Business Breakdowns
· Sean Barrett
[00:00:00] S1: There are three or four risks here that we think about and talk about and debate a lot. One is just macro exposure, and you hit the nail on the head early in the call. How much of that fintech gross profit is really recurring? And I think in the restaurant business, it is a tough industry in some ways. In other ways, it's also a really great industry. It's a big market with $1 trillion of volume every year. It does grow. And in tough times, we've actually seen the restaurant industry is super resilient. So if you go back to 2008, 2009, I think the restaurant industry as a whole was down low single digits, one of the better performing industries in the economy because it turns out that no matter what's going on, people need to eat. And even in tough times, they wanna go out and they wanna eat and socialize with friends or family. The second thing we think about a lot, which we talked about today, is industry churn and how that plays out for Toast over time. So we follow the data, and so far what we've seen and what we believe we'll continue to see is industry-leading gross retention for Toast versus the competition. But it's certainly something we wanna stay on top of. The third thing we think about is the price sensitivity of the customer base and how much ARPU can you really squeeze out of the customer base over time. If this was a price game and we were betting on a lot of growth to come from pricing, we would be more concerned about this. What we've seen from the Toast management team, which again is super innovative, thoughtful, customer first, is that they're coming out with products that can be meaningfully high ARPU for Toast, but also a really good ROI for the customer. Toast Grow marketing is the perfect example. $500 a month sounds like a lot when you're talking about a customer that probably has $150,000 or $200,000 of profit per year. But then if you put it in the context of raising revenue for your customer by $100,000 and replacing another cost bucket that they have where they're already spending $10,000, it actually becomes a no-brainer, and it's a win-win for Toast and the customer. And then the last thing, I saved it for last, but it's probably the risk that we stay on top of the closest, is competition. We're always talking to customers. We're always surveying customers.
· Sean Barrett, Matt Reustle
We go put feet on the street and boots on the ground to make sure that Toast is winning in the wild, but it's something that we stay super close to. [00:00:00] S0: This has been timely and fascinating, and Toast has extended way further than I had imagined before researching the name. What stands out to you as a key lesson from this business that you could apply elsewhere? [00:00:00] S1: I've known the Toast team a long time. The restaurant industry is really hard, and Toast has been through a lot over the years with COVID, now the SaaS apocalypse. They always come out on top. And so why is that? I was reflecting on why that is, and what they've reinforced for me, I think, is a lesson of resilience. Work hard, expect the unexpected, put the customer first, learn from your mistakes, and I'll leave you with a pun, stay hungry. [00:00:00] S0: I love it. Well, Sean, thank you again for coming on, sharing the knowledge, making it timely. This has been a true pleasure. [00:00:00] S1: Thanks so much, Matt. Awesome seeing you.