Today, we are breaking down Toast, a name we have covered before but are revisiting because the story has changed enough to be worth telling again. Most listeners will have tapped a Toast terminal without thinking much about the business behind it. 

Our guest is Sean Barrett, founder, managing partner, and chief investment officer of Counter Global, who holds Toast as one of his largest positions and walks us through how a restaurant point of sale company became the operating system that runs the restaurant.

He argues that Toast is best understood as the operating system for the restaurant rather than a payments terminal with software attached, and that the business grows as fast and as profitably as it does because the company spent years building purpose-built hardware, a multi-tenant software platform, and a sales force on the ground before it moved into new markets across grocery, enterprise, hospitality, and international. 

We also discuss why a business winning roughly half of new restaurant openings in the United States still trades at a multiple that looks closer to a mature company than a category killer.

Please enjoy this Breakdown of Toast.

For the full show notes, transcript, and links to the best content to learn more, check out the episode page⁠⁠⁠⁠⁠⁠⁠ here.⁠⁠⁠⁠⁠⁠⁠

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Timestamps

(00:00:00) Welcome to Business Breakdowns

(00:03:19) Toast Business Overview & Financials

(00:06:31) Recurring vs. Reoccurring Gross Profit

(00:07:39) Nuance on Revenue Semantics

(00:10:05) Transformation from 2020 to Today

(00:11:51) Full Product Offering Overview

(00:14:13) Revenue Model — Recurring vs. Transaction-Based

(00:16:08) Net Take Rate

(00:17:22) Software Side of Revenue

(00:18:49) Hardware & SaaSpocalypse Connection

(00:22:31) AI Offering & What They're Shipping

(00:27:01) Impact of 8% Revenue Uplift for Restaurants

(00:27:12) Competitive Landscape

(00:32:44) Switching & Churn Dynamics

(00:34:52) Competitive Advantage & Moat

(00:37:43) Management Team & Culture

(00:39:57) $10B Gross Profit TAM & Runway

(00:44:01) Valuation Approach

(00:45:53) Key Risks

(00:48:32) Key Lessons