Toast Says Payments, Lending Are Digital Recipe for Retention

Digital transformation is serving up new efficiencies for the restaurant and hospitality sector.

With razor-thin margins, shifting consumer tastes and an insatiable demand for convenience, digital tools that optimize how chefs, servers and owners manage everything from orders to payroll have become the secret ingredient to staying in business.

That’s good news for cloud-based restaurant platform Toast, which on Thursday (Nov. 7) reported third quarter 2024 financial results that beat expectations and sent its share price up well north of 20%. 

“Toast delivered a strong third quarter, adding approximately 7,000 net new locations, growing our recurring gross profit streams 35%, and achieving adjusted EBITDA of $113 million. We are well positioned to finish out the year strong and carry this momentum into 2025. Our differentiated vertical software platform is at the foundation of that success, and we continue to innovate to deliver more value to our customers: this fall we launched new products like Branded Mobile App and SMS Marketing alongside over a dozen feature updates,” said Toast CEO and Co-founder Aman Narang. 

During the most recent quarter, Toast’s gross payment volume (GPV) increased 24% year over year to $41.7 billion and the number of total locations relying on Toast’s platform increased 28% year over year to nearly 127,000. The company’s annual recurring revenue from software-as-a-service grew by 33%, complemented by a 44% increase in subscription revenue. 

“Payments ARR grew 23% and FinTech gross profit increased 27% in the third quarter,” said Toast CFO Elena Gomez.

By automating back-office tasks, Toast and similar tech companies are letting restaurant teams focus on what really matters: the food, the ambiance and the customer experience. That’s where tech becomes less of a novelty and more of a game-changer.

Read more: Why More Restaurants Need to Bite Into Digital Transformation

In July, PYMNTS Intelligence interviewed Toast’s Michel Rbeiz, general manager of FinTech, on why innovations in payment variety and the use of data are key to restaurants’ future.

“Today we proudly serve nearly 127,000 locations, and we’re just getting started … Over the past three years, we’ve more than doubled our market share in the U.S. but weʼre still only at 14% penetration,” CEO Narang told investors on Thursday’s call.

Toast executives spent much of their initial remarks highlighting “healthy demand” for Toast Capital, a financial service designed to provide restaurants with access to funding tailored to their unique needs. Eligible Toast customers can obtain loans ranging from $5,000 to $300,000, which can be used for various purposes such as covering short-term cash flow, hiring staff, purchasing inventory and equipment, refinancing existing debt, renovating current locations or opening new ones.

“Defaults remain in line with our expectations, and due to continued optimization and the addition of forward flow, bad debt associated with Toast Capital is down relative to the prior year even as we scale the program,” said CFO Gomez.

The application process is streamlined, allowing restaurants to apply in just a few minutes. Once approved, funds are typically deposited as soon as the next business day after signing the loan agreement. Repayment is automated and adjusts with the restaurant’s daily sales, meaning payments are a fixed percentage of daily card sales processed through Toast. 

PYMNTS Intelligence has found that while most financial institutions (FI) rate their lending processes as very good or excellent, three in four are unable to fulfill the loan process — from application through approval to disburse funds — for both consumers and small to mid-sized businesses (SMBs) in the same day. Just 7% of FIs have an average application-to-fulfillment time frame of a few minutes for consumer loans, and even fewer can do so for SMB loans.

PYMNTS covered on Thursday how, with just 33% of FIs having automated their SMB lending processes, there exists a lot of greenspace opportunity in the marketplace. 

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