In the span of a decade, Toast transformed from a three-person team into the toast of the restaurant tech world, integrating everything from orders to payroll under one roof and locking in tens of thousands of loyal restaurant customers along the way.

In plain English, the average restaurant on Toast increased its spending by 35% compared to the prior year. This ultra-high retention signals how deeply Toast embeds into its customers’ operations - once onboard, restaurants keep finding more Toast services to adopt, making it harder to ever let go.

Here’s what you’ll learn: 

It’s 2013, and a typical restaurant’s “modern” POS is anything but. Most eateries are running legacy point-of-sale systems (think clunky touchscreens and bulky servers in a back closet) that haven’t changed much since the 1990s. These on-premise setups demanded massive upfront investments, typically $10,000 to $15,000 for hardware alone, plus hefty installation and support fees. Despite that lofty price tag, they delivered sluggish performance. In fact, older POS terminals often suffer 10–15 second delays per transaction, causing longer lines and lost sales during the rush. For restaurant staff and customers, those extra seconds feel like an eternity, adding to the frustration when tables are waiting.

Besides being slow and expensive, legacy POS setups were painfully inflexible. Adding new features or integrations was often impossible. Introducing online ordering, gift cards, or analytics required expensive upgrades or manual workarounds. Most systems couldn't talk to modern software, forcing restaurants to re-enter orders from third-party delivery apps or run payroll in completely separate systems because the POS couldn’t talk to the HR platforms. All this led to wasted time, data errors, headaches, and frustration.

To make matters worse, these systems locked restaurants into long-term vendor relationships with steep maintenance contracts. Need to update a menu or fix a bug? Call a technician and pay extra. By 2022, 81% of independent restaurants were still stuck on traditional legacy systems. In an industry with razor-thin margins, operators were literally paying the price for outdated tech. The pain was real, widespread, and ripe for disruption.

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Toast founders Steve Fredette, Aman Narang, and Jonathan Grimm spotted an opportunity others missed. Founded in 2011, the trio recognized that restaurants didn’t just need another generic POS system, they needed modern technology built for their unique workflows. That insight shaped the strategic decision that created their competitive moat.

First, Toast chose Android over iOS. While most competitors built on Apple's closed platform, Toast bet on Android's open-source flexibility. This let them customize everything from kitchen printer fonts to tip-sharing rules. When restaurants requested larger screen buttons or specialized workflows, Toast could adapt instantly. Competitors locked into Apple's rigid ecosystem couldn't match that responsiveness.

Second, Toast integrated payments directly into the platform. Rather than just selling software, Toast became a payment processor, capturing a slice of every transaction while making the entire system work seamlessly. Online ordering, gift cards, and loyalty programs all flowed through one system, eliminating the data errors and wasted hours that plagued multi-vendor setups.

Third, they expanded strategically beyond the POS. The 2019 acquisition of StratEx brought hiring, scheduling, payroll, and compliance into the platform. Everything connected: handheld devices sped up table turns, loyalty data automated marketing campaigns, and each new module added more friction if considering making the switch to a competitor. By 2021, 59% of Toast customers used four or more products beyond the core POS.

Toast's business model exploited a simple truth: restaurants that succeed on the platform spend more over time. In 2021, the company reported 135% net revenue retention—the same customers generated 35% more revenue than the prior year. This wasn't upselling or price increases. Restaurants that grew their sales processed more transactions, triggering higher payment processing fees for Toast. The platform's success was directly tied to customer success.

The unit economics proved the model. Toast captured revenue three ways: subscription fees for software, transaction fees on payments (typically 2.5-3% of gross payment volume), and ancillary services like lending through Toast Capital. As restaurants processed more sales, Toast's revenue grew automatically. By 2024, the company processed $159 billion in annual payment volume, every transaction generating a small but predictable margin.

Scale validated the economics. Toast grew from 57,000 locations in 2021 to 134,000 by 2024, capturing roughly 16% of all U.S. restaurants. Revenue jumped from $823 million in 2020 to $4.96 billion by 2024, a sixfold increase in four years. The company went public in September 2021 at a $20 billion valuation. Annual churn remained around 10% despite serving price-sensitive small businesses.

Most importantly, the model reached profitability. Toast achieved positive adjusted EBITDA in 2023 ($61 million) and full GAAP profitability in 2024 ($19 million net income). The path was clear: acquire restaurants, grow with them, capture increasing payment volume, and compound returns over time.

Here are the lessons you can apply: 

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134,000 - Number of restaurants served by Toast as of 2024, or 16% of US restaurants

$159B - Toast’s total payment volume in 2024

200+ - Number of third-party integrations in the Toast ecosystem, allowing restaurants to connect delivery apps, reservation systems, accounting tools and more directly into Toast

43% - Portion of Toast customers using six or more Toast modules in 2023

12% - Reduction in first-year failure rate for restaurants using Toast

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