Restaurant365 LLC is dining out again.
The Irvine-based software company, whose cloud-based offerings provide restaurants a central point to manage their accounting, payroll, scheduling, inventory and other back-office functions, announced this month it would acquire fellow restaurant management platform Compeat Inc.
It’s a sign of growth for one of Orange County’s better funded startups, which has raised a reported $127.5 million over three rounds since its 2011 founding. Its most recent round was an $88 million deal in mid-2019.
The company felt pressure amid the pandemic-driven downturn.
Restaurant365 scaled down its operations and tweaked its business model to support its restaurant customers during the crisis.
The deal with Austin-based Compeat—terms of which were undisclosed—is expected to better help the restaurant industry save on expenses and provide a boost to their profitability as the economy reopens, officials said.
The combined companies will offer the “most robust” platform on the market, with products that span accounting, analytics, inventory, scheduling, payroll and more, according to Tony Smith, co-founder and chief executive of Restaurant365.
“We’re nearly doubling in size in customers and revenue,” Smith told the Business Journal.
The company expects organic growth north of 25%, Smith added, which puts it on track to generate over $60 million in 2021 sales.
“We have complementary offerings, we’re intimately familiar with [Compeat’s] customers, and that gives us a ton of confidence in combining the businesses.”
The deal will result in a combined workforce of about 350 employees that cater to over 28,000 restaurant locations across the U.S. such as Blaze Pizza, BJ’s Restaurants and Hopdoddy Burger Bar, among others.
Restaurant365 says that restaurant customers save between 2%-4% on goods and 1%-3% on labor with its platform, amounts that can be make-or-break for an industry known for its often razor-thin margins.
It has billed itself as the only all-in-one platform for restaurant accounting and operations.
It’s even more confident in that claim after purchasing Compeat, according to Smith, who will remain CEO of the combined companies.
Compeat was formed in 2000 with the same goal of using software tools to simplify operations and increase restaurants’ profitability. In 2017, Compeat, along with equity partner Serent Capital, acquired fellow competitor Ctuit of Petaluma.
Smith said that through the previous combination of Compeat and Ctuit, the business brings capabilities in tools used inside of the restaurant, such as employee scheduling, manager operations and event management.
Newer products in human resources and payroll have also been well-received by customers, and the pandemic in general has opened customers’ eyes to the benefit of technology products, Smith said.
Restaurant365 will continue to offer various subscription plans that range from about $129 and $429 per location per month.
Restaurant365 wasn’t immune to the effects of the coronavirus, but it continued to grow, though at a slower pace than previous years.
It increased sales about 25% in 2020, down from growth between 80% and 100% every year between 2015 and 2019.
Still, “that spoke volumes, that our solution really drives profitability and offers value, because customers still wanted to adopt our technology during such a tough time,” Smith said.
When the pandemic hit, it watched as its customers saw an average drop in business of 75% in April last year.
The company took steps to become a leaner organization. It cut its workforce in half to about 200 workers. It slowed growth plans and developed a recovery toolkit to help restaurants convert to delivery and enhance sanitation measures.
It even provided assistance to restaurants applying for payment protection plan loans and offered flexible payment terms to strained customers.
The recent acquisition included an undisclosed, but large cash component, as well as a minority equity agreement with Serent Capital. Serent joins previous backers of Restaurant365, which include Silicon Valley’s Iconiq Capital, Bessemer Venture Partners and Tiger Global Management.
As for the future, Smith said, “we like to say we’ll conduct ourselves in that way, they way we think every high-growth SaaS company should operate, and be prepared for an IPO, though that’s not the ultimate destination we have in mind.”
Smith added, “This is our first acquisition, and there could be more M&A activity down the road.”