This is an English adaptation of a FoodBud historical article originally published on May 29, 2022.
After the 2020 pandemic shock and the 2021 market reset, Meituan had built a clear lead in restaurant SaaS in China, especially among small and mid-sized restaurants. Alibaba Local Services, after several turns, used its local-services resources to remain the main follower with a stable second-place position.
Independent restaurant SaaS vendors, led by Hualala and TianCai ShangLong, had established leadership in integrated SaaS for chain restaurants, including large Chinese dining chains, fast-food brands, and tea-drink chains. Although China’s SaaS market still appeared to have 6-8 years of growth ahead, restaurant SaaS had already consolidated quickly because Meituan and Alibaba entered deeply. The market was being occupied rapidly by the two platforms, squeezing the room left for independent vendors.
In China’s restaurant SaaS market, long-term survival requires strategic capital, a distinct position, and access to incremental market opportunities.
The main players fall into two groups.
Listed-company-backed players include:
Relatively independent, unlisted SaaS providers include:
Meituan remained the strongest player in this market. Through strategic investment, it was reportedly losing around RMB 1.2 billion per year in the segment, pulling the whole market into a difficult competitive environment. But restaurant SaaS was only one part of Meituan’s platform system, and losses could be offset from other businesses.
Other players, without steady cash flow from other sources, face a harder path. As a result, restaurant SaaS vendors have been searching for sharper positioning.
One example is Hualala’s recent strategic investment of several hundred million RMB in Guanmai Technology, becoming its controlling shareholder. Guanmai is described as a leading SaaS company in China’s fresh-food B2B sector. It had served more than 11,000 food-ingredient distribution companies, including more than 200 companies with annual revenue above RMB 100 million.
Hualala had served more than 400,000 restaurant merchants. Annual transaction volume on its platform exceeded RMB 700 billion, close to 15% of China’s overall restaurant market. Its move from restaurant front-end systems into back-end supply chain was an attempt to lock customer transactions more fully into its own system.
Weimob offers another case. As a listed company, it can access more capital from public markets than unlisted players, and its business is not limited to restaurants. But it still lost money in 2021: revenue exceeded RMB 2 billion, while net loss was RMB 850 million.
In restaurant SaaS, Weimob’s differentiated position focused on helping mid-to-large Chinese dining groups and mid-market chains, such as Tang Palace, Din Tai Fung, and Zuo Ting You Yuan, operate online. The logic was that SaaS tools themselves were becoming similar, while operating capability on top of the tools remained differentiated.
Large platforms play for scale and standardization. But turning tools into cost reduction and efficiency gains still requires operating capability. Weimob targeted that layer, aiming to share in the incremental value created by improving customers’ operations.
Overall, restaurant SaaS in China is a difficult business. Pure tooling alone leaves limited room: vendors either get consolidated by giants or must build a differentiated position with some defensible moat.
In North America, two restaurant SaaS companies that went public in 2021 stood out: Toast and Olo.
Toast was founded in Boston in 2011 as an integrated POS provider for restaurant companies. It combined polished hardware with cloud software, creating communication channels across kitchens, servers, and managers. Its system shared information across the platform so service staff could access data anytime, and it used collected data to provide recommendations on sales and customer loyalty.
Toast’s three founders came from MIT. The original idea was inspired by the pain of splitting bills at group meals, leading to a consumer self-payment product for restaurants. Because it was not compatible with many restaurants, Toast shifted to a cloud- and Android-based ordering and POS system that supported customized ordering and better order management. This smart POS system quickly gained traction with restaurants.
Toast’s development had two phases.
From 2011 to 2018, Toast expanded in the Boston restaurant community with its multi-platform integrated management system, Toast Point of Sale. It used referral rewards to broaden adoption and launched online ordering, ToastGo, and Toast Flex, advancing both platform services and hardware.
The system gave restaurants tableside service, performance analytics, and real-time menu management. It also enabled integrated management of inventory, kitchen, front-of-house, and staff. According to Toast’s website, 82% of customers chose self-service ordering through website or app, and remote ordering opened delivery opportunities for merchants.
After 2019, Toast began acquiring companies. StratEx was its first acquisition and a move into HR and payroll services. It acquired xtraCHEF, building on an existing partnership, to strengthen accounts-payable automation and inventory management. Toast Capital, launched in 2019, provided loans of USD 5,000-25,000 to restaurants that had subscribed for more than six months, with repayment taken as a share of daily sales.
Toast emphasized hardware and its contactless POS terminal, Toast Tap. Beyond hardware sales, it used POS devices inside restaurants to collect customer spending information, converting daily customer interactions into email lists and sending different marketing content to new customers, regular customers, and potentially churned customers.
Customers could choose between an all-in-one POS package, including software and hardware, or software services. Hardware was paid for once, while software was usually paid monthly and included installation, training, and maintenance. On that base, platform payment take-rate accounted for nearly 80% of Toast’s revenue.
Toast’s revenue came mainly from four areas: subscription services, financial technology solutions, hardware, and professional services. The largest source was financial technology solutions, including transaction fees and lending income. In 2021, Toast’s financial technology solutions revenue was USD 1.4 billion, or 82% of total revenue.
For comparison, by the end of 2021 Weimob had 8,406 restaurant merchants. Smart Catering revenue was RMB 540 million, up 20% year on year. Average order revenue per restaurant merchant was RMB 17,000.
Toast’s operating data showed:
Weimob’s comparable metric was that, by the end of 2021, high-quality service customers purchasing three or more products or services contributed 51% of revenue.
From a business-model perspective, Chinese and U.S. restaurant SaaS companies were not radically different. Nor was the issue simply that Chinese players were not working hard enough. The bigger difference was market structure: the amount of money a provider could earn from each merchant differed, and capital-market valuations reflected that gap.
Toast’s market capitalization had recently been USD 10 billion, after reaching USD 32 billion at listing, then falling to about USD 8.5 billion, or around RMB 57 billion. Hong Kong-listed Weimob, by contrast, had a market capitalization of only HKD 10.4 billion, or about RMB 8.9 billion. Different markets produced different outcomes.
Note: forward-looking growth expectations, IPO references, market capitalizations, financing, acquisitions, and financial figures are historical as of the original May 29, 2022 article.