Layoffs come to restaurant tech

4.9.2020

Welcome to Expedite, a (mostly) weekly newsletter by Kristen Hawley covering what’s important in restaurant technology. I'm working to send updates as frequently as the news dictates during this time.

The Layoffs Have Come to Restaurant Tech

Nearly a month ago (!) as restaurants around the country closed their dining rooms and doors for an indefinite period of time, most laid off service staff almost right away. In a business where just a few bad services can put costs in the red, most small businesses couldn’t hope to sustain payroll through this devastating crisis.

Now, business shutdowns have hit the technology companies built on top of the restaurant industry. Several have announced large reductions in their workforce this week. The justification is basically universal: we have no idea how long this will last, and we are in an unsustainable position. Most companies have offered some fee relief to restaurant clients and reduced pay for executives and other leadership.

This morning, Yelp announced it had laid off 1,000 workers and furloughed an additional 1,100, according to a blog post by its CEO, Jeremy Stoppelman, which was also circulated via email to staff. “We came to this decision as a last resort only after cutting non-employee expenses where possible,” he wrote.

Last year, Yelp changed its advertising strategy, based on visits, not ad impressions. It also moved away from long-term advertising contracts in favor of non-term agreements. As of last summer, local businesses made up 75 percent of Yelp’s ad dollars. The company had committed $25 million in relief to restaurants and other small businesses in the form of free marketing products.

Point of sale provider Toast laid off or furloughed half of its staff Tuesday. Toast sells hardware, software, and most importantly, credit card processing to restaurants. “...with limited visibility into how quickly the industry may recover, and facing slower than anticipated growth, we now find ourselves in the unenviable position of reducing our headcount,” wrote Chris Comparato, the company’s CEO.

The once fast-growing company had been comfortably on the road to an initial public offering. After a February $400 million raise, the company was pushing a valuation of close to $5 billion. As is the case with many high-growth startups, Toast was not yet profitable — though its revenue had grown by over 100 percent year over year in 2019. “We aren’t profitable yet because we’re investing ahead because of the demand we see coming,” Comparato told Bloomberg at the time.

Ticketing and events site Eventbrite also announced a 50 percent workforce reduction this week.

There’s really no way to prepare for the destruction a pandemic can cause your business (unless you’re Wimbledon, did you catch that news?) — and this is absolutely a worst case scenario for… just about everyone. Viable tech business models lost their viability overnight, just as restaurant businesses lost customers and revenue. So far, these companies vow they will come out on the other side, and have cited the dramatic labor reductions as a way to control costs so that they can actually survive.

Mostly, I’m curious what will emerge a technological need vs. a technological want from this time. Restaurant businesses have long disliked Yelp; will they continue to pay money for advertising, marketing, and other add-ons? Operators like Toast’s functionality and hardware, but not so much its payment processing fees — will this time away give them time to reassess their tech stack in favor of a less costly option?

It’s challenging to write about the future when it looks like one giant blank slate. The job losses are staggering — another 6.6 million Americans filed for unemployment last week, bringing the total to about 17 million out of work in the last few weeks — and those numbers are representative of people who have managed to file, never mind hourly workers who don’t qualify, 1099 workers who aren’t supported by new policies not yet put into place in many states, or salaried employees who haven’t managed to file in systems that have been completely overwhelmed by demand.

The future has never felt so wide open, yet so completely restricted at the same time.

A bright spot:

This week, direct-to-consumer aperitif brand Haus launched its restaurant project. It partnered with restaurants across the country to create new flavors for pre-order — like juniper, elderflower, and oranges from Seattle’s JuneBaby, and shiso, citrus, and chrysanthemum from San Francisco’s Rich Table. All profits from the products go directly to restaurants right now, and products ship next month. Other restaurants can apply, too.

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About:
Expedite is produced by Kristen Hawley, a San Francisco-based journalist with over six years of experience covering the restaurant technology industry. Previous iterations of this content were available via Chefs+Tech and Skift Table. Thanks for reading.

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