How Does Toast Make Money? Toast Business Model In A Nutshell

  • Toast is a cloud-based restaurant software company founded by Steve Fredette, Aman Narang, and Jon Grimm in 2012. After receiving the necessary funding, the trio was able to build a platform that revolutionized a restaurant industry plagued by archaic technology and slim margins.
  • Toast makes money by selling hardware combining point-of-sale systems, third-party payment processing, customer loyalty programs, and other value-adding features. The company also sells associated hardware such as cash drawers and receipt printers.
  • Revenue generation is split into the categories of digital ordering and point of sale. Each category features three, tiered subscription plans with varying degrees of functionality.

Origin Story

Toast is a cloud-based restaurant software company founded by Steve Fredette, Aman Narang, and Jon Grimm in 2012. 

Though the trio were all recent MIT graduates, they met while working for software company Endeca. When Endeca was sold to Oracle in 2011, the co-founders embarked on a mission to revolutionize restaurant point-of-sale systems. 

However, Toast had difficulty securing early funding because many believed the industry was too complicated and nuanced. Many restaurants were running antiquated systems that were over twenty years old because it was too difficult to upgrade. What’s more, investors were spooked by notoriously poor margins and tight budgets within the industry.

Toast initially began as a consumer app centered on mobile payments and customer loyalty. However, the company quickly pivoted to a full restaurant technology platform after the founders realized restaurant owners wanted something that could do more than just accept payments. 

By 2013, more than 1,000 merchants across the United States signed up to a service offering online ordering, gift cards, and consumer analytics. Impressed by the passion, drive, and ability of Narang in particular, former Endeca CEO Steve Papa got the ball rolling with $500,000 of his own money. Successive rounds of venture capital funding resulted after it became clear that Toast’s profit margins were sustainable and that the client base was rapidly growing.

The company now provides point-of-sale systems in more than 48,000 restaurant locations, with a recent IPO raising $870 million one of the largest in 2021.

Toast revenue generation

Toast makes money by selling hardware that combines point-of-sale systems, third-party payment processing, customer loyalty programs, and other value-adding features. The company also sells associated hardware including receipt printers, cash drawers, and magstripe card readers.

Importantly, the Toast platform can be used in the kitchen and integrates with restaurant-specific services such as Grubhub and OpenTable. 

Revenue generation is split into two categories: point of sale and digital ordering. 

Point of sale

Customizable point-of-sale packages are available to restaurants, with several plans available depending on the growth stage of the restaurant:

  • Pay-as-you-go (from $0/month) – a plan ideal for smaller restaurants that want to get up and running on the Toast platform. Features include starter kit essentials such as a point-of-sale terminal, tap payment device and router, point-of-sale software, and dedicated customer support. Additional hardware can be purchased as required for wan upfront fee and sometimes a monthly fee also. For example, a handheld device for drive-through and curb-side orders costs $389 plus $50/month.
  • Essentials (from $165/month) – for restaurants wishing to expand into off-premise channels. In addition to pay-as-you-go features, the essentials plan features online ordering and delivery, restaurant-grade hardware, and the Toast take-out app.
  • Growth (from $272/month) – for restaurants interested in using data to attract new clients and drive repeat visits. Additional features here revolve around loyalty programs, marketing tools, and gift cards.

Digital ordering

Toast also offers three plans for restaurants who simply want an online presence:

  • Toast Now (from $75/month) – offering online ordering, the Toast take-out app, and contactless delivery.
  • Toast Now Plus (from $100/month) – offering all Toast Now features plus e-gift cards. 
  • Toast Now Premium (from $175/month) – offering all Toast Now Plus features plus email marketing.

For all three plans, delivery services are also available at an extra cost. While there are no upfront costs for this service, Toast charges its restaurant partners a flat per-order service fee.

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Published by

Gennaro Cuofano

Gennaro is the creator of FourWeekMBA which reached over a million business students, executives, and aspiring entrepreneurs in 2020 alone | He is also Head of Business Development for a high-tech startup, which he helped grow at double-digit rate | Gennaro earned an International MBA with emphasis on Corporate Finance and Business Strategy | Visit The FourWeekMBA BizSchool | Or Get The FourWeekMBA Flagship Book "100+ Business Models"