How Embedded Financing is Transforming Cash Flow for Restaurant Management Platforms

Published
October 7, 2024
The restaurant industry, known for its tight margins and fluctuating cash flow, presents unique financial challenges to business owners. From covering payroll to managing inventory and paying suppliers, restaurateurs face constant pressure to keep their operations running smoothly. In fact, recent industry data shows that food cost percentages and store labor percentages are critical metrics that restaurant owners must constantly monitor to maintain profitability.

Fortunately, advancements in restaurant management software (RMS) have been key in streamlining operations. Now, these platforms are going a step further—by embedding financing solutions, directly into their offerings, they are reshaping how restaurant owners manage their cash flow and grow their businesses.

The Financial Struggles of Restaurants

In the restaurant world, balancing income and expenses is notoriously difficult. Even successful restaurants can experience cash flow gaps due to seasonal trends, fluctuating customer demand, and increasing pricing. This leaves restaurant owners in a vulnerable position, often needing to rely on expensive short-term loans or credit lines to bridge the gap. These traditional financing options often come with high fees and may not be available for new businesses, as traditional institutions struggle to accurately assess their risk. This can lead to a vicious cycle of debt for those who rely on costly loans without other accessible funding alternatives

Recent data from the restaurant industry highlights the critical importance of effective financial management for maintaining profitability. Food costs typically range from 28% to 35% of total revenue, with many successful restaurants striving to keep this percentage below 30%. Labor costs, another significant expense, often account for 30% to 35% of revenue, emphasizing the need to optimize staffing and productivity.

Enter Restaurant Management Platforms

Restaurant management platforms like Toast, Square for Restaurants, and Lightspeed have long provided restaurateurs with tools to manage staff, inventory, reservations, and more. However, many are now recognizing the value of integrating financial services directly into their platforms.

By incorporating solutions like embedded financing, these platforms help restaurants overcome cash flow challenges more easily and affordably. This form of embedded finance helps solve one of the restaurant industry's biggest pain points: managing cash flow during periods of seasonal fluctuations in demand. Restaurants often experience significant variations in customer traffic throughout the year, which can create financial strain. During slower seasons, they may find it challenging to cover operational costs, pay suppliers, and manage payroll, leading to cash flow gaps.

A Case in Point: Toast Capital

Toast Capital, integrated into the Toast restaurant management platform, provides restaurants with quick and flexible access to financing through a Merchant Cash Advance model. Loans range from $5,000 to $300,000, with funds often deposited as soon as the next business day based on sales data from the platform. This enables a seamless and data-driven loan approval process. Repayments are structured as a percentage of daily sales, allowing restaurants to pay more during busy periods and less during slower times. This financing solution empowers restaurants to manage cash flow effectively, invest in growth, and cover urgent expenses without the lengthy paperwork typically associated with traditional loans.

By offering embedded financing solutions, Toast has strengthened its ecosystem, making the platform more indispensable to restaurant owners who not only rely on it for operational management but also for financial support. This has led to higher customer retention and loyalty, as restaurants are less likely to switch to competitors when their financing needs are seamlessly met within the Toast platform.

Integrating Embedded Financing into RMS

While companies like Toast Capital have successfully integrated financing into their restaurant management platforms, developing these solutions in-house can be costly and time-consuming. For B2B software platforms looking to offer similar benefits without the heavy lifting, Invoys presents a powerful alternative.

Invoys offers invoice financing platform designed to be embedded into existing B2B platforms, allowing businesses to offer invoice financing directly to their clients without the need for custom-built financial products. By integrating Invoys, B2B platforms can deliver the same fast, flexible financing options, helping business owners bridge cash flow gaps, and invest in growth—all without requiring the platform to build out its own financing infrastructure. 

Want to learn more? Contact us today to discover how easy it is to integrate Invoys into your B2B platform and empower your clients with essential financial tools. 

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