Let’s ignore Toast’s TAM issue for a second and just focus on domestic, US restaurants.
Toast has reached ~120K restaurant rooftops, which is nominally more than NCR or Micros ever achieved. The problem at NCR and Micros, as then-executives would explain it, was that churn just meant you were constantly fighting to add back the merchants you lost every year.
I think you’re exaggerating things a bit here, Jordan. First, there are a bunch of private highly profitable restaurant software companies that predominantly serve enterprise (think Crunchtime).
Second, Micros and NCR both built multi-billion dollar franchises before software companies even tried to capitalize on payments revenue…and captured most of the enterprise market.
I think it is hard to JUST have POS as your only product, but used as a platform engine it seems to make more economic sense. As PAR will likely show in 2025, once you’re selling all the side modules on your platform, you can build a profitable business. PAR flipped EBITDA positive this quarter and I don’t expect them to look back (maybe not GAAP Net Income positive because of amortization expense, but should get to FCF positive shortly). The contract they get with Burger King is miles better than the ridiculous contract they did with Arby’s originally.
The companies you mentioned are subscale, or their investors would have gladly paraded them out for an IPO to lock in gains.
Enterprise merchants pay pennies relative to their SMB counterparts.
Remember, NCR and Micros existed in a pre-internet era where the margins on hardware were enormous.
Now a merchant with an eBay account can find their hardware for fractions of what an old terminal would have cost.
Same with perpetual licenses in the tens of thousands of dollars per location.
It’s just a different world.
You cannot charge for hardware and software anymore.
That means you can only make money (and I say this with very, very compelling empirical data, clearly) on payments.
And enterprise merchants will not pay 7% effective rates like an SMB will.