RIP Revel. Let the Feasting Begin

Hate to see it.

In 2020/2021, Revel fielded offers from potential suitors in the high 9 figures, but Revel’s owner, PE fund WCAS, wanted more than a billion dollars.

You know what they say:

Revel just sold for relative pennies on the dollar to Shift4, who paid about $250M for the business.

Let us break out all the mistruths (or as we see them, lies) in Shift4’s messaging on the acquisition.

Mistruth #1

Shift4 offers payments and other technology to a range of industries, including restaurants. Its restaurant POS system, SkyTab, is used by operators of many large chains, including Burger King, Applebee’s and Denny’s.

Huh?

What chains are using SkyTab as the mandated POS?

A CIO would get fired so fast they’d never consider this purchase. There might be some fringe franchisee somewhere who hasn’t upgraded to the corporate POS mandate, but we know that none of the brands referenced above use SkyTab at a corporate level.

Culturally there is no way any large restaurant operator (with a brain, which is perhaps a huge disqualification in itself) would choose SkyTab.

It’s just too risky to put your entire IT stack at the hands of a peak-payments-bro company that spends trivial amounts on R&D.

And this $44M number is probably wildly inflated.

That Shift4 chooses to capitalize R&D tells you all you need to know: no real tech company does this.

Software is capitalized and then amortized instead of being expensed when the company wants to show lower reported expenses and therefore higher net income.

Across the industry, about 57% of public U.S. software companies capitalize some percentage of their R&D spend, though notables such as Salesforce, Amazon, Workday, and Atlassian capitalize less than 1% of their R&D spend.

By comparison, Toast spends $350M a year on R&D.

And it’s not capitalized.

Mistruth #2

[Revel] was an organization that intentionally overlooked payments for a very long time… So, instantly, you have the ability to pursue existing customers, switch them over to payments.

Jared Issacman, CEO Shift4

Bro.

Revel had been juicing payments the last few years.

Juicing.

We had seen merchants doing hundreds of millions in volume that should have been paying 8 bps of margin paying an effective 40 bps.

And Revel eschewed the SMB merchant to focus on mid-market accounts.

So now these mid-market accounts are expected to pay how much more than market rate for payments?

3x?

4x?

Here’s how Shift4’s communications will go:

Shift4 to Revel merchants: our bugs won’t be fixed and you won’t get the features you need. But we have better news: you now get to pay 5x market rates for payments so our CEO can space walk! Aren’t we generous?!

What’s interesting is that as of late, Shift4 is hiding that they cornhole restaurants (and no, we’re not talking about an innocuous game of tossing bean bags into a hole on a slanted piece of plywood).

Used to be that they broke out payment margins by vertical, but we have to go all the way back to Q3 2022 to get to the truth of the matter.

Let’s bring this image back up so all the Revel merchants can prophylactically start covering their rectums for what’s coming.

Shift4’s new positioning – which is so terrible it could only work on dumb shit restaurants – is that Shift4 is “a third of the cost of the leading competitor [Toast].”

Look at this misleading masterpiece put out by Shift4:

Gotta squint real hard at the red box we highlighted.

For those in the back,

Analysis EXCLUDES COST TO ACCEPT PAYMENTS AND ASSUMES PAYMENT PROCESSING COST IDENTICAL for both SkyTab and Primary Competitor

Hilarious Shift4 positioning

Lolz.

Did Shift4 suddenly and conveniently forget what they published in Q3 2022:

… 76 bps of blended payments margin…

Toast merchants are paying 55 bps (although Toast publicly announced that this is going to increase).

Shift4 restaurants are likely paying 100 bps in payments margin and Shift4 didn’t want it out there so that’s why they stopped reporting on the metrics this way.

Which would mean that Revel merchants, which are primarily mid-market in size, are going to be paying 10x market rates to keep Revel POS.

Revel merchants: START SHOPPING FOR A NEW POS IMMEDIATELY.

Mistruth #3

You don’t need two restaurant products… You’re going to take the best capabilities out of Revel for QSR and enterprise and bring them over into SkyTab.

Jared Issacman, CEO Shift4

Yea, Shift4 going to do this with their prolific R&D investments?

Please.

See above.

Lightspeed struggled in their tech stack consolidations and they’re spending $140M a year in R&D.

Fellow payments bro Global Payments is impotent in the POS space despite acquiring 5 restaurant POS companies for the same reasons Shift4 is all bluster.

Here’s a quick summary for Revel

• They were always challenged because of their choice to run on iOS. You’re trying to sell the most expensive hardware to the cheapest people on the planet
• WCAS, like all finance bros, got greedy. This ultimately cost them a lot of money
• There are very few exit options for retail/restaurant tech. Because merchants refuse to pay for value, the industry is a graveyard

Now the feasting begins.

Shift4 starts feasting on Revel merchants by jacking up the rates.

And POS competitors start feasting on Revel’s merchants by winning them away from a payments bro company.

We predict that Revel’s rate of attrition will be very high over the next 8 quarters as merchants are shown this article, decline to read it (they’re actually illiterate so it’s not even a fair judgement), get a call from their banker telling them that they’re bleeding money, then move POS providers and refuse to pay that vendor anything either.

A business that serves merchants has only ever made money by stealing from merchants.

Shift4’s about to teach a master class from orbit.