Restaurant365 orders $175 million at a valuation of over $1 billion to supersize its restaurant software stack

The U.S. restaurant industry is expected to surpass $1 trillion in sales for the first time this year, despite greater economic pressures on consumers. Now, Restaurant365, a startup that creates technology to run these businesses, has raised a $175 million round to capitalize on that growth.

The funding is led by ICONIQ Growth with participation also from KKR and L Catterton, all existing backers of the company. Restaurant365 doesn’t disclose its valuation during the round, but Tony Smith, co-founder and CEO, confirmed to TechCrunch that it was an increase. “We are delighted that it continues to grow and that we have very supportive investors behind us,” he said. For some context, last year – when the startup raised $135 million – it revealed that it had surpassed a billion-dollar valuation.

The startup also doesn’t release updated usage figures. Last year we reported that its software was used in 40,000 locations, and that’s still the number it shares today. It appears that in 2023 the company will have generated $100 million in revenue, based on per-location pricing that starts at $469 per location per month.

Based in Irvine, California, Restaurant365 provides an all-in-one platform for restaurant businesses of all sizes to manage their accounting, inventory and workforce, along with an analytics suite for help understand trends within the business – anything that is essentially off topic. sales operations. Smith said the plan would be to use the money to continue to expand its product line, as well as its customer base, on the heels of the company’s purchase and digestion of ExpandShare, a training platform in catering, in April 2023.

“We are also planning funds for future acquisitions,” he added. Although Restaurant365 will be used by both independent restaurants and large chains, another major focus will be creating tools aimed at “big hotel brands,” he said.

Unlike many people who get into the world of creating solutions for business users, Restaurant365 doesn’t have its DNA in the restaurant world per se. “By the time I graduated from college, I had (only) 12 jobs, including one at a pizza place, so I wouldn’t say my restaurant experience was strong,” Smith said.

Rather, he was a technology enthusiast who saw an opportunity to solve a clear problem. “My first job out of college was in technology and it was exciting to see the future that software could play in all types of businesses.”

He, along with John Moody (chief strategist) and Morgan Harris (chief community manager), founded the startup in 2011 to address what they discovered was a pretty tough place for restaurateurs: they operate on very tight margins. thin (one of the reasons why so many restaurants end up dying: either owners give up out of exhaustion, or they can no longer do the math because of a variable like rising rent); and they run on a patchwork of software to get things done.

They may not have started with restaurants in their DNA, but they knew they had to graft it in to solve the problem.

“As technologists, we immediately surrounded ourselves with restaurateurs to fully understand the problems they were facing,” he continues. He said this included unlikely indigenous market research.

“We would go to restaurants and wait until they closed in the evening to speak with the manager, who must have been a little worried that we were stalking them,” he said. “I remember asking for a clipboard so I could count inventory with them, and they probably thought we were crazy for participating in their work for free. (But) it was shocking to learn how complex running a restaurant is due to the need to reduce food waste, control costs and manage labor.

It seemed like a strong match though. “The problems restaurants were struggling to solve were a perfect fit for our skills, and when we looked at what was available in the market, we knew we could create a more comprehensive solution to help restaurants thrive,” he said. he declared. “Restaurateurs work very hard and it’s a privilege to work with them and help solve these problems.”

That being said, the market is truly overflowing with restaurant software, from point solutions to those that take an all-in-one approach. The biggest players include Toast, Lightspeed and Crunchtime (no relation to TechCrunch!).

Smith says it’s the only one that consolidates the functions it performs (indeed, many others targeting the restaurant industry start from point of sale or labor management, rather than combination offered by Restaurant365).

“Our key differentiators are that we are all-in-one and restaurant-specific,” he adds.

Will Griffith, founding partner of ICONIQ Growth, said the startup’s attack was all the more appealing because it brought together essential functions in a usable way.

“The Restaurant365 suite consolidates essential functions such as accounting, inventory management, payroll and employee scheduling into a unified system,” it said in an emailed statement. “Whether enterprise brands are cutting expenses or investing, they still need a continuous flow of information to quickly identify areas needing improvement, whether it’s people management or procurement , in order to consistently and dramatically reduce costs and improve profitability.

That being said, there is a large opportunity for consolidation, given the large number of players offering point solutions in the market.

“When we started the business, we encountered countless restaurants that were struggling to survive with multiple disconnected systems that led to inefficiency and limited visibility,” Smith said. “We have launched a consolidated product and we are grateful that operators and the market at large have validated this strategy by trusting us with their business and demanding that technology providers create more comprehensive offerings.

“While we have made a number of acquisitions, we also continue to invest heavily in our product development and research teams and will continue to do so. For us, the question is not whether to add more products organically or through acquisitions. The question is what will add the most value to our customers’ businesses. Then we go out and do it.