COVID has definitely made winners and losers of the market. Some businesses were entirely savaged for doing nothing wrong, while others have seemingly prospered overnight. In our tale of two cities we examine some recent acquisitions in the restaurant technology space.
First we have Touchbistro, who bought TableUp. TableUp primarily served table service customers, and they’ve been dying by the dozen. Undoubtedly Touchbistro picked up the asset at a great price given the strong headwinds in the segment.
The value to Touchbistro was really around loyalty, where Touchbistro partnered with loyalty provider ReUp early on only to watch the company be acquired by Lightspeed, a competing Canadian POS company. We know this irked those at Touchbistro who were concerned that Lightspeed now had full visibility into some Touchbistro customers.
The next acquisition on our radar came from SpotOn, the payments processor growing further into software. Seatninja, a restaurant reservation system, was surely struggling with the pressures on table service operators. Unlike TableUp, which operates in a hyper fragmented loyalty market, reservations are a David and Goliath situation, with OpenTable sucking all the air out of the room. In what can surely be assumed to be very favorable terms, SpotOn acquired Seatninja.
This marks more stack consolidation by POS companies. Some prognostications:
- Will the acquired products get better? It’s hard to devote the time and attention that a founder gives to a product (look at everything NCR has ever acquired as evidence of a worst case scenario), let alone the R&D budgets needed to keep them competitive with standalone products. So we think products will likely get more stale over time
- If you’re a third party selling a competing product into a Touchbistro or SpotOn customer, start adjusting your books to account for those accounts churning as the POS companies do what they can to place their competing products
- Restaurant customers using the acquired products will start getting pitches for POS and payments
We’ve covered enough stack monopolization to give you the gist of things.
As an independent dealer, carrying more than one of the “big” players products I can tell you first hand that the so-called legacy products (a pejorative term in my opinion) have been hung out to die. With the acquisition of a new cloud based product, I see the company leave the lion’s share of their current business vulnerable while they promote and move most resources to selling the new product. There is no logic, or common sense once you have corporate suits managing software. They are out of their element.
I’m not sure what will happen but a “legacy” POS is still what most places currently need and can afford. I understand the cloud is the future, but unless you are actively transitioning your base to the new product aren’t you just churning and burning?
I guess we’ll see now that some of the big boys grow weary of software development, it’s low margins and need for high quality people, none of which they are good at start to cut them loose.
Dan, everyone, including Oracle now, is jumping onto the payments bandwagon. You cannot make money with value in brick and mortar anymore, except perhaps at the enterprise segment of the market. I never met anyone who, deadpan, would believe something was actually free without ulterior motives until I saw what POS companies did to restaurant merchants. You cannot fix stupid.
6 months into the shutdown, runways are starting to get real short. I’d be interested to see your crystal ball of where restaurant tech M&A is heading or 2021 predictions in general. Toast has to be thinking of doing a SPAC, Square gets into ghost kitchens with Travis Kalanick, NCR buys Zomato to drive software innovation.