Latest Toast Demands Irreparably Harm Industry and Look Desperate

Before we get started we just want to point out that we said this would be precisely what Toast does to their “partners” years ago.

Why did we say this about Toast (and NCR) and nobody else?

Because by our accounts, they have a morally corrupt culture.

All you have to do is look at how they tripled payments margins on their own customers during the pandemic and it tells you everything you need to know about their priorities.

Toast has raised so much money – and is so voracious – that they want to own everything.

Everything.

Non-Toast software providers are just inconvenient speed bumps on Toast’s path to world domination.

It doesn’t matter that Toast’s analogue is almost always inferior nor more expensive: all that matters is Toast wins.

We’ve had a handful of Toast integration “partners” (third party software companies that support Toast merchants and thus integrate to Toast) tell us that Toast is now demanding such ridiculous concessions that we didn’t even believe they were real.

Except that they were all so similar the odds of collusion were just too small…

Then we saw Toast’s written demands and HOLY SHIT.

There are three consistent components to Toast’s demands, though the economics appear to fluctuate a bit.

Toast Payments

Many third party softwares process payments in their own applications. A good example would be an online ordering software that processes online orders, likely using a provider like Stripe.

Well, Toast is demanding that these third parties use Toast payments to process transactions in their application. So instead of using Stripe’s feature rich, nicely documented API, the online ordering company needs to use Toast payments.

Toast appears to acknowledge that their current payment offering is nowhere near as robust as stand-alone processing providers like Stripe (shocker), but they’ve been unwilling to let that get in the way of demanding that third parties move to Toast payments.

More concerningly, Toast has not offered development dollars or resources so these third parties can successfully move over their processing, and we’ve yet to see an instance where Toast is willing to share payment economics with the third party software.

What a raw deal.

Oh, so you like using a robust payments API that you could easily integrate, support, and make money on? Should have thought about that before you sold to a Toast merchant, you dip shit. LOL boy you are stoooopid.

Likely Toast corp dev conversation

Square actually has a similar payments model BUT they rev share payments with the third party partners.

Sigh: we warned third parties that Toast would do this.

SaaS Revenues

Referring business to other vendors is common practice. The standard economics for a referral are 10% of the first year SaaS revenues.

And usually everyone is okay with this: the recipient gets a customer they didn’t have before, and the the referrer gets some greenbacks for creating the value.

But what if someone demanded recurring revenue on every single one of your customers because they just happened to use their software?

Then you’d be able to call yourself Toast! (Or NCR to the historians out there)

Toast is demanding that third parties pay ~20% of their recurring SaaS revenues for any MUTUAL customer, even if the third party originated the customer themselves.

This is wild.

As if selling SMB restaurant wasn’t hard enough, this KILLS the CAC:LTV for virtually any vendor.

It’s not like Toast merchants aren’t already paying for API access: they pay something like $25/mo/store for unlimited Partner Connect integrations (outside of the third party delivery companies, but that’s moot for our purposes here).

This is just fucking evil, and nobody else in the POS ecosystem that we know – except NCR – demands this.

Blackballing

Lastly, if the third party doesn’t concede on these points in totality then Toast will no longer support the integration, and the third party cannot board any new Toast customers.

Let’s just play this out a bit.

Assume the third parties agree to these concessions.

They’re not going to be content to give Toast 20% of their revenues, all their payments margin, and go out of business.

Instead, they’re going to increase their costs 20%+ to the end merchant.

So now that Toast merchant is paying substantially more for third party solutions just because they chose Toast.

Total cost of ownership (TCO) on Toast is now drastically higher than that of another POS system.

(If you see the parallels to high tax states and nations, congrats).

And Toast probably loves this, actually.

Because remember, Toast wants to own the world.

Their management team is undoubtedly growing chubs just thinking about how to push out any non-Toast solution from their customers so they can swoop in and shit the bed with their inferior version of the product.

“But remember, 7Shifts was soooo expensive (because we feed them to death, shhh). Now you have Toast labor, which is better!”

The timing was no doubt catalyzed by Toast’s precipitous decline in share price, but we had seen this coming for years. All one had to do was look at the culture at the top.