Against the backdrop of higher interest rates, a slowdown in venture capital funding, and the growing prospects for a recession, both start-up and established restaurant technology firms are tightening their belts.
Among startups, ChowNow — which helps small restaurants without an online presence offer delivery and pickup — laid off almost 100 people. Lunchbox, which is developing online ordering tools for enterprise restaurant chains and ghost kitchens to act as a restaurant’s entire digital tech stack, recently announced it cut 60 positions, or roughly 33% of its staff. Sunday, the QR code restaurant payments app launched in 2021, is pulling out of 60% of its markets and making extensive cuts to its global team, (Sifted, July 6).
“We need to keep in mind that startups are based on believing strong enough in an idea and willing to risk a lot of capital to make their wish come true,” Bob Vergidis, founder of pointofsale.cloud, told The Food Institute. “Food technology startups are spending a lot of money trying to train the industry to do business in a new way. That means that up front they are spending way more money than they bring in with the hope that the market eventually will accept their solution.”
Vergidis added, “One of the things they know are users’ buying habits because they have amassed a lot of data over the years and it’s probably clear to them that consumers are now starting to become price sensitive. This price sensitivity is where the market for innovation starts to break down. “
At the same time, other areas of concern for start-up and more-established restaurant tech companies alike are the prospects for lower earnings and an economic downturn.
“The hospitality tech industry saw a lot of growth capital enter the market, in large response to the pandemic-created demand and ease at which capital was gained,” Dan Jacobs, chief operating officer at RASI, an accounting, payroll and finance platform for the hospitality industry, told The Food Institute. “My hunch is that investors are hedging their bets to essentially “play it safe” by focusing on EBITDA targets that have become more meaningful as access to capital has become more expensive to obtain.”
“If you look at the publicly-traded companies in our industry, they’re all posting record numbers, whether it is Toast or Olo or DoorDash or Square,” ChowNow CEO Chris Webb said in an interview with Restaurant Dive. “Yet their stocks are all trading at just about all-time lows. And so it’s this weird dynamic of business continues to be strong, but as you look further out we’re all pretty nervous about what’s ahead.”
With that, Webb says more industry players will trim their payrolls in the near term.
“I know there’s more coming,” he said, referring to layoffs. “I have enough private conversations with other companies [to know] that this isn’t stopping this week. This will continue through the summer.”