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Daily news and analysis about the food tech revolution

xtraChef

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.

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.

Survey: Despite Low Adoption Today, Automation Is a Key Part of Future Restaurant Operations

Automation could significantly help restaurants deliver high-quality experiences to customers more consistently and easily, according to a new Zenput and Technomic survey of 295 restaurant industry personnel.

That might seem like an obvious statement in this day and age, where digital ordering is on the rise and you can’t turn a corner without running into a self-service kiosk. But as Zenput and Technomic’s “2020 Restaurant Ops Report” suggests, the restaurant industry as a whole remains slow when it comes to adopting technologies that can automate more manual day-to-day tasks for restaurant employees. 

Just 27 percent of restaurant operators said their company is embracing automation “to a great extent.” The number is higher among corporate stores (33 percent) than franchisees (18 percent). Meanwhile, smaller operators (think less than 50 units) are more likely to embrace technology that automates employee tasks than larger ones. The latter point makes sense, given the time, money, and sheer organizational factors needed to introduce new technologies across thousands of restaurant units.

But slow adoption will almost certainly speed up in the near future, however. As the report notes: 

“The reality is that to remain competitive and consistently deliver positive customer experiences, corporate brands and franchisees need to find ways to get more out of every store and field employee they have. This means embracing new strategies, processes, and automation — technologies that will enable staff to focus on higher value activity and do it more efficiently.”

The report doesn’t call out many actual technologies, but it’s a safe bet to say the bulk of restaurant automation in the near future won’t be in the form of burger-flipping robots or widespread delivery via drone, which while promising are expensive and time-consuming to implement on a wide scale. Instead, automation will be software that streamlines day-to-day tasks like inventory management and bookkeeping, which in turn frees up employee time to focus on customer service. As the National Restaurant Association noted in its recent “Restaurant 2030” report, “Everything from inventory management to scheduling to payroll, taxes and bill reconciliation will be more automated in the restaurant of the future.”

Already companies like Fourth and HotSchedules, who merged in July of 2019, as well as Toast, LimeTray, xtra Chef, and many others, offer software platforms that automate “busy work” in the back of house — tasks such as order tracking, inventory management, and bookkeeping. 

And while adoption of automation technologies may be low right now, approval is high among those who are already using them. The Technomic-Zenput survey notes that “83 percent of operators who embraced automation say their experience has been a positive one.” Operators cite more effective store operating procedures, clear visibility across store units, and the ability to quickly identify operational issues as some of the big benefits of software automation. 

One of the predicted trends for restaurants in 2020 is that operators will focus on streamlining their tech stack and employing software more strategically in the coming months. In other words, rather than inundate employees with a pile of new digital tools to learn, restaurants will pick and choose which technologies are most effective at solving the big issues. Tech that can pinpoint and solve more operational issues is likely to be high on the list of many over the next year.


xtraChef Raises $7.5M Series A to Organize the Restaurant Back of House

Restaurant-management software company xtraCHEF announced yesterday it has raised a $7.5 million Series A round for its back-of-house focused business intelligence platform. The round was led by MVP Capital Partners with participation from existing investors ValueStream Ventures and Laconia Capital Group. This round brings the company’s total funding to $10.5 million.

Founded in 2015, company automates business-related restaurant tasks like bookkeeping, order tracking, and building budgets via its cloud-based software platform. Such tasks, usually left to owners, chefs, and managers to perform, are a great example of the kind of “busy work” that’s at high risk for human error but could easily be streamlined with technology for greater accuracy. Plus, data entry is boring and not why anyone gets into the restaurant business in the first place. Automating much of it can, in theory at least, free up restaurant staff’s time and help them make the hospitality business more, er, hospitable.

The xtraCHEF platform works across devices and brings inventory management, invoicing, and accounting into a single interface that also syncs with QuickBooks, Microsoft Dynamics, Toast POS, and other third-party tools. If much of your bookkeeping is done on actual paper, xtraCHEF can digitize it with a simple photo or email and organize the information within its interface. And of course, all that data becomes potentially useful information for restaurants to act on, whether it’s around a declining budget or repeatedly late orders from a vendor.

Bringing order to the oftentimes chaotic back of house at a restaurant is something many companies these days are trying to do through software. Which is to say, xtraCHEF faces some serious competition. Of late, Resy, who started out as a humble restaurant reservations platform, has morphed into an end-to-end system that will handle back of house management; the company also just announced it was being acquired by American Express. Toast, who seems to add a new feature or partner every other week, recently added payroll management to its restaurant-tech arsenal.

According to the press release, xtraCHEF will use the new funds to continue growing both the product itself and the team of people working behind it.