Shu Chowdhury had spent the better part of his professional life building and deploying large-scale ERP and CRM systems in aerospace and financial industries. So when he was first exposed to hospitality and saw the tools that even the best operators were using he furrowed his brow. “I thought I was missing something,” Shu says. “Like, surely this is not as good as it gets.”
But it was.
In 2012 Shu decided he couldn’t bear the inefficiencies any longer and started Salido.
“Salido was and is more than a POS,” Shu explains. “When we created Salido we sought to eliminate all the problems we saw with current POS technology and how the restaurant industry suffered under its constraints. Salido is more of a rOS – restaurant operating system – than a simple POS. Our goal is to bring everything an operator could need under one roof so they’re not wasting time trying to piece together information from disconnected systems.”
Shu’s background in expansive systems leads him to see the benefits of combining everything. But it isn’t always that simple.
While Shu started work on Salido in 2012, he didn’t have a prototype until 2013 and didn’t launch the system into the wild until 2014. “I had hoped to reach our current position by 2016 if I were to be honest. Things just took a lot longer than I originally anticipated.”
POS is hard. It’s fundamentally a low margin business because of the paltry amount merchants pay relative to their excruciatingly long sales cycles. It’s also a game of infinite features, where every restaurant runs a little differently and thus demands their POS provider customize features to extract their pound of flesh. Why do you think Micros and Aloha took 30 years to reach their respective market positions?
Salido’s vision of their rOS compounds this drastically.
“We view the rOS as having great solutions for inventory, labor, and marketing. We think we can offer competitive solutions in each of these categories that far outweigh the perceived benefits of sourcing these solutions from disparate third parties.”
If this sounds a little familiar it’s because we’ve seen such efforts before.
The back office space has spent years – and tens of millions of investor dollars – trying to pull off the vision of Salido’s rOS, albeit on a smaller scale. Back office companies (and their investors) like Hotschedules (TPG), Compeat (Serent), Crunchtime (Battery), and Restaurant365 (Bessemer) have all repositioned themselves as a one-stop-shop for labor, inventory, reporting, and accounting solutions. Yet the reality is that none of them are able to provide a best-of-breed in each category. Hotschedules is still the leader in labor, Compeat is still ahead in accounting, and Crunchtime might be the industry’s favorite inventory provider.
Salido’s challenge, then, is going to be building solutions that go head-to-head with the aforementioned back office companies AND the entire POS industry.
“Look I’d be lying if I said it was going to be easy,” Shu admits. “But integrating all of these solutions makes the life of the operator so much easier it has to be done. We are betting that our rOS can be close enough to best-of-breed in all the of categories we touch that it makes sense for restauranteurs to use our system. Even the time savings of not trying to piece together insights from all of these separate systems will be huge,” Shu proclaims.
To give himself a higher chance at success Shu has culled restaurant experts to build Salido with the restaurant operator in mind. “We’ve found the best operators in the industry to help us hone the product over the last five years. Whereas most products present one interface and force restaurant departments to make it work, we wanted Salido’s products to be so effortless that we spent the time building views for managers, chefs, server so as not to interfere with their normal productivity workflow.”
Though unlike a number of legacy POS systems Salido’s rOS isn’t Salido or bust: if restaurant operators prefer to use third party solutions on top of Salido that’s fine too. “We have an open API that anyone can integrate into. There are no tolls and we are as far from a walled garden as possible.” And Salido has a little different approach on data. “A lot of POS systems out there own the merchants’ data. We take a different view and will never share data without a customer’s approval.”
With this unique vision Salido raised $15M from First Data, a large payments processor.
Shu says the fit with First Data felt good on many levels. “Firstly, we get to use their Clover hardware, which is undeniably best-in-class.” Many legacy POS companies couldn’t get their EMV solutions figured out so Clover became a very popular solution to work around the incompetence of non-software companies. So it’s been battle hardened. “Secondly, First Data gets us distribution… when we’re ready.”
Right now Shu and team are focused on targeting best-in-class operators and improving their POS feature set. “We’re standing up locations around the globe and really improving our feature set since something that’s only incrementally better is not good enough. We’ve been successful at great brands like Eataly and Restoration Hardware, proving that we can handle segments from quick service to fine dining.”
When we asked Shu when he would be expanding he thought it would be towards the end of 2018. “We want to prove how valuable a POS should be to operators. Once we’re confident that we can really scale out that machine we’ll explore distribution options. Some accounts will be direct, some will be through referrals, and others might be through the reseller channel. We will have to take that one day at a time.”
If Shu does go the reseller route that channel is going to need additional revenue streams on top of the POS. Currently Salido is doing all the support in-house since they have such deep restaurant expertise. “When a customer calls in they’re going to talk with someone who has been running multi-million dollar brands. We think that depth of support is very differentiated.” But is it scalable for a reseller?
Another dealer revenue opportunity is in the payments.
“The reality is that the collective restaurant industry is undervaluing the true cost of POS. The software market is being massively subsidized by venture capital and payments, which has pushed the market sideways. The unfortunate truth is that many customers are only considering low price POS options, even if they’re paying more over the long run on the payments contract. We can’t fight the market so we’ve had to make a payments play as well.”
Salido, like Breadcrumb (Upserve) and Toast, only works with their own payments processor: First Data. “A silver lining in this is that we’re able to capture customer card insights and marry that with the POS data.” That should remind you of another of First Data’s restaurant POS partners: Upserve.
Shu didn’t seem to think there would be any conflict between First Data having restaurant POS partners in both Salido and Upserve. “Upserve is a great tool but they have a different focus today. We’re doubling down on larger groups and a long tail of features, which we feel is a good bit differentiated.” The restaurant market is big, but this might become an issue down the road: if a lead is generated by a First Data payments rep, which POS partner gets the first look?
Lastly we asked Shu for his observations in the POS market. Going after restaurant groups run by celebrity chefs undoubtedly means he’s running into the likes of Micros and Aloha. Is there any movement at the top?
“This is obviously anecdotal, but I’d say 50% of the restaurants we talk to are considering new POS systems. Some restaurants are in the ‘If it ain’t broke, don’t fix it camp’ but those are your classic late adopters. Everyone else is waking up to the idea that the POS should deliver ROI and not be a cost center. If you’re in the ROI neighborhood of $20,000 a year per location – which Saildo easily is – the conversations get more serious.”
Here are our takeaways after reflecting on our conversation with Shu.
First, it’s good to see more cloud POS companies tackling larger, full service establishments. Most cloud providers today are focused on the long tail of merchants, many of them fast casual or lighter on features. To see a move of new technology upmarket – where it’s finding success – is good for innovation and progress generally.
Second, POS is undeniably the hub for future merchant value. Open, free APIs are a requisite for success here as well; it’s good that Salido has such a mindset. But it’s going to be really hard for Salido to build all these bolt-ons well enough to be competitive against third parties who focus on their one bolt-on 24/7. We have seen much greater success when POS companies partner with third parties to deliver this value. Look at the bolt-ons provided by legacy POS providers as proof of how this can backfire.
Third, while we appreciate Salido’s approach on data ownership the reality is that the restaurant industry comprises many horrible business people. If progress is to be made, POS companies should have access to merchant data for R&D purposes. We’re not endorsing a POS company’s right to share what Bob’s Burgers’ sales were, but we are endorsing their right to to aggregate that data to solve problems and build solutions that the restaurant industry would otherwise never develop on their own. This is fundamentally in the merchant’s best interest and why companies from POS to back office are changing their EULAs to own copies of the transaction data.
Fourth, it seems that there’s no way to build a POS product in today’s market without having skin in payments. We understand how lucrative payments can be but we remain skeptical of POS systems with only one payment option. This puts merchants at a huge risk for SMOPP. Do you trust your payments provider not to screw you? If you don’t have full conviction in a negatory response you could be making a big mistake.
Lastly, the POS is changing from a cost center to a revenue center. Much as the payments industry is struggling to find differentiation, POS is rapidly becoming commoditized as well. POS systems that are able to quantify their ROI (something merchants have struggled with for decades) will win this market in the long run.
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