The Scene
The restaurant industry went through one of its most tumultuous periods in years when Covid hit, with millions of jobs suddenly lost, followed by a worker shortage when the economy recovered.
One way many restaurants coped was through technology, which boosted Toast. The $13 billion company makes software that acts as a kind of operating system for those businesses. It has also expanded into new areas like marketing and AI assistants, and now says it has so many restaurants signed up that half a percent of the country’s GDP runs through its systems.
Toast co-founder Aman Narang took over as the company’s CEO last year, two years into its debut as a public company. I spoke to him about what it’s like going from a scrappy startup to a public company, and what the AI-enabled restaurant of the future might look like.
The View From Aman Narang
Reed Albergotti: One of your big value adds for restaurants is marketing. How do you see the discovery of restaurants changing in this new AI world?
Aman Narang: It’s a hard problem. At the highest level, I think one of the most important things most restaurants face is driving demand. Pre-Covid, you could have a great restaurant if you had good food, great service. And today, it’s great food and great service, and you also need to have a great digital presence. One of the things that platforms like Toast offer is the ability to build all of the stuff in the restaurant, but also put together a world-class digital experience, whether it’s your website, your online ordering, the ability to understand your guests and their data, the CRM to remarket to them.
Where AI can play a role is to automate some of that. One of the things we’ve done is our CRM platform, you can give it a few signals or cues so it can create thoughtful campaigns and AB test them and get feedback. It’s starting to help restaurants generate demand on their own without having to do a lot of manual work that often they don’t have the time to do.
Is it to the point where a mom & pop restaurant owner who is not tech savvy can get insights that normally would take a data scientist?
That’s the direction we’re headed. One of the things we just launched is this benchmarking capability. One of the hardest things restaurants deal with is there’s not a lot of great data that is actionable. Staffing: They have some data, but it’s not perfect. They’re looking at the weather and looking at demand the same day, last year, last week, but there’s not a lot of perspective beyond that. How to price menus, what to put on menus, how to think about how many people to put in the front of the house or the back of the house?
With this tool called Sous Chef [an AI chat assistant], we give them really easy insights on three, four or five things you should really consider or pay attention to, or change or factor in as you think about your operations. It could be things like what to put on menus for concepts that are very popular in your zip code, how to think about inflation trends, how to think about pricing. It’s still early. I wouldn’t say it’s quite like having a data scientist on staff, but you start to see early signals.
As generative AI gets more powerful, is Toast eventually going to become the automation component of a restaurant? Will you be handling everything from AI chatbots to robotics?
I’ll share a bit on the evolution of the company and maybe that’ll give you some perspective on that question. The reason platforms like Toast took off is a lot of this technology, believe it or not, in 2012 and 2013 was actually in servers in the restaurant. So you can imagine restaurateurs. They’re not technologists. They’re not CIOs. It was like oil and water trying to manage all this infrastructure. Just moving to the cloud made it operationally simpler, made it more cost efficient.
As we grew, we added capabilities. A lot of this was customer driven. We added fintech capability like payments and lending. We added the capability to manage the guest experience. This is the website, the online ordering, the loyalty programs.
As we think about the next decade, that’s a big part of our ethos. We believe we have to innovate on behalf of restaurants, so we’re certainly tracking all the trends very closely. There are things that will happen in the next decade. There might be voice AI at the table that augments the server. There might be times when you just want to leave or have your water refilled.
How it plays out in the restaurant ecosystem, whether it’s robotics or AI, I think a lot of it is figuring out what people want.
What will be automated in the future and what will remain human?
Some of the work that is more manual [will be automated]. When you go out to eat, you don’t realize how much manual work happens in the background. Scheduling staff, paying staff, tracking inventory, there’s so many workflows. There’s a lot of opportunities to automate what is more manual.
If you’re a restaurant, it could take a lot of time to manage your staffing, scheduling and paying employees. That’s a problem that’s ripe for disruption.
On the kitchen side, I don’t think robotics could do the last mile, in terms of what makes a chef a chef. But in terms of some of the prep, I do see opportunity. Devices that can make eggs or chop food or do some basic things. That’s likely where you see innovation in the mid term.
In terms of the front-of-house experience, you see opportunity for technology to create automation in workflows but also create personalization. One of the things restaurants struggle with is yield optimization. You see that in hotels, flights. Restaurants might do happy hour, but you could do more data-driven strategies to drive more demand.
The technology exists to recognize that Reed is here, and Reed might have or a family member might have an allergy, or what is Reed going to like on the menu. Checking out could be a matter of just walking out.
It’s like what a fine dining restaurant might do or a nicer hotel might do. Bringing that to life at scale with data, I think, is something that’s very much possible.
Can you use AI to change restaurant menus? I remember years ago, there was a trend where restaurants in San Francisco used data to figure out that they should stop being a pizza restaurant and instead become a chicken restaurant. Is that the kind of thing that will happen?
One thing our benchmarking tool does is to help restaurants benchmark against restaurants like them in their zip code and give them that perspective. One question that comes up is, ‘Am I pricing my menu right?’
I think telling them if they’re the right kind of restaurant, that’s going too far. But are you staffing your restaurant right, are you getting supplies from the right suppliers.
The thing you should be careful about is that you actually have to close the loop and show the impact and show when it doesn’t work. Because these things aren’t perfect.
But the data is absolutely there to say ‘Here’s four items on a menu that you can consider,’ or ‘Here’s how you should think about pricing your drinks and the range of the prices or the sizes.’ There’s a lot we’re starting to do there.
On the subject of pricing, we’ve seen what’s happened with inflation, and food has been particularly hard hit by that. Are restaurants charging too much or not enough in general?
A lot of these customers are small business owners. Restaurateurs are often dealing with the here and now, because they’re just running their business today. They’re on the frontline, serving us, dealing with an angry customer. They’re dealing with a kitchen issue, they’ve got a dishwasher down.
They’re paying attention to inflation trends and doing something about it, but has that translated as well as a big box store? Probably not.
It’s been really tough through Covid. They’ve dealt with inflation and labor challenges. They’ve got to be thoughtful about what they do with these challenges, because you can pass on the cost to some extent to guests, but it’s not easy to manage that.
Pop culture question: Have you been watching The Bear?
I’ve watched one episode, I need to watch more of it. Every time I talk to restaurant owners, they talk about how that show just brings to life what it is like working in restaurants. In the episode I did watch, they have all these online orders and the restaurant can’t fulfill them.
I remember one of our customers in the Boston area, they were launching online ordering and they wanted to run a promotion to get the word out. And I think it was dollar burritos, and it broke the restaurant because of the demand.