Toast S-1 Reveals the Anatomy of a Successful SaaS Business

As analysts and industry observers, we are always excited to see real data. Too often we hear from industry players that “they’re crushing it” or “sales couldn’t be better”. We listen and take in those comments, often with often a grain, or many grains, of salt. So when companies pursue the path toward public ownership via an IPO we are always eager to pore over the strategic and market descriptions. We tend to focus less on financial structure issues. 

So as Toast, the restaurant point-of-sale platform pushes ahead with its IPO, we are rewarded with an opportunity to examine real numbers. Sure every company put its own spin on the numbers. But in the end, the numbers are the numbers. 

The Toast S-1 filing begins with an overview of the company’s current progress. After a decade of operating, Toast now has nearly half a billion dollars of annual recurring revenue. As a point of comparison, when EverCommerce filed its S-1 earlier this year, the company reported about $321 million in recurring revenue.

Will There be Any Crumbs Left After Toast Goes Public?

Similarly, Toast is reporting that 29,000 customers are driving its revenue. That works out to over $17,000 per year per customer. For EverCommerce, that same calculation comes out to $642 per year per customer. 

The reason we highlight these numbers is because of the considerable strategic differences. Toast is a SaaS solution built entirely for the restaurant industry. The company’s focus on this single vertical has resulted in truly impressive APRU. EverCommerce, on the other hand, chose a strategy of building and selling SaaS to three broad categories of small businesses. This led them to a much lower APRU. Albeit, with a much larger customer base — 500,000 versus 29,000 for Toast. 

Upper Tier Net Retention

Digging deeper into the Toast filing reveals more interesting data points. The company offers a Net Retention metric of greater than 110%. Again, by comparison, EverCommerce’s Net Retention was about 100%. And last month Thryv’s reported Net Retention was up to 92%, which was up 24 percentage points from the prior year. So as you can see, Toast is in a class by itself in terms of Net Retention. 

Here’s how Toast describes what it does:

Toast is a cloud-based, end-to-end technology platform purpose-built for the entire restaurant community. Our platform provides a comprehensive suite of software as a service, or SaaS, products, financial technology solutions including integrated payment processing, restaurant-grade hardware, and a broad ecosystem of third-party partners. We serve as the restaurant operating system, connecting front of house and back of house operations across dine-in, takeout, and delivery channels.

In many respects, Toast is the poster child for the all-in-one solution that we’ve written about time and time again. The company’s focus on the restaurant space affords it the ability to consider the business challenges of running a restaurant from every dimension. As a consequence, their Net Retention rate and overall ARPU are very impressive. 

And from the looks of things they’re really just getting started. The company says are some 22 million restaurant locations driving $2.6 trillion of annual revenue on a global basis. There are certainly some very large multi-location operators among that 22 million. Think McDonald’s (40K), Subway (40K), Burger King (18K). And we don’t see big operators like that moving off of their proprietary platforms. So if we net out the hundreds of franchise operators and many thousands of associated locations, there still remains a sizable untapped market for Toast. 

Toast Bolsters Platform as Restaurant Recovery Accelerates

Not Two, but Three Stakeholders

The prospectus lays out the three principal stakeholders that the company is focused on helping. These are the restaurant operators, the guests, and the employees.

This three-legged stool framework is forward-looking and smart. Many prospectuses we’ve reviewed focus solely on two legs. Usually the business owner and their customers. By adding the employee dimension into its thinking, Toast recognizes that we’re a long way away from robots taking our orders and preparing our food. Instead, this acknowledges that how critical employees are to the equation. After all, diners rarely interact with the actual owners.

Here’s what Toast says about each of the three stakeholders.


We arm restaurants with a wide range of products and capabilities to address their specific needs regardless of size, location, or business model. As a result, restaurants using Toast often see higher sales and greater operational efficiency. Given the super-thin margins that most restaurants operate on, helping the operator achieve higher sales and margins is critical for the restaurant’s success and by extension for Toast’s success. 


We are laser-focused on helping our customers deliver memorable guest experiences at scale. Guests can place orders easily, safely, and accurately across web, mobile, and in-person channels for dine-in, takeout, or delivery. In addition, our platform empowers restaurants to utilize their guest data to deliver targeted and personalized experiences with loyalty programs and marketing solutions. In June 2021, we saw an average of over 5.5 million guest orders per day on our platform. We think the focus on guests placing orders easily – no friction – safely (Covid) and accurate – no mess-ups – is really smart. Those are key factors in retaining customers and building loyalty. 


Our easy-to-learn and easy-to-use technology improves the experience of up to 500,000 daily active restaurant employees across Toast customers. Employees are core to delivering great hospitality, and it is critical for restaurants to engage and retain employees in an increasingly competitive labor market. Our products enable new employees to learn quickly through guided workflows, facilitate faster table turns and safer, streamlined operations, and provide greater transparency around, and timely access to, employees’ wages.

This is where Toast is really smart to pay attention. We all have read about the shortage of capable, qualified employees to work in restaurants. We’ve also seen the stories about how burnout has driven many restaurant workers from the industry. As a result, and we saw this first hand in New York City recently, individuals who may have been bussing tables are now being prompted to servers. Toast, by focusing in on “enable new employees to learn quickly through guided workflows . . . “ will address a key industry pain point head-on. 

The figure below offers a pretty compelling view of their “flywheel”.

Just Getting Started?

Like is written in so many S-1 filings, this company too believes they’re in the early stages of growth. They believe they’ve penetrated just 6% of the potential restaurant locations and their revenues represent just 3% of a $15 billion market opportunity.  

Like other SaaS for SMB companies, Toast has benefited greatly from the last 18 months of the pandemic. The pandemic compelled many small business operators to finally adopt new cloud technologies to help with their operations.

The pandemic hit the restaurant industry particularly hard. This was especially true in the early stages of the pandemic. But now, those operators who did move forward and adopt appropriate technology and learned how to utilize it are well ahead of their peers.

We tend to believe those operators are also a large cohort of Toast’s customer base. That suggests they’ll be around for a while, which bodes well for Toast. After all, the restaurant industry has a notoriously high failure rate. If Toast can deliver on its value proposition, we’d expect fewer restaurant start-up to be, well, toast. 

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