The price of food continues to go up and up, but surprisingly that hasn't (yet?) played out as pressure on the wider restaurant industry. Now, a startup that's building technology to serve that sector announced a supersized round of funding to nourish its growth.
Restaurant365, which develops all-in-one restaurant management software, announced $135 million in new funding co-led by KKR and L Catterton. Previous backers -- specifically ICONIQ Growth and Bessemer Venture Partners -- are also participating in this round, which brings the total raised by the startup to $288 million.
The company's software, which covers accounting, analytics, staff and inventory management (but not point of sale solutions), is currently used in some 40,000 locations, with customers including small businesses, franchises and chains, and accounting firms that work with restaurants. It will be using the funding to continue developing product across all of those areas.
It's not clear if Restaurant365 is profitable, but it's currently making some $100 million in annual revenues, it said.
The company -- based out of Irvine, California, and founded in 2011 -- is not disclosing its valuation specifically, although a quote from CEO and co-founder Tony Smith notes that the company now has reached "$1 billion in value". A spokesperson for the company has now confirmed to me that the enterprise value is, indeed, over $1 billion. That's a big jump: according to data from PitchBook, Restaurant365's valuation was just over $305 million in 2019.
The investors here are interesting and strategic: KKR and L Catterton, as PE firms, both have a number of holdings that extend into the food service industry; ICONIQ and Bessemer are more directly major VCs in the world of tech investing.
“R365 has achieved continuous, accelerated growth, which is a testament to our strong team who is eager to change the restaurant industry for the better,” states Tony Smith, CEO and co-founder of Restaurant365, in a statement. “Anytime we receive funding, we recognize it as a privilege. However, the primary driver of this round is uniting with two strategic investors so intimately tied to the restaurant industry. Having recently crossed exciting milestones of $100 million in revenue and $1 billion in value, we can’t wait for what’s next.”
The company's funding injection is coming at a time when many believe that the global economy, and those of individual countries, are teetering on the brink of recession, as the world continues to recover from the COVID-19 pandemic and the shifts that it brought into how consumers make and spend money. But ironically, signals from those closely watching how restaurants are doing seem to point in a different direction.
The U.S. National Restaurant Association, in its annual state of the industry report (from February 2023), notes that while some of the headwinds of 2022 are continuing into this year, the food service industry is forecast to grow to $997 billion in sales this year, with 500,000 new jobs (to bring the total to 15.5 million by the end of 2023, post pre-pandemic levels), and a strong consumer desire to continue going to restaurants in their leisure time. Not all is totally rosy, though: The rising cost of food that's driving those increased revenues, and the fact that there are more restaurants popping up (more jobs), means a lot more competition, too.
All of that, however, points to a wider base of potential users for companies like Restaurant365, along with the many others in the space that cater (sorry) to the same clients. They include Toast, Lightspeed and others like Square, PayPal and more. While a lot of the businesses serving the restaurant industry found themselves on their knees during the big pandemic shutdown, Restaurant365 emerged as one of the tech companies that was providing tools to help its customers weather the storm.
“Restaurant365 has demonstrated compelling growth throughout its history, now powering more than 40,000 restaurant locations,” said Jimmy Miele, director, Tech Growth at KKR, in a statement. “Moreover, their software has played a crucial role in helping many struggling operators keep their doors open during uncertain times. We look forward to being a part of this next chapter, helping even more operators achieve their highest potential.”
“L Catterton has deep experience investing in world-class restaurant brands globally,” added Ian Friedman, a partner at L Catterton. “With deep insight into the everyday pain points of restaurant operators, we believe Restaurant365 is the gold standard in the industry, helping to streamline operations and boost profitability, and we are proud to leverage our consumer and technology investing experience as a partner to Tony and the team.” Friedman is joining the board.
Updated with valuation information.