One company I may have been wrong about is $PAR. Their software, Brink, just grew 43% this quarter. Toast, which I thought was a competitor, fired half their staff (enterprise sales).

But Toast makes all their money on payment processing for SMB’s, most of which are closed during the crisis. The fact that they fired their enterprise (larger companies) sales team (as opposed to the SMB sales team) reveals they couldn’t compete in the market.

I see it as $PAR consolidating the market. Part of the long thesis for PAR is that small restaurants are going bust, and so bigger companies will grab market share. And even if their same-store-sales are down, they’ll continue paying for their POS software.

PAR’s brink software allows restaurants to get mobile orders, coordinate delivery, loyalty programs, etc. from one central software. Dairy Queen is paying for its franchisees to have Brink installed because they know if they want to save the franchise base they need it.

PAR’s TAM is 600k units, their current penetration is 10k units, and about 2100$ in ARPU. The bull case sees them hitting 30k units in the next couple of years and doubling ARPU. There’s also a difference in value add from Lightspeed and Square.

These two companies aren’t enterprise grade, they’re good at payroll & payments for SMBs. They can’t do inventory management, back-office, mobile ordering, delivery, loyalty programs, etc. Brink is the only product that has successfully installed mutli-unit chains.

Square and Lightspeed don’t even compete on deals. So there’s a long runway for growth in restaurants; their bread and butter is enterprise (Five Guys, Dairy Queen, Arby’s, etc.). There’s a lot of VC money in SMB, like for Toast - but not for enterprise.

And even if Square or Lightspeed wanted to compete with PAR, they don’t have the product or team to do it so these enterprise chains won’t sign with them.

Brink has proof of concept and a big reason why it is winning is because it has existing relationships with QSR’s from its legacy hardware business. There’s also a lot of integration work, the sales cycle is v long, SMBs are more profitable today because of payment processing.

A good sign customers love Brink is that PAR has had ZERO churn since the company was founded – what other company in the world has that churn?
The only places QSRs can go towards is Micros or Aloha. Micros is owned by Oracle and hasn’t reinvested in product.

New customers are also higher APRU. Savneet has repriced them to 3k, which is still massively underpriced. Micros costs 10k/year, Aloha 5k/year.

About M&A:
The Brink POS is the Brain of the restaurant, i.e. everything is connected to the POS.

So Savneet buys smaller companies that provide niche services that can be integrated into the POS to increase its value add even more. Ex: they bought Restaurant Magic for 42M$ (enterprise reporting) so PAR could upsell the product to their 10k customers and

triple the size of the business and Savneet wants owners to remain in place.
PAR is burning about 1M$/month, but their balance sheet is very clean.
Hardware (mostly consumables and services now) is doing 15M of EBIT. Probably worth at least 100M.

Government is doing 12M of EBIT, probably also worth 100M. Paying less than 4x ARR for a high moat 50%+ grower with a CEO that may be an outsider. Huge TAM with no competition and huge M&A runway.

If you've done work on $par and are bearish, feel free to share. Would love to hear your thoughts.

I imagine many don't like how Savneet is overly promotional.