Restaurants in 2019 continue to face several challenges, including everything from attracting and retaining customers to hiring and training staff. These challenges, both customer-facing (“Front of House”) and operations-focused (“Back of House”), keep restaurant profit margins low at 6% and contribute to the industry’s high failure rate. Increasingly, restaurants are more attune to these pain points and seek out restaurant-focused software and tech-enabled outsourcing solutions to increase sales volumes and reduce costs. As a result, the restaurant tech stack continues to evolve, providing restaurants with more options than ever to help them improve and grow their businesses.  Catalyst has a wealth of experience backing vertical-specific businesses, including one currently in the Restaurant Tech space (ChowNow). We believe restaurants will continue to actively seek out best in-class restaurant-specific solutions, and are eager to partner with more of these businesses seeking growth equity capital. At Catalyst, we employ a proactive, research-based approach to investing, targeting sectors experiencing outstanding growth. If you are an owner, operator or investor in a growth stage Restaurant Tech company, we would like to hear from you. Please send inquiries and business plans to kapil@catalyst.com.

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Restaurant Tech
September 2019
Kapil Desai

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Restaurant Tech Overview
 Investor’s Perspective: The restaurant industry has clear pain points on both the customer-facing side as well as
the operational side and will continue to benefit from the adoption of industry-specific solutions
• Restaurants struggle managing their workforce – high employee turnover and low morale manifest in higher
costs, mismanaged processes and a worse diner experience
• The procure-to-pay function within restaurants is antiquated, leading to waste, expensive accounts payable
processes and inefficient costing
 Market: In the US alone, the restaurant industry is an $863BN market growing ~4%, with over 1MM restaurant
locations employing 15.3MM people[1]
• The industry is fundamentally diffuse, with 70% of restaurants operating in one location[1]
• Restaurants have razor thin margins (6% profit margins)[2]
 Restaurant Tech refers to software and tech-enabled outsourcing solutions provided to the restaurant industry
including restaurants, bars, cafeterias and other locations where food and beverages are served
 Front of House Tech includes technology that enables customer-facing operations, on- and off-premises,
including marketing, reservations, takeout / delivery and customer loyalty
 Back of House Tech includes technology that enables out-of-sight operations, including point of sale,
payments, workforce management, inventory and general operations
[1] National Restaurant Association
[2] IBISWorld

3. 3
Anatomy of a Restaurant in 2019
DINING AREA
BAR
KITCHEN
STAFF
ROOM
INVENTORY
OFFICE
Back Of HouseFront Of House
RESTROOMS
FRONT OF HOUSE
 Diner acquisition strategies have
gone digital, with 67% of restaurants
planning to pay for social media ads
in 2019[1]
 Restaurants rely on word of
mouth to grow and build loyal
customers – 88% of restaurant
guests said that friends and family
recommendations influenced their
dining decision (compared to 35%
who said online reviews influenced
them)[1]
 US online food delivery market
is growing from $22BN in 2019 to
$28BN in 2023[5]; major third party
delivery services (e.g., Uber Eats,
GrubHub) charge ~20-30% take rates
which are tough on a restaurant’s
already thin margins
 Restaurants are building out
their first party digital ordering
capabilities; 51% of guests ordered
directly from a restaurant’s website
in the past month[1]
KITCHEN
 Consumer dietary preferences are shifting to healthier, sustainably-sourced options
 Restaurants need to respond to seasonal supply availability and pricing changes by constantly
updating their menu – 71% do so at least monthly[1]
 As delivery grows as a share of restaurant sales, restaurants are increasingly turning to cloud kitchens
– shared restaurant spaces with no store front that exclusively serve food via delivery
BACK OFFICE
 Restaurants invest in BI
& reporting systems to
reduce waste and monitor
performance, with 50% of
restaurants considering such
systems to be extremely
important[1]
 Restaurants allocate 25-
35% of their operating
budgets to food[2] –
accurately tracking inventory
is crucial to ensure profitable
dishes and minimal waste
STAFFING
 Restaurant and hospitality industry
has the highest staff turnover rate of any
industry in the US at 40% per year[3]
 35% of restaurants claim they have
positions that are hard to fill[4]
 Low unemployment and higher
wages are forcing restaurants to focus on
employee retention
 Self service kiosks and robotic
kitchens foretell an upcoming labor
automation / optimization trend
[1] Toast: The State of the Restaurant Industry Report, 2019
[2] QSR Magazine
[3] The Worker Institute, Cornell University
[4] National Restaurant Association: State of the Industry Report, 2019
[5] Statista

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Restaurant Management
Kitchen & Bar Management
Ordering Enablement
Restaurant Tech Market Map
Front of House Back of House
Marketplaces
Reservations Digital Marketing & CRM
Catering
Loyalty & Rewards
Workforce Management
Accounting Solutions
Procurement
Note: this landscape is intended to be a representative sampling and is not an exhaustive list.
Please direct inquiries to kapil@catalyst.com.
Point of Sale
ONLINE ORDERING

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Please send any inquiries to kapil@catalyst.com