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Daily news and analysis about the food tech revolution

restaurant tech

Consolidation Comes for the Restaurant Back Office

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Consolidation of restaurant tech companies has been a topic for years. And in the last few months, deals like PAR’s acquisition of guest loyalty platform Punchh and Squarespace nabbing hospitality company Tock suggest M&A is alive and well in restaurant tech. 

News from the last week suggests that the next big area of restaurant tech up for consolidation is the restaurant back office. 

Toast, which wants to be the Swiss Army Knife of restaurant tech, recently said it is acquiring xtraCHEF, whose software digitizes and organizes back-of-house and back-office tasks. Think accounting, scheduling management, inventory management, and budgeting. While Toast’s partner network features a number of different back-office software platforms, restaurants can integrate into their systems, the full acquisition of xtraCHEF means Toast can add to its own ever-growing list of software products for restaurants. 

Shortly after the Toast news, Restaurant365 said it was acquiring Compeat, which digitizes labor, accounting, vendor relationships and other tasks for restaurants. In this case, Restaurant365 is itself a back-office company, with software that does much the same thing as Compeat. The acquisition suggest Restaurant365 wants to increase and improve its capabilities in this area. 

Both deals are notable because, until now, the back office has been less of a priority for restaurants and has received way less investment money over the years than front-of-house tech and customer-facing tech. Amid a broader industry consolidation (see above), this past week’s deals suggest a greater need, or at least desire, from restaurants for more precise management over their bookkeeping, inventory taking, and other behind-the-scenes tasks.

That isn’t too surprising. The last year or so devastated the restaurant industry. Excepting chains with deep pockets a la Chipotle, those that have managed to hang on are operating off margins even more razor-thin than they were before the pandemic. Better management of inventory, invoices, vendor relationships, and so forth means a better overall view of where costs in a restaurant are going, which could ultimately save businesses money at a time when there isn’t much of it to be had. Those restaurant tech companies that can are swooping in to add more tools for the back office in the hopes of staying at the top of a restaurant tech space that’s currently more bloated than Taco Bell’s pre-COVID drive-thru menu.

Whether digitizing the entire back of house will make enough of a noticeable difference in restaurants’ margins will be determined only at some point down the road, when more restaurants have swapped pen and paper for mobile apps and other software. If they do. After all, these systems aren’t free to implement, so it remains to be seen how many restaurants, particularly small and/or independent ones, do so in the near future.

In the meanwhile, restaurant tech consolidation will continue. It wouldn’t be all that surprising if a company like Restaurant365, which though large still only focuses on one area of the restaurant, were picked up by an even larger all-in-one platform like Toast. 

Stay tuned . . .

More Restaurant Tech Headlines

Starbucks Reinstates Its Reusable Cup Program With a Low-Tech Twist – Starbucks will reinstate its reusable cup program in the U.S. on June 22, more than a year after suspending the program because of COVID-19-related safety concerns. 

JustKitchen Raising $20M, Expanding into the U.S., Asia – Vancouver, Canada-headquartered JustKitchen announced this week it is in the process of raising $20 million to expand its network of ghost kitchens and virtual restaurant brands.

Virtual Restaurant Company Curb Raises €20M – Stockholm, Sweden-based ghost kitchen startup Curb has raised funding to expand its ghost kitchen network and virtual restaurant portfolio.

Restaurant365 Acquires Back-Office Software Company Compeat

Restaurant management platform Restaurant365 announced this week it has acquired Compeat, which makes software to help restaurants manage their workforce and the back office. Restaurant365 will continue to support Compeat products and customers after the deal goes through, according to a press release sent to The Spoon.

Restaurant365 is itself a back-of-house-focused company, with a cloud-based software platform that gives restaurants a single, digital place to manage their accounting, payroll, scheduling, inventory, and other back-office tasks. The system integrates with other tools in the restaurant, including POS, vendor, and banking systems. 

Compeat offers a similar set of cloud-based tools for restaurants. In addition to its technology, the company will bring its own rather robust list of restaurant clients as well as some hotel chains to the partnership. 

Both companies offer a similar promise to hospitality businesses: to digitize and therefore simplify back-office tasks and in doing so save businesses time and money.

Restaurant365’s announcement comes right on the heels of Toast’s acquisition of another back-office/back-of-house management platform, xtraXCHEF. Other deals, mergers, and acquisitions are bound to follow. The last year has devastated many restaurants’ businesses. For those that managed to survive, keeping a tighter grip on costs is an imperative right now. Many restaurant tech companies claim that digitization and better management of the back of house can help restaurants maintain better margins.

The combination of Restaurant365 and Compeat will serve over 28,000 restaurants. Restaurant365 CEO Tony Smith will lead the new business. 

In the meantime, expect more consolidation for restaurant tech over the next several months as the industry continues its slow recovery phase.

Toast Acquires Back-Office Software Platform xtraCHEF

Restaurant tech company Toast has acquired back-of-house management platform xtraCHEF, according to a Toast statement released today. The deal follows a partnership the two companies launched in 2020. Financial terms were not disclosed.

Acquiring xtraCHEF will give Toast access to back office tools that automate tasks like invoicing, budgets, and recipe and inventory management, among other things. The pitch xtraCHEF has long given restaurants is that its software platform can help manage food costs and achieve better margins. Andy Schwartz, CEO of xtraCHEF, said the deal will combine Toast’s point-of-sale data with his company’s line-item spending details, giving restaurants “a true end-to-end view of their financial health.” 

The xtraCHEF/Toast integration already boasts a long list of capabilities, including digitizing invoices and receipts, synching daily sales data from Toast with budget targets, setting price alerts, and managing all documents in one central cloud-based location.

Up to now, xtraCHEF has been listed alongside several other integrations on the Toast site, including beverage-specific inventory platforms like Bevspot and PourMyBeer, as well as general back-office platforms like PeachWorks and Synergysuite. With the announcement of the acquisition, xtraCHEF will become xtraCHEF by Toast.

Both Schwartz and xtraCHEF CTO and cofounder Bhavik Patel will remain in their current roles for now.  

Losing margins to wasted and/or mismanaged inventory has been an issue for years, as has general organization of the restaurant back office. The pandemic-related losses restaurants have suffered over the last year and a half have made the need for more precise BOH management more urgent for many.

Many back-of-house-focused platforms exist nowadays and promise to digitize more of what goes on behind the scenes at restaurants. Galley, Statis.ai, and SousZen are other companies bringing more technology to this space. But as Toast’s Partner Network can attest, the restaurant tech space is rather bloated at the moment, which makes further consolidation a foregone conclusion. End-to-end platforms like Toast and Square will likely be snapping up other restaurant tech players in the near future as digitization becomes more mandatory for doing business.

Oakland Residents Push Back Against a Forthcoming CloudKitchens Location, Citing Trash, Traffic, and Parking Issues

Residents of Oakland, California are pushing back against the opening of a new ghost kitchen location from Travis Kalanick’s super-secretive CloudKitchens company (h/t Berkeleyside). The facility is slated to open in July. But in an online petition, residents argue that the city of Oakland issued permits for the building quickly “without public notice or any consideration of the impacts on our neighborhood.”

The planned CloudKitchens facility at 5325 Adeline St. in North Oakland will house space for 35 commercial kitchen spaces, which is huge by ghost kitchen standards. The kitchens would operate seven days per week, 18 hours per day, according to the online petition. 

Those opposed include the Golden Gate Community Association and the Oakland Neighborhoods for Equity. These groups as well as residents of the North Oakland neighborhood are pushing for a freeze on construction at the forthcoming CloudKitchens location until the city can address a list of concerns around having a massive ghost kitchen facility in the area. That includes more traffic from the assumed influx of drivers that will be coming and going from CloudKitchens, a loss of parking for neighborhood residents, and “a more dangerous Adeline Street” because of these things. The petition also cites noise, exhaust, odors, and pests as other potential problems. 

This is not the first time CloudKitchens has gotten pushback from residents of a city. Earlier this year, those in Chicago’s North Center neighborhood complained of traffic, parking, and garbage issues from the CloudKitchens facility that opened in 2020. The city finally intervened, but only after police recorded numerous parking violations , calls for disturbance, and crashes in the span of three months.

Nor is this the first time the issue of ghost kitchens’ impact on surrounding neighborhoods come up. As the format has grown in popularity over the last year or so, restaurants, kitchen operators, and city residents alike have surfaced the discussion about the impact of these facilities on daily life and local business, not to mention basic safety on the streets. Talks stand to get even more nuanced as major ghost kitchen operators like CloudKitchens expand and more restaurant chains redesign their store formats to accommodate the uptick in pickup, delivery, and drive-thru orders.

Oakland residents are asking their city to delay the CloudKitchen’s opening as well as its number of food businesses and hours of operation.

Tesla May Soon Open Its Own Restaurant

Tesla has filed a trademark under restaurant services, which suggests the automaker may be finally working to realize its dream of combining its charging stations with an old-school drive-in restaurant concept. The application is currently waiting to be reviewed. 

This isn’t a new idea. As far back as 2018, CEO Elon Musk has said he wants a “retro carhop” where a menu would automatically pop up on a driver’s dash when they parked their car at the restaurant. Roller skates and rock ‘n’ roll would also be included in the package. And these restaurants would, of course, include Tesla charging stations. The company even applied for permits to build this “Supercharger station” in Santa Monica, California.

For the last few years, no work on the project has been done until building applications for said Supercharger station were submitted this year, and the trademark application filed last week. Under the latter, Tesla’s “T” logo would be trademarked for use by “restaurant services, pop-up restaurant services, self-service restaurant services, take-out restaurant services,” according to the application. 

While the name “Tesla” may not automatically conjure images of restaurants, the idea of combining a quick-service eating establishment with a charging station makes perfect sense. Consumers need something to do if they are away from home while having to charge their car. Eating a meal is an obvious activity, and many restaurant chains are already partnering with companies to host charging stations in parking lots.

Whether Tesla concocts its own restaurant concept from the ground up or partners with another brand remains to be seen. 

Yum China’s New Program Will Teach Digital Skills to Children in Rural Areas

Yum! Brands spinoff Yum China is investing in more digital education for underserved areas. The company today launched its Digital Classroom Initiative that gives children in rural parts of China access to online classes that will teach coding and other digital skills. 

The digital divide between China’s urban and rural populations has narrowed somewhat in recent years. Still, the COVID-19 pandemic once again highlighted its existence, showing the disadvantages the rural population is at when it comes to online learning and, in some cases, access to the internet. 

Yum China says it will use its newly launched Digital Initiative program to provide children in the Hunan province with free computer equipment and instructor-led virtual coding courses. 

The company has been involved in bringing digital education to remote areas since 2019 when it began establishing digital classrooms with help from Leap Learner and the China Foundation for Poverty Alleviation. Yum China has been quietly expanding the program ever since, first in the Ningxia and Hunan provinces and now in the Hunan province. 

While highlighting his company’s own evolution in an increasingly digital restaurant industry, Yum China CEO Joey Wat talked in today’s press release of preparing rural youths with “much-needed skills to thrive in a digital world.” Increasingly, restaurants are part of that shift. The march of technology into restaurant kitchens, dining rooms, and off-premises experiences will create new types of digital jobs in these settings. Some companies are now training underprivileged groups with the kinds of skills they would need for such jobs but may not have the opportunity to gain on their own. Over in Berlin, Germany, Delivery Hero highlighted this recently when it launched its own program, the Tech Academy. 

For its part, Yum China says it will eventually expand its program across more rural areas of the country. 

A Few Thoughts on Yum’s Dragontail Deal

This is the web version of our newsletter. Sign up today to get updates on the rapidly changing nature of the food tech industry.

Greetings from Eastern Kentucky, where I’m taking a quick breather from the restaurant world and am off to tour AppHarvest’s high-tech greenhouse.  

But first, a few quick thoughts on the recent Yum! Brands acquisition of Dragontail Systems, which was announced at the end of last week. In case it wasn’t clear already, Yum — parent company of Taco Bell, KFC, Pizza Hut, and The Habit Burger Grill — has big ambitions when it comes to its technology plans. The Dragontail deal suggests that a big chunk of that ambition is to enable better delivery at its restaurants. 

Australia-based Dragontail Systems is known around the restaurant biz for its AI-based workflow management system for kitchens. The system can process a restaurant’s incoming orders, manage each food item’s cook time so that it’s ready when the delivery driver arrives (not before or after), assist with managing and scheduling drivers, and provide real-time updates. In the past, restaurants have also used Dragontail’s AI-based camera to assess food quality and ensure safety and cleanliness standards in the kitchen. 

Dragontail is Yum’s third major technology acquisition so far in 2021. Earlier in the year, Yum acquired AI firm Kvantum to assist with its marketing campaign analytics, and Tictuk, which makes omnichannel ordering software that lets consumers place orders via social media, SMS, email, and other formats.

The Dragontail Acquisition, is hyper-focused on improving delivery operations, and pizza delivery in particular. Yum said it already has Dragontail installed in roughly 1,500 Pizza Hut stores across 10 countries. If a wider implementation of the tech is successful, Yum will eventually install the tech further around its Pizza Hut locations, and eventually across all its brands. 

Of course, Dragontail originally debuted its system at a Domino’s location in Australia, so Yum’s bid to buy the company is at least in part a way of competing. I doubt fighting Domino’s is the only motivator, though, as the deal seems aimed at a larger move to make food preparation more efficient at Yum restaurants.

Restaurant kitchens have always operated in a kind of orchestrated chaos, but with many businesses still struggling in the wake of last year’s events, efficiency is everyone’s favorite word right now. On paper, Dragontail’s capabilities sound easy: managing drivers’ arrivals and departures, determining more precise fire times for each food item, assessing the quality of the food more precisely. But as anyone who’s ever worked in a restaurant kitchen knows, getting one detail wrong can set off an entire chain of mishaps that lead to lower-quality food, unhappy customers and, in the end, lost money. With the Dragontail acquisition, Yum is placing its bets on tech to help the company avoid that scenario. 

Plant Power Fast Food Chain Raises $7.5M Series A – The San Diego, California-based all-vegan chain trying to redefine the concept of “fast” food said it will use its new funding to continue its expansion plans and focus on new corporate unit development.

7Shifts Raises $21.5M for Its Workforce Management Platform for Restaurants – The company will use its $21.5 million Series B round to add new features that simplify the process of managing, scheduling, and communicating with restaurant workers.

Square’s Back-of-House Display System Now Available for Delivery-Only Restaurants – Payments company Square recently made its restaurant software stack a little more versatile when it launched its Square KDS back-of-house display system as a standalone item available via subscription.

7Shifts Raises $21.5M for Its Workforce Management Platform for Restaurants

Workforce management platform 7Shifts announced this week it has raised a $21.5 million Series B round. Enlightened Hospitality Investments, the growth equity fund affiliated with Danny Meyer’s Union Square Hospitality Group, led the round. Existing investors Ten Coves Capital, Relay Ventures, and Conexus Ventures also participated in the round. 

Saskatoon, Canada-based 7Shifts said it will use the new funds to expand both the size of its team and the products it offers as part of its labor-management software stack. Currently, products include tools for scheduling, time clocking, communication, and keeping managers in sync with one another, among other features. The company’s promise to restaurants is that its software simplifies the task of managing workers and helps businesses control costs. New funds will go towards expanding the capabilities of its scheduling and communication tools as well as introducing new features. 

In this week’s press release, 7Shifts said it is currently experiencing “record onboarding.” While the company cited a general desire by restaurants to control costs as a big reason, the current labor shortage no doubt is also playing a role. Restaurant operators are currently struggling to fill open positions, making it difficult for businesses to manage the masses of people returning to restaurants for dine-in service. 

The labor shortage, of course, is a very nuanced situation, and it will take more than software to resolve the bigger issues at stake, like fair wages for workers. Setting those points aside a moment, tools like 7Shifts have the potential to help restaurants control costs and manage the employees they do have more easily while the larger questions remain unresolved.

7Shifts is one of several restaurant tech companies focused either wholly or in part on workforce management. Fourth is the other notable company, while Toast, the Swiss-army knife of restaurant tech, offers features, too.

To date, 7Shifts has raised $51 million, including this week’s round.      

On-Demand Pay App DailyPay Raises $500M in Capital

On-demand payment service DailyPay announced today it has “secured” $500 million in capital, according to a press release sent to The Spoon. Of that number, $175 million comes from a Series D round led by Carrick Capital Partners with participation from existing investors. The remaining $325 million comes in the form of “credit capital from various sources.” DailyPay says it will use the capital to make its platform available in new markets.   

Through the DailyPay platform, restaurants (among other business types) can offer employees instant access to wages earned that day with the DailyPay app. For employees, this means not necessarily having to live from paycheck. For restaurant owners and operators, the ability to offer a better pay structure for employees theoretically means happier workers and hopefully less turnover. 

DailyPay’s fundraise and planned expansion comes at a time when the restaurant industry is grappling with an industry-wide labor shortage. As the world reopens again, restaurants of all sizes say they are having trouble getting old employees to return to work or new ones to take their place. Frequently, former restaurant employees are leaving to work in other industries or choosing to live off unemployment benefits. In major cities like NYC and Los Angeles, the shortage can also be attributed to people leaving for more affordable places to live. 

On-demand pay can’t fix all of these problems, but certainly doesn’t hurt if a restaurant offers such a system to its employees. And many do nowadays. Over time, DailyPay has added the likes of Captain D’s, Boston Market, Sprinkles, and other chains to its list of customers. Other chains, such as Domino’s, McDonald’s, and Chili’s, use similar services from apps like Branch and Instant.

The DailyPay platform also lets restaurants disperse tips immediately, reward employees with financial commissions or bonuses, and offers workers some financial assistance tools to help them better manage their earnings.

Join the Spoon for a Virtual Restaurant Tech Summit This August

For many, 2020 will go down in history as the year the restaurant biz changed forever. It could also be remembered as the year restaurants absorbed about 10 years’ worth of technological evolution in the span of a few months.

But while last year was all about adopting restaurant tech to survive, the next few years will be all about using tech to create a better restaurant experience. I don’t just mean faster service and the ability to pay for meals with your own phone. The most valuable restaurant tech in the future should also create safer dining and working environments, help us reduce food and packaging waste, promote healthier eating habits, and create better new and more fulfilling jobs.

The bottom line is in order to survive, restaurants need to understand how technology will change their business. To that end, The Spoon is announcing our latest event, The Restaurant Tech Summit. The Restaurant Tech Summit will bring together the most important players from across the restaurant industry, from large QSRs and independent establishments to ghost kitchen providers and companies creating the next generation tech stack for restaurants. Together, these companies and individuals will discuss not only how they survived the chaos of 2020 but also what they are doing to thrive — and help others do the same — as they move forward into a digital-first era for restaurants.

The Restaurant Tech Summit will feature founders from building new platforms, to those leading the digital innovation efforts for the largest chains in the country, to chefs and operators using these tools everyday, we’ll have leaders from every side of the restaurant business come together to discuss how technology will transform business and operational models over the next decade.

We already have some great speakers from companies like Wow Bao, Perfect Company, Slice, and we’ll be keeping you updated over the next several weeks as more speakers are added and the full agenda is released.

If you’d like to participate as a sponsor at The Spoon’s Restaurant Tech Summit, drop us a line.

If you’d like to buy a ticket to the Summit, early bird pricing is available through July 15th.

In the meantime, reserve your ticket today.

 

C3 Launches Brick-and-Mortar Food Halls for Its Virtual Restaurants

Over the last year we’ve seen scores of brick-and-mortar eating establishments turn their restaurants into delivery-only concepts. C3, a hospitality company that runs a portfolio of virtual restaurant brands, has chosen to do things the other way around. This week, the company announced Citizens, a network of brick-and-mortar food halls for its virtual brands.

The first location will open this July in New York City, with a second location planned for Atlanta, Georgia and slated to open in 2022. Further Citizens locations are planned for Seattle, Miami, and California.

The 40,000-square-foot Manhattan West location will be part food marketplace, part sit-down restaurant, and will feature all of C3’s existing restaurant brands in addition to new ones. Customers will be able to order meals from kiosks or the C3 app (which the company launched in collaboration with Lunchbox), then choose to either take food to go or eat it onsite. The location will also feature pre-made grab-and-go options.

The forthcoming Atlanta location will offer a similar setup, and also include a delivery option to the surrounding neighborhood. 

All food hall locations will be powered by C3’s in-house tech stack, which includes the Lunchbox-powered ordering software. 

Plenty of virtual food hall concepts exist currently, from Deliveroo Editions to Zuul’s newly launched effort that’s an online marketplace of restaurants working out of the company’s kitchen facility. Few of these have added any physical spaces outside of the kitchens, though that may begin to change as the pandemic recedes and people return to the world of onsite dining.

Citizens is part of C3’s overall plan to expand its restaurant business, which has previously only been available in the form of delivery-only concepts. Earlier this year, the company announced a partnership with Graduate Hotels to run virtual restaurants out of the latter’s kitchen spaces. C3 has also partnered with multiple residential properties.

This week also saw C3 expand for the first time outside of the United States, to the United Arab Emirates. Via a partnership with ghost kitchen network Kitopi, C3’s virtual restaurants will be available through the UAE as of this coming summer.

ChefHero Rebrands as Notch, Aims to Digitize the Entire Foodservice Supply Chain

Restaurant supply chain software company ChefHero announced today it has officially rebranded as Notch and adjusted its business model to focus on digitizing the wholesale foodservice supply chain for both restaurants and distributors.

As ChefHero, the Toronto, Ontario-based company’s platform mainly focused on connecting restaurants with suppliers, providing what was essentially a marketplace for buyers. For a long time, the business was largely driven by restaurant food order volume. Needless to say, when the COVID-19 pandemic closed restaurant dining rooms and impacted overall restaurant sales, ChefHero’s business took a hit as well. In a recent interview, the company said its revenue in March 2020 decreased by 80 percent week-over-week.  

In response, the company rebuilt its software platform with a new focus on both restaurants and food distributors, and rebranded the entire operation as Notch. The software is available via an iOS and Android app. 

For restaurants, the Notch platform offers one central, digital place to view all suppliers, create inventory lists, and view details such as cutoff times and order minimums for each supplier. Via the Notch Market feature, businesses can also get deals on pricing, compare prices across different suppliers, online invoicing and bookkeeping, and use real-time inventory management. The platform integrates into a business’s existing accounting and inventory management systems. 

Digitizing such tasks in the restaurant back of house can help businesses cut down on waste, whether it’s in the form  of food or finances. Notch says that up to 40 percent of a restaurant’s revenue is spent on food, 12 percent of which goes to waste before it ever reaches the customer. 

Meanwhile, the Notch Connect feature lets foodservice distributors build a digital storefront on the platform and connect with restaurants. Distributors can also manage invoices and collections, accept digital payments, and view all customers from one central dashboard. 

Notch is currently available to customers in Toronto as well as in Chicago, Illinois and “major cities” in Texas. The company plans to launch in additional cities in North America in the coming months.