AGC's Insights - Restaurant Technology Year-End Market Update

The restaurant landscape has improved, but continues to face challenging macroeconomic and operational headwinds. US restaurant spend has increased to over $1.1T, reaching record levels, and the number of locations has grown to approximately 762K domestically, compared to 703K at the start of 2019. Employment levels are now back above pre-COVID levels, with 12.45M employees versus 12.29M previously. While single-brand chains and distributors are seeing a significant uptick in public market performance, restaurant software continues to lag behind broader SaaS index performance.

Despite the rebound in spend, employment, and location growth, the Restaurant Performance Index currently sits at 98.6, the lowest level since the Great Recession, signaling contraction within the restaurant market. Sustained inflation, increased input spend, expanding competition, dynamic consumer habits, added dining complexity (such as in-house vs. delivery), and ongoing labor issues remain significant challenges for operators.

The year 2023 marked a period of "tech rationalization" in the industry, during which small and mid-market operators worked to shed excess solutions in favor of consolidated stacks, while enterprise-sized operators prioritized identifying true "best-of-breed" solutions. However, operator adoption has returned in 2024, with a focus on true ROI and profit-generating solutions, driving back-of-house (BOH) and input efficiency through improved data, analytics, and business process management (BPM). Public software providers estimate a US software total addressable market (TAM) of $50-$170B ($100-$340B globally), though AGC's bottom-up approach suggests a more conservative TAM of $16-$32B in the US ($40-$100B globally).