Dive Brief:
- POS and technology provider, Toast, cut about 50% of its staff through layoffs and furloughs on Tuesday, Toast CEO Chris Comparato said in a blog post. That equates to about 1,300 employees, according to CNBC.
- The company’s revenue rose 109% in 2019 and it had been hiring to set up for another year of growth. With restaurant sales declining 80% in March following stay-at-home orders and dine-in closures, the company initially froze hiring, pulled back offers and halted merit increases before reducing its workforce. Toast’s leadership team will also reduce its pay, Comparato said.
- “With limited visibility into how quickly the industry may recover, and facing slower than anticipated growth, we now find ourselves in the unenviable position of reducing our headcount,” Comparato said in the blog post.
Dive Insight:
Over the last two years, Toast skyrocketed to $5 billion in valuation, receiving $400 million in new funding in February, which boosted its total funding to $900 million, according to Crunchbase. It was prepping for another year of growth, but the novel coronavirus has forced just about every restaurant and industry-adjacent providers to pivot their operations. About 97% of restaurants have been impacted by dine-in closures and restaurant customer transactions declined by 42% in the week ending March 29, according to The NPD Group data emailed to Restaurant Dive.
As restaurants were forced to transition to takeout and delivery, Toast offered its customers a one-month credit of software fees and three months of free access for customers and non-customers for online ordering, Toast TakeOut, gift cards and marketing tools. This helped restaurants save millions, but came at a cost to Toast, Comparato said in the blog post.
Toast is also going to face a tough global payments industry, with McKinsey expecting the industry to drop as much as 8% to 10% this year as opposed to growing 6% as it previously projected. Revenue is expected to decline $165 billion to $210 billion, comparable to the 10% to 11% reductions faced during the Great Recession.
That is a dramatic pivot for an up-and-coming company like Toast, which has greatly benefited by the growth of the restaurant industry, especially as many new and upscale restaurants turned to technology to modernize operations, according to CNBC. But even with Toast benefiting by additional funding in recent months, it is an example of what is to come with the rest of the restaurant POS industry, which will all have to face difficult cost-cutting decisions the longer this crisis continues and restaurants shutter or greatly pull back on spending.
