We read yesterday that according to American Express, restaurant spending is rebounding quite nicely. The company’s CEO Steve Squeri told CNBC the company saw restaurant spending in May of 2021 totaling 85% of May 2019 levels.
“The people that are really spending a lot in restaurants [are] millennials — 130% in April of what they spent back in 2019,” Squeri told the business network. “We believe that that’s going to continue to move forward.”
To assure that its restaurant customers can extract as much profitability from this brewing rebound, restaurant technology provider Toast has added another piece of the puzzle to its end-to-end cloud solution. Toast has acquired xtraCHEF, a provider of back-office tools and solutions for restaurants.
What xtraCHEF does is make the hard stuff easy for restaurant managers. It tracks food costs and handles inventory management. These are two functions that can make the difference between success and failure based on how well (or poorly) they’re managed.
We looked at the xtraCHEF solution. One thing we noted that the company is deploying AI to help restaurant owners automate some key manual tasks. This makes a ton of sense for restaurant operators given the widely reported restaurant labor shortage. If an operator can automate some laborious data entry tasks, for example, that’s one more headcount they can deploy to the front of the house. After all, that’s where restaurants make the money.
We noted that the software has multiple integrations with other key restaurant industry vendors. This includes companies like Sysco, Xero, US Foods, and Restaurant 365.
To us, xtraCHEF looks like a data play. And that should fit nicely with Toast’s solution by enabling operators to see line item level detail related to their core food costs. Broadly speaking, xtraCHEF is a financial and operations management solution. The suite includes things like food cost management, budgets, procurement, inventory, and recipe management. It also offers vendor statement reconciliation and vendor rebates.
Toast CEO Chris Comparato said this about the acquisition. “Time is the most precious and scarce resource for restaurant operators who are constantly focused on growing their business while juggling the need to provide a delightful guest experience. Together with xtraCHEF, we immediately deepen our capabilities in automating cost management for restaurants, helping restaurateurs reclaim time previously spent navigating complex, manual processes and better understand their profitability, down to the menu item.”
While Toast has raised almost a billion dollars and plenty of industry analysts have expected a Toast IPO in 2021. Meanwhile, xtraCHEF is tiny, having raised just $10 million since its founding in 2015.
Andy Schwartz, CEO, and co-founder of xtraCHEF will remain with the company. That’s not surprising since the path to an IPO requires considerable management talent. He said the following about the transaction.
“Restaurant operators work far too hard to waste time and money,” Schwartz said in the deal announcment. “xtraCHEF’s automated tools and dynamic, interactive dashboards make it easy for busy restaurateurs to track, compare and control costs.”
We’d be surprised if Toast isn’t a public company in a year’s time. After all, they’re clearly assembling all the piece parts to be the end-to-end provider of restaurant cloud solutions.
One more thing. We have written in these pages considerably about the restaurant food delivery space. We note with considerable interest the data that American Express CEO shared about restaurant spending by millennials this April versus April 2019 and how that number was 130%.
Is this an early indicator that the delivery trend lines we witnessed during the peak of the pandemic are headed south and east? Not sure, but that data point should send some ripples through the offices of DoorDash and GrubHub.