payroll, and employee scheduling into a unified system,” he said in an emailed statement. “Whether reducing spend or investment, brands can quickly identify areas for improvement, such as staffing and supply management, and consistently and dramatically reduce costs and increase profitability. We always need a seamless flow of information to improve.”
Still, there is a huge opportunity for consolidation as there are a huge number of point solution players in the market.
“When we founded the company, we met countless restaurants who were struggling to get by with multiple disconnected systems that created inefficiencies and limited visibility,” Smith said. he said. “While we launched as an integrated product, we are confident that operators and the market as a whole have trusted us with their business and validated our strategy, both with technology providers who have a desire to develop more complete products.” I am grateful for that.
“While we have made a number of acquisitions, we have also invested heavily in our product development and research teams and will continue to do so.For us, the question is whether we will add products organically or not. It's not about adding through acquisition; it's about what brings the most value to your business. Then we go out and do it.”