All right, we'll get started. I'm Neil Dalal, Managing Director in our tech investment banking group here at JP Morgan. I'm honored to be joined by Savneet Singh, President and CEO of PAR Technology, for the first time at our conference. We're thrilled to have you guys. I'll start. Can you just give a quick overview for the audience on what PAR is, what you guys do, especially for the folks who are new to the company?
Sure. PAR simplistically is a platform to run your restaurant. We run a suite of products that effectively allow you to connect all your data across all your different products within a restaurant organization. We are a point-of-sale software system, which is our core product. It's our heritage. It's what we're known for. We run a back-office product, which manages your inventory, your COGS, your labor. In the front of house, we have the largest loyalty product in restaurants and online ordering business. Together we call it a unified commerce offering. In reality, we're a platform to run your restaurant. I think simplistically, it's the easiest way to get your hands around it. The core tenet of that is we focus on large restaurant organizations or fast-growing ones.
You won't find us in most single store concepts, but you'll see us in Arby's, Five Guys, or somebody like a Cava Grill or a Sweetgreen. Enterprise or very fast growth.
Got it. Actually, it's a good segue. When you talk about the type of restaurants you target, you said enterprise, you said larger. Again, and question in the market is where's the cutoff? Like what is the
Yeah.
What's the sweet spot for a PAR restaurant versus some of the other players in the space?
From a size perspective, we are, you know, I think 50 units and above. Our sweet spot's hundreds and thousands. You know, we service someone like a Dairy Queen, which is 5,000 stores, and we service, you know, smaller chains that are like a Bluestone Lane, that's like 25 stores that has ambitions to be multiple hundreds. The way we define it is sort of 50 units above is kind of our sweet spot, but if you are one of these high growth organizations, you know, like a MOD Pizza, I think we've had since two stores, and today there are 600 or 700, you know, we're the right, I think set up for you.
The other distinction is that we're really strong in QSR, quick service restaurants and fast casual, and we're now emerging in what we call table service, which is sit down restaurants. Our core base today is historically QSR and fast casual.
Got it. Okay. You talk a lot about. Just let's pivot to your platform for a second, your unified commerce platform and how that's differentiated for your clients. Just talk about what the unified commerce platform means and how you've built it over time.
You know, I think it's interesting. Restaurants have gone through this rapid forced innovation. You know. An illustrative example is McDonald's, which many would argue is the most advanced technology restaurant, technological restaurant. You know, started their loyalty program in 2021. Like, there wasn't an app before 2021. You think that's late to the game, but in restaurants you're like, "Wow, if the leading innovator is that's where they were, you can think about where restaurants are in general." What the pandemic did, but this sort of happened before, was that I think restaurants were just starting to come to terms with that software was eating the restaurant. And it took them a long time to get there because they didn't need to for a long time.
You could continue running your restaurant with disparate products, you know, candidly, a lot of manual labor. What the pandemic really forced was an aggressive adoption of a disparate set of products that didn't speak to each other. As an example, you went from a restaurant that had a point-of-sale system and a drive-thru to now saying, "I've got a point-of-sale system in my store. I've got a drive-thru, but now I have Uber Eats and DoorDash. I have an online ordering system. I've got a mobile app. I've got a loyalty program. Oh, by the way, I've got to have artificial intelligence. I've got to have supply chain software, inventory software." All these products kinda like grew like crazy.
Many of you probably had that experience when you go to a restaurant and you see like the 15 tablets all over the place, you know, a couple for DoorDash and Uber Eats, a couple for the back office. The sprint to buy product created a bunch of disjointed connections. What we sort of thought about at PAR is like, that's probably not going to be the way that the restaurant wins. In the end, this has all got to be unified. When you have an order on your online ordering website, it should be literally the same schema as an order in your store or your drive-thru, so you can understand who's that customer, what's the product they bought, does it match your inventory system?
You know, a funny thing I oftentimes do with CIOs or CEOs of big restaurant chains, and they'll say, "Oh, we've adopted, you know, Braze and Snowflake." I'm like, "Oh, that's amazing. Have you gotten any value from it?" Because in reality, the POS system, which is still 80%, 90% of your orders, is sending data up in a very different format than your online ordering system and your loyalty product. I think the big aha for us was saying, "This is only gonna work if it's unified," because then in many ways you can change that experience of the customer. A good way to think about it is, today, I feel like CIOs of restaurants are vendor managers. They're literally managing a different vendor for every single part of their workflow.
I think they've lost the ability to focus on their customer and create a great experience. Our goal is to unify all this, make the data exactly the same, and then give them control so they can kind of think more about the guests all over again instead of kind of dealing with, you know, 12, 15, 20 different products.
Super helpful. Actually, to play off that for a second, when you make this pitch of unified commerce to the enterprise restaurants, what holds them back from using someone like you? Why would they wanna keep things disparate?
Historically, you know, restaurants have been best of breed buyers. You know, I think that came out of, you know, two broad theses. The first was, there weren't a lot of products that you absolutely needed to run your restaurant. Like I said, you didn't really need a loyalty product. You didn't need an online ordering product. You didn't need all the software. You didn't need to have, you know, you didn't need to have a large staff to manage these. You could actually be best of breed and say, "Hey, I want the best POS, I want the best back office," so on and so forth. That I think, that paradigm has definitely sort of shifted. It's that heritage is sort of still the way they operate.
The other part is, you know, some restaurants, I think for years and years got value by building some of this stuff themselves. They invested, they hired dozens, sometimes hundreds of people to build their own POS, build their own connective software through their infrastructure. They could actually argue that that created ROI. I would say it did create ROI. Some of the best performing restaurant chains in the world, whether it be a McDonald's or Chipotle and so on and so forth, they have tons of software developers. I think both of those reasons are starting to wither. You know, on the first part, there's just so many products now. The average restaurant company is actually still a really small company.
You know, if you're a 1,000-store restaurant chain that's heavily franchised, you might have 100, 120 total employees. You know, 10 of them work in, you know, IT. There's not a lot of staff. The point on building yourself, which has, I think, been the other holdback of people adopting our products, I think it's hard to argue in today's world that restaurants themselves will build better software than software companies. I think it's hard to argue that, you know, the great software developers that graduate college wanna work for a restaurant company or a software company. That's just a shift that's happening in our culture, where 15 years ago, if you're a great developer, you would go to Procter & Gamble, but today you wanna go work at Google or a software company.
I think both of those things are changing, and the pace of underneath all of this is just the pace of innovation is so fast. If you think about your IT staff having to manage three times the number of products you had three years ago, at some point you need help. I think these are all kind of the way that I think is starting to change. Those are historically the holdback, which is, hey, we kinda built all this stuff. We have all these people. Do we fire them? Do we not? Then this historical view of being best of breed, which is also starting to change.
Let's pivot a little to the competition, which you touched on, slightly in your response. Who do you guys compete with generally, and then how do you guys win?
you know, our biggest competitors still to this day are NCR and Oracle, who have very, very much dominated the restaurant industry. You know, each of them, even having lost, you know, thousands and thousands of sites, you know, still operate, we estimate each at around 100,000+ restaurants, which is, you know, very meaningful when you think about, you know, North America or just, you know, some people say the United States is 750,000, some say 1 million. Still meaningful market share. They really do dominate the, the space. It's, it's one of the things we enjoy because I think those are both, you know, obviously esteemed companies, but I don't think somebody would call them the most innovative companies, nor the ones most focused on R&D and product.
Obviously, are small divisions that runs very, very large conglomerates. So the focus isn't there. The big, I think. In some ways, that's it. Those are the big guys. I think the other parts to be competitive are everyone you hear about, Square, Toast, you know, Lightspeed, these amazing companies. One of the benefits that we've drafted off of is that most of that focus is down-market, where it's the single store restaurant, it's the fine dining, it's the coffee shop. Those firms I think wanna eventually come up into our market, but we haven't seen a ton of that yet. It'll inevitably happen. We see them, but we don't see them nearly as much as you think.
As you sort of referenced, there is this really big difference between running a small restaurant and a big restaurant. When you're a small restaurant, the CEO, the CMO, the CIO, the CTO is almost always the same person. When you're selling to Arby's, you're dealing with, you know, huge corporate staff. You're dealing with massive needs for integration into everything. You know, as an example, you know, for our large customers, our data is oftentimes going into SAP. It's going into Workday. It's going to wherever it may be. When we're selling to a small restaurant, you know, it might be going to QuickBooks, you know, like maybe. There's just such a big distinction there, and I think that has created real product a product moat for us.
Actually to play off that, a question we get a lot from the market is what is the tangible difference between serving the enterprise market versus serving the SMB or single unit restaurants? Can you expand on that?
Yeah. So first is product, which is, you know, when you're a small restaurant, you need a very simplified product, kind of that does it all for you. You can buy a POS system that has a reservation system built in, that has a little bit of loyalty built in, that's got a little bit of back office built in, and it's there. When you're running a large restaurant, I think that the most critical element that's different is that that product has to be extensible because there are dozens and dozens of products that need to pull data out of that or push data into that. You know, when you're running a huge restaurant organization, your POS system is your lifeblood. That data's gotta go into your ERP system, your HR system, your financial software systems.
It's gotta go in your back office system. It's gotta go to tax authorities. I mean, it's an enormous amount of extensibility. Then you as a large organization have probably made investments into marketing automation software, supply chain automation software, all sorts of stuff that just like pull in every different direction. The other part is, I think the dynamic, the difference in the markets is at least is when you sell down market, it's a really great business. Like it is juicy. I mean, you can sell a small business owner a POS system, a loyalty system, an online ordering system, a back office system at the time, at the point you're literally making that first sale. So you get a ton of revenue for that period of time.
As you all probably know, most small restaurants don't have a very long lifespan, you've got to maximize revenue in a very short period of time. What I love about the enterprise is that while we can't bundle 1,000 products at the moment we're selling them our first product, you have almost decades of time to monetize that relationship and build great partnership because these are incredibly durable businesses. You know, I always joke that, you know, if you go to a franchisee convention, they don't measure their longevity in years, they measure it in decades. That's how long these businesses. You know, find a McDonald's franchise, find an Arby's franchise that's usually been in the families for decades. You have immense durability.
I think over time you'll have a larger TAM because the need for product is so much higher in the enterprise. Every enterprise restaurant needs some form of marketing automation and supply. I mean, they will continue to need more product. Those are the two distinctions. Just one is product, which you just need different stuff, but two, it's the way you sell is completely different.
Yeah. How does the cross-sell and up-sell motion work with an enterprise, given that it's harder to do it at the initial sell?
Yeah. It's, it's evolving. You know, historically our goal was plant point of sale, bring in back office, bring in payments and bring in loyalty. That works fine. Again, once you win the point of sale business, you have undue influence on the customer, and not in any sort of like nefarious way, but when you are the POS, the customer said, "We trust you with our most important product." If your POS system goes down in any restaurant, like literally any restaurant, everything is down. Your loyalty is down, your online ordering is down, your Grubhub and DoorDash break. I mean, everything breaks.
Once they say like, "Hey, we're gonna give you this thing," you have an incredibly tight partnership with that customer that allows you to influence the other buying decisions that they have. As I said in the beginning, what's changing though is they're saying, "It's not just that we trust you." It's like, "It makes sense." Why would I buy another online ordering product if the menus are different, the products are different, the pricing's different, the data's different? Why would I go through that hassle if it's just there? We're starting to see that. You know, what we've noticed is that, you know, 80%+ of our customers now adopt payments at the time we do a deal.
you know, our biggest driver of our back office product is now pulled through the point of sale system. You're seeing this shift happen. Generally PAR point of sale can grow, but it is changing just because the customers are also realizing, "Why would I go buy from three different vendors if they all have different... I'm gonna spend all this time in taking the data from different vendors, putting it together myself, trying to get something out of Snowflake or Braze or whatever. It doesn't really make sense anymore.
Yeah. You alluded to payments. Let's spend a moment on that. Talk about the evolution of your philosophy towards payments, how you guys launched that piece of your business, and where you see it going over time.
You know, it's interesting. Payments went, you know, PAR is a really windy and interesting corporate story, but you know, when we originally started running the business, you know, we really played down the opportunity in payments. It was kind of this thing we had hoped for, but I used to always say, "I don't know if it's gonna be a 10% or 20% of our customers or 80% of our customers." The reason was that it was our belief that enterprise restaurants could get great payment rates direct from processors. What I think kind of completely shifted was that we're like, some enterprise restaurants can do that.
Oftentimes the reason that they'll buy payments from us, as you heard, 80%+ of our customers buy payments from us now and our new customers, excuse me, is that it's not just that we can get them a great rate, which we really can do an awesome job. It's again, the simplification of their workflow. If you go to any restaurant, literally any restaurant, and you ask them what they're charged for payments, like none of them can tell you. All they'll say is, "I just know I'm getting ripped off. I don't know how." When it's integrated into the point-of-sale system, you have complete transparency of exactly how much per transaction we're making. That is a lot of value to the customer.
Over time, I think what everyone has realized is that the idea of embedded payments is obviously a great rate, simplification, transparency, one vendor, but it's what can you do with all that data? That's where I think it gets really exciting where we can say, "Hey, if we're your point-of-sale system, if we're your loyalty system, and we have your payment data, we can now give you complete data on every single customer you have," and that is super valuable. You know, what we've seen is an excitement from our customers to bundle payments with us. That's why it's been growing very quickly. Now we'll see if we can crack the huge restaurant chains over time.
I think we feel pretty confident that on average, our customers will adopt payments partly 'cause of price, but I think over time because of product.
Got it. Let's pivot a little bit to Punchh, a business you bought a few years ago. Talk about the thesis when you bought the business.
Yep.
A lot of focus more recently on the performance and a little bit of the slowdown. Talk about that and where that's going.
Sure. We, we acquired Punchh in April of 2021. You know, it was an incredible deal for us at the time. To put in perspective, you know, Punchh was the same size as our entire software business growing faster with lower churn, but we spent like, you know, less than a third of our market cap on it. You know, it was a great trade for us at that time. You know, I think we were, you know, leverage our stock well. It's been our, by far our biggest grower. The business doubled within 20 months of our ownership. We're, you know, we figured out to go to market really well, we could take customers live, so on and so forth. What Punchh does is loyalty software.
If you have a loyalty, a restaurant, loyalty app on your phone, it's, you know, if it's a top 100 U.S. restaurant, more than half the time it's us. We really do have the dominant position of loyalty products. The reason we acquired at the time is that we were, at the time we did point of sale and back office, but we never knew who the customer was. If our vision was to unify all this technology, you kind of need to know who the front of house is and the customer was. It made a lot of sense to kind of connect those. The other reason was relatively simple.
We did a survey of our customers and we said, "What is your one or two most important digital need?" I was expecting it to be like robots and AI and whatever it may be. They're like, "We want a better integration between the point-of-sale system and the loyalty system. We want a better integration between the point-of-sale system and online ordering system." I was like, "Wow, the bar is low," and we can effectuate one of those things. That's why we bought it. You know, thesis played out great. The business has grown, you know, way faster than we expected. The integration with PAR, the talent we acquired was fantastic. Today the business is slowing, and we've been really transparent about it. You know, I think it's coming from a few parts.
The biggest part is that when a restaurant adopts a new loyalty system, it is a big commitment. It's not just you're spending seven figures with us, but you're also training all of your restaurants on your franchisees saying, "Hey, here's why you should pay for this. This is why we're gonna pay for this thing, which is really your money we're spending. Here's all the training you need to do for all of your staff to explain here's how the loyalty app works, here's how you redeem," blah, blah, blah. Then you gotta educate all your customers. It's like a big commitment. When there's this sort of a little bit of fear around the macro, like things definitely slow down, things get pushed out. That's kinda what we observed on this product line for a bit.
I think the other part is it was us. I think we could have executed better and built more pipeline in 2022. You know, we feel pretty confident where we are given where the position that we hold with our customers. I think again, over time, I suspect our customers will also buy Punchh because of the integration to the other products. I think that's where I get excited over time, which is the durability of our business increases with every product we add.
Great. Let's stay on the theme of innovation. You know, we've seen folks like Toast, Square, and others really innovate in the SMB space. As you cited earlier-
Yeah.
we've seen less innovation in the enterprise space.
Totally.
Why do you think that is?
I think it's probably analogous to most industries where you don't have infrastructure and, you know, decades of history, it's easier to innovate. I think that, you know, we forget that it. As I said, if you're the point-of-sale system of a gigantic restaurant chain and you screw up and you go down, it's like your pacemaker stopping. Like, you never forget. I still remember when I became the CEO, I did a tour of our customers, and I literally never got screamed at like that in my life. Like, it was the most interesting experience 'cause I was like, "Wow, we're just like a software company." Like, they're like, "They wanna murder me." I mean, just the anger. I realized it's because you're so critical to their day-to-day.
I think that like sort of way of thinking is just there. Inevitably what's going to happen, and I think is happening, is that the ROI on automating your workflow has just gotten too high. When we install our back office software as an example, like we can literally tell them within like, you know, two to five months you paid it off. Like it's so high that ROI. I think they're all coming to terms it's gonna happen. I kinda think I have a sort of like a contrary view here, but I think over time the enterprise will be more innovative than the downmarket where we've seen that innovation. I think downmarket gave innovation because the vendors could push it, as opposed to the customers pushing.
I think over time, enterprise customers will actually demand more innovation because they need to, and they're seeing what's happening. As an example, today I suspect if we were selling to small restaurants and we were gonna leverage artificial intelligence, we as a vendor would be using it in our own business. I think if you talk to enterprise customers, they're like, "How is AI gonna fix their business and what do we need to push our vendors?" I think over time you'll see the enterprise, but I think in short it's just a little bit of a risk-averse market. Remember, restaurant CEOs, while they serve you the end customer, they're really serving their franchisees, who generally are, you know, I historically found them relatively risk-averse on technology investments.
Got it. let's pivot to M&A. You've been an acquisitive company historically. You talked about Punchh. Your most recent acquisition was MENU. Talk about MENU.
Yep.
how you found that deal and what it does for you.
It was a, it's a small online ordering business based out of Switzerland, and we had, I think, for some time realized that we had now kind of captured the loyalty customer base, the in-store customer base, and the one part of our offering we were missing was the off-premise. You know, while off-premise today is still a very small portion of restaurant orders, the majority of restaurant orders still run through your point-of-sale system. You know, some restaurants it's 95%, some restaurants it's less. Then you have the super digital adopters like a Sweetgreen that's like 50/50. You know, our goal was to say, "Hey, we need to own all the orders and to provide value back to our customers." We needed some digital ordering system.
Part of that was also the observation that, you know, the number of channels that you order from a restaurant is evolving. You know, it's not just coming to the store, it's not just the phone, it's gonna be Snapchat, some Instagram, TikTok, whatever. Those are all going to need to flow into our systems anyways. Partnering with third parties didn't make a ton of sense for us because then we don't control the experience with the customer. We spent a year and a half literally looking at every single product in the space, trying to find a product that worked in the enterprise. That was the big challenge, which is all the innovation is down-market, small restaurants. When you are scaling to an enormous restaurant chain, you really need scale.
We discovered MENU, and it was one of those moments when we were like, "Well, like how did we find this thing?" It was sort of like a, you know, people in software will sort of, you know... I'm an old hip-hop fan, but, you know, it's like game knows, you know, game knows game. You're like, "Holy cow," like, "this thing is amazing." It was just, it blew our minds. Anyways, we were really excited about it. We also thought that there was an opportunity in the market where online ordering is dominated by one player in the United States, and they're an incredible business, done really well, but they are also, you know, aging. The product is getting stagnant, we saw an opportunity. We acquired it in August.
Our original plan was to not really sell in the United States for at least a year, because there was pipeline in Europe, and we needed to kind of commercialize and operationalize the business for the U.S. What we discovered, you know, literally a few months in, was the demand in the U.S. was way ahead of what we expected. We've been retooling the business to focus on the U.S. On our last call, two weeks ago, we announced that we've already signed 500 restaurants, again, way ahead of schedule, all in the United States. I, you know, I think it's all coming together, which is it's everything we talked about, which is we're unifying your orders. We're also, I think, picking off a competitor at a time when I think they're at risk.
Importantly, it, for us, it also kind of just unites what we're doing and adds a little bit innovative flair to what we're doing because they're a startup, that culture helps us become more innovative.
Great. Talking a little bit about the M&A environment, there's a lot of speculation that 2023 and 2024 will be an accelerated M&A environment because of the capital markets backdrop. Hasn't really come to fruition yet, so walk us through the conversations you're having.
Sure.
What's the tone, and how you think the market's gonna evolve?
I'd say it probably hasn't come to fruition from the M&A banking side, but if you talk to any operating company, it's like, you know, clearly become a huge part of your workflow just because the quantity of deal since it, you know, has just been far more than we were used to in 2022 or even really 2021. You're definitely seeing an incredible amount of deals come to market. You know, just like anything else, on average they're not really worth, most of them aren't worth your time. What I think is interesting, at least in our market, is the valuations are now at a point where, you know, you can make something interesting happen.
I think, you know, in our market, what people observe is, you know, there's just like this interesting dichotomy in software, which is, you know, it's sort of ironic, but the companies with like low NPS tend to have better stock market returns than high NPS. You know, think about like your cable companies, think about your payroll companies, like over time, they're amazing stocks, yet everybody hates them as a customer. I used to always tell people like, "Just buy low NPS stocks." People are like, "Well, doesn't the product suck? Are they gonna churn?" I'm like, "No.
It's because you're mad at them because they are so important." It's like when I said your pacemaker analogy, like you are so influential to the customer that you make one mistake, they hate you forever, but they can't get off you. I think people like in our market at least have observed like, "Oh, that's like the company that's worth the multiple," not that little tiny vertical product that's growing really fast, that's like so sexy. In the end that product that you kind of hate but really runs your workflow is the one that's gonna say, "Hey, you know that really cool, sexy product that you're behind that's growing really fast?
Like I got the same thing and I'll give it to you for 80, you know, for 20% off or, you know, whatever it may be. By the way, it integrates everything else you do," and you're gonna be like, "Yeah, sure." That's what's happened in our market. I think, you know, the market sort of observed that like, yeah, we may not be the sexiest thing. Selling POS software is not the sexiest thing, but the durability of our market is worth, you know, is worth more than, you know, sort of a niche product. I think that has definitely kind of changed our landscape.
Makes sense. Let's pivot a little bit to margin structure and and cash generation. You've talked about getting to cash flow positive at the end of this year and being EBITDA positive as well. Just talk about the building blocks to get there and then where you go from there.
For us, it's relatively simple. You know, we've guided, we wanna grow 20%-30% this year, and hold our operating expenses flat. For us, it's getting the operating leverage from the G&A base and the R&D base that we've built up over time. You know, what's exciting about that is that, you know, it's not something we, it's something we can do for a long time. We made a huge ramp-ups in R&D investments to get our ship in the right direction. It's a long story we'll skip, but, you know, we were a challenged business, great product that needed a lot of investment, and so we kind of did that, ramped up R&D. Today, you know, we are still growing our business 20%-30%, but we haven't...
R&D went down last quarter. And we're still making massive investments. We talked on our last call, you know, our internal IT investments are like five, six, $70 million this year, and we're still holding OpEx flat. All we've done is become incredibly efficient by, you know, one, being really thoughtful about our workloads and how we use our products, but also leveraging offshore, pushing more of our development to cheaper geographies. I think underneath all of that is just a radical focus on cutting costs. It's not like a new thing for us. You know, it's funny.
When, even when we were growing spend and, you know, everybody went through those boom days, like I don't think anyone at our company would've been like, "Oh, we, we spend silly," or like, "We, we pay too much." We were always a little bit, you know, highly focused on that ROI. Anyways, it's simplistic. We're keeping, we're gonna continue really nice growth and keep our OpEx flat. Again, I think we'll continue that, you know, in out years too.
Great. One more question before I open up to the audience. Outlook for the sector. A lot of focus on churn, on difficulty in unit growth given the tough macro environment. What's your outlook for the enterprise restaurant sector specifically?
I would say, up until now it's been incredibly resilient. In fact, like, beyond anyone's wildest imaginations. You know, I think in aggregate, our customers have thrived in this scary macro environment. We've not seen, you know, massive slowdowns anywhere. We've also just seen a real focus on ROI. It's been, you know, categorically, I can say enterprise restaurants have done great. Now, there are pockets that have changed. You are seeing the shift from, you know, table service, call it expensive meals, to cheaper meals. Again, where we sell is QSR and fast casual, so you'll see those guys do a little bit better than the other guys.
I think if I dig into the data, you know, in 2021 and 2022 we saw incredible growth in price per unit. What I mean by that is, menu prices were going up across the board on almost every customer. You're not seeing that anymore. You know, menu price increases have kind of stopped. Today, what does that mean? That means restaurants have to continue to drive volume. Where last year volumes went down, but revenue still went up. That's something to be cautious of and look at. On the inflation side, you know, food inflation has clearly come down. We see that in our data. It's very, very clear. Wage inflation has not, and wage units have not, meaning it's still super tight on the hiring front.
What does that mean? It means I think if restaurants can hold the top line, like you might actually have higher margins this year because food prices have come down and you don't see a lot of restaurants rushing to bring down pricing or competition's not fortunate enough yet to happen. I think they're in a strong place. You know, I would say this, the enterprise restaurant market is, these are just great businesses, you know? Like McDonald's franchisees, Popeyes franchisees, you know, the payback periods, like these are great businesses they can withstand these tough times in our respect, continue to make technological investments that help them on ROI.
To date, I'd say they've done great on a relative basis, and I think that's why the market's been surprised by I think all the restaurant tech earnings, which has all been decent. I suspect that will continue, particularly in that QSR fast casual, where you're cheap, you're efficient, and you've made the technology investments to serve in a, you know, changing world.
Great. Let's open up to any questions from the audience.
Hi. Thanks. Could you talk about some of the major QSR chains or fast casual chains and if they have any contracts that are rolling off, whether it's MICROS or NCR in the next handful of years, any sort of the lumpier opportunities that could be coming to market within the medium term? Thanks.
Sure. It's hard to go through specifically, but I say this. This year is the first year we see like the whales starting to look to adopt third-party technology. That's really exciting for our business because I think people have always discounted the TAM and saying, "Well, you're never gonna win one of the top five guys," and I can sort of say, "Well, eventually we will," because they're all starting to do it. You are seeing that. It's not tied to a contract renewal by any means. You know, most of these deals particularly for the large guys, these are just sort of renew every year kind of things. They've had them for a decade, sometimes more.
Those vendors do not have the power to say, "I'm gonna sign you up for five years with 10% price declares." Like, they do not have that influence on the customer. It's not so much the opportunity growing because of the contract, it's just because I think they're sort of also to the point of like, "Hey, like we might wanna adopt." The other part of it is also cost driven. You know, when you are one of these restaurant chains, and there are not many who have made the decision to spend a ton of money, of your own money building software, updating software, that OpEx is hard to recoup. Because today, when a customer buys our POS product as an example, it's the franchisee who pays for that.
The corporate pays zero for that. You're building your own software, like you're billing your franchisees, but it's never enough, I suspect, to recoup all that OpEx investment you have to maintain and support. Imagine where like, you know, 10 years ago you were charging your franchisees whatever it was for a POS product. Today, the expectations from your franchisee on what that POS product has exploded, just like the expectations of what you want from your phone has exploded. Like the same thing's happened there, but you still have to support all of that.
You have to say, all of a sudden say, "Hey, I need to hire a bunch of developers to have a better DoorDash or Uber Eats or a loyalty." Like you are funding all of that, and there's only so much of that you can push to your franchisee without revolt in the franchisee base. I think it's also cost is probably changing it, which is like, why do we have all this OpEx that we could push to the franchisee and maybe keep them as happy?
Great. Any other questions in the audience? All right. I'll give a couple more.
What we got-
Oh, sorry, go ahead.
Thanks for the time. Maybe just another quick one. When you think about moving down market, maybe just talk a bit about, is it more difficult to? Do customers wanna prefer buying some of your pieces piecemeal, like loyalty or back office? Are you happy to do that? I guess, does that make a tougher competitive ask against someone like a Toast who can offer something maybe similar for cheaper? Thanks.
You know, we haven't really had a huge desire to go down market. You know, in certain sense, could the product go down market? Sure. It's, it's too much product though, right? We're, we're selling, you know, a really robust set of solutions that they probably don't need. You know, arguably, I bet you it's easier to go down market than to go up market because we're just cutting functions and features versus having to build and learn something new. To me it's, would we win there? Like could we win stores? For sure. Do we know how to market to these customers? Do we know how to service, support, operationalize? Like that's not our DNA and what we do.
You know, I think down market, your huge like sort of key factor in winning a deal is your marketing. It's your, you know, your ability to like convert customers quickly, get them through an Instagram ad, get them through the funnel quickly. When you're selling to enterprise, it's a product that wins. You know, you can have an amazing salesperson, but the product isn't up to snuff. Like, you're not getting past the RFP or the demos or the labs, right? It's just a different DNA where, you know, if we wanted to go down market, like, give us a $300 million you know, marketing budget, and, like, we would win. Whether our product was, like, okay or great, we'd still win a lot of business. If you do that in the enterprise, I don't think it works.
I just think it's a different culture, different DNA, different organization that succeeds down market than up market right now. As a result, we haven't really pushed that. To what extent do you get to compete or partner with someone like Adyen? We could partner with them on payment processing. You know, everybody has a processor they work with. It can be Worldpay, it can be Adyen, it can be Stripe. They would be a partner for us in certain parts of what we do. Conversely, if we pick one of their competitors, I guess we're competitive to them. You know, I think they in particular have done a good job with both in-store and off-premise functionality, I'd say arguably better than their competitors.
You see them growing nicely in restaurants because they're one of the few guys that are really good for in-store retail plus the there. I think the challenge for them is every software vendor like ourselves is literally getting pitched by them plus their modern competitors and their old competitors. You know, pricing is gonna get harder and harder because it's. To us, since we're building software on top of it, the value is there, but it's not. You know, said differently, one of their competitors came in a penny cheaper, we'd pick their competitor. It's very much price dependent for us.
You talked about acquiring MENU and that filling one of the main product gaps you were looking at. Punchh was sort of the first step on that journey. When you look at some of the whales like we were talking about a second ago, are there other features that they have, whether from their in-house software or from some of the legacy vendors, that you guys still need to use a third-party vendor or are addressing internally that are sort of key to winning those types of business?
I wouldn't say the legacy guys have stuff we want. I think we actually have the most complete solution now, and I think that's why we're winning and growing. There's a lot of stuff that, you know, fits in the bucket of, you know, that would be nice to have. You know, as an example, there's so much middleware around the POS system that it's kinda crazy. Like there's tax software that literally just takes the data out of ours, rebundles it, and sends it, and they sell it to the customer. I'm like, "I don't know, should that be part of it?" The core functionality delivered that the brand promise we've given to our customers, we have those products.
There's a lot of stuff around there that I suspect we will build or acquire over time that just doesn't need to be a separate product and will give a better customer experience. You know, ironically, we got into payments not 'cause we thought we'd make a ton of money, just 'cause it was easier for our customers 'cause they were struggling so much with the payment vendors, then it became a business that we're excited about. There's a lot of stuff around, as far as like, you know, for two years, we're like, "We need an online ordering company." It's not like something like that right now.
All right. We got one last question from the webcast here. Can you talk about your ability to raise prices, price elasticity across your customer base, and how you guys think about that?
Yeah. We've been raising prices pretty consistently. You know, I think, just like everybody else, I think we got the cover of the macro. I'd also say I think we were bozos about pricing for a long time. You know, PAR as an organization didn't do a price increase for a decade on anything. There's a lot of value lost. We've pushed very aggressively in our POS products to do that, on our loyalty products. You know, over time it'll be, you know, for us I think, I'm not sure if it's different in other businesses. A lot of our price increases have been small because they've been contractually small.
As we renew and have demonstrated value to our customers, in the out years I think you'll see more pricing ability from us than others 'cause we didn't get the ton of benefit this year. This year you're seeing we're getting more dollars of price than we did last year. And I think that'll happen again and again as these contracts renew and we can get ourselves to a better position. You know, once you're in there, you're in there. You know, we want to make sure the customer appreciates the value before we take more.
Great. All right. We're at time. Thanks so much, Sundeep, for being here and, we'll see you soon.
Thank you, David.