Dive Brief:

• Restaurant point-of-sale and software provider Toast has tapped commerce fintech FreedomPay as a payments gateway partner for large restaurant brands, according to a Monday release.
• Partnering with FreedomPay gives Toast access to “the infrastructure to expand beyond (small and mid-sized business) customers” by offering services to large restaurants in the U.S. and Canada that are on FreedomPay’s platform, a FreedomPay spokesperson said. Among FreedomPay’s restaurant customers are Starbucks and Shake Shack, according to a spokesperson.
• As a result of that partnership, Boston-based Toast is making its hotel restaurant technology available to a segment of hotel company Marriott International’s properties in the U.S. and Canada, according to a separate Monday news release. Among the hotels in that segment are Courtyard and Springhill Suites locations, according to Marriott’s website.

Dive Insight:

Philadelphia-based FreedomPay integrates with about 100 payment processors and acquirers globally, linking payments data with customer loyalty systems and marketing platforms, the spokesperson said.

The tie-up “will allow Toast to enable complex payment orchestration required by enterprise,” including payables, receivables, capital and data, as well as cross-border capabilities, the spokesperson said. 

Toast launched its hotel restaurant product last year. Through the partnership, Toast is targeting “the largest restaurant and hospitality brands,” a spokesperson for the company said Monday. Combining FreedomPay’s technology with Toast’s point-of-sale capabilities enables the restaurant payments provider to serve the needs of large customers “with complex environments,” such as Marriott properties, the Toast spokesperson said.

Toast currently serves about 85,000 restaurant locations, equal to approximately 10% of the U.S. restaurant market, according to a June 1 Bank of America Global Research note on the company. Restaurants with fewer than 20 locations make up about 60%-70% of Toast’s addressable market.

The breadth of Toast’s platform and “being purpose-built for a restaurant” give it an edge over competitors, Toast CFO Elena Gomez said during a June 6 appearance at an investor conference. Still, Toast is battling with a number of competitors who share its upmarket ambitions. 

In addition to Toast, cloud-based players Block-owned Square, Fiserv’s Clover, Shift4, SpotOn and Lightspeed Commerce are all angling for a bigger share of the intensely competitive restaurant point-of-sale space. Legacy players such as NCR and Oracle also have a sizable presence in hospitality with their Aloha and Micros systems, respectively. 

Last year, Toast’s $92 billion in gross payment volume topped that of Lightspeed ($87 billion), Shift4 ($72 billion) and Square food and drink ($58 billion), but was less than half of Clover ($225 billion), according to BofA Global Research. However, figures for Shift4, Lightspeed and Clover included their non-restaurant payment volume. 

Although Fiserv’s Clover has “fierce competitors” in the space, “we have a deep bent on growing out restaurant,” Fiserv CEO Frank Bisignano said during a June 6 investor conference appearance. Fiserv purchased restaurant software company BentoBox in 2021 to bolster the software services it could sell to merchants who are payment acceptance clients.

Restaurant operators turn to Clover if they’re seeking data capabilities, access to capital, employee management and communications functions, Bisignano said.

In the restaurant segment of its business, NCR’s global customer base is about three-quarters large restaurants, such as table service restaurant chains or quick-service chains, and about one-quarter SMBs, CEO Michael Hayford said during a June 7 investor conference appearance.

NCR has encountered fewer new rivals at the large restaurant chain level, which has complexity that many of NCR’s competitors haven’t been able to address, Hayford said. NCR has run into more competition at the SMB level, but Hayford noted some of those rivals are now more challenged as venture capital has become harder to find and they don’t yet have scale or profitability. He didn’t name the rivals he was referring to. 

Hayford called out Toast as a big competitor that’s done well, but is primarily playing in the small and mid-sized business space. 

Another rival that has needled Toast is payments provider Shift4, which has a big presence in restaurants, hotels and stadiums. Shift4 targets table service restaurants, as Toast does, whereas Clover and Square are more commonly found in deli, coffee shop and food truck settings, Shift4 CEO Jared Isaacman asserted May 17 during an investor conference appearance.

Shift4 isn’t going “blow-to-blow” with Toast over a new small restaurant, Isaacman said. The two are more often winning business if a restaurant operator is fed up with Global Payments-owned Heartland Payment Systems or NCR, he contended.