Speaker 1:
From the library of the New York Stock Exchange at the corner of Wall and Broad streets in New York City, you're inside the ICE House, our podcast from Intercontinental Exchange on markets, leadership, and vision and global business, the dream drivers that have made the NYSE an indispensable institution of global growth for over 225 years. Each week we feature stories of those who hatch plans, create jobs, and harness the engine of capitalism, right here, right now at the NYSE and at ICE's exchanges and clearing houses around the world. And now welcome Inside the ICE House. Here's your host, Josh King of Intercontinental Exchange.
Josh King:
In 1948, the legendary brothers Dick and Mac McDonald revolutionized the food service industry, introducing the Speedee Service System at their McDonald's restaurant in San Bernardino, California. It was with this system at that first McDonald's that the ability to produce a mass quantity of food quickly and efficiently was born. As depicted in the 2016 film The Founder, customers could now have a fresh, delicious burger from grill to counter within 30 seconds.
John Carroll Lynch:
Speed, that's the name of the game. The first stop for every McDonald's hamburger is the grill, manned by two cooks whose sole job it is to grill those all beef beauties to perfection. Meanwhile, as the patty cooks our dressers get the buns ready. Watch out. Burger Crossing.
Speaker 4:
Burger crossing, burger crossing.
John Carroll Lynch:
Every McDonald's burger has two pickles, pinch of onions, and a precise shot of ketchup and mustard.
Michael Keaton:
Now, where'd you get those?
John Carroll Lynch:
We made them.
Michael Keaton:
Made them.
John Carroll Lynch:
Yeah, custom-built. The whole kitchen is. Next-
Michael Keaton:
That is-
John Carroll Lynch:
... this is the finishing station where we put the whole thing together. And voila, a fresh, delicious burger from grill to counter in 30 seconds.
Josh King:
We all have our early McDonald's memories. For me, it was the store across Route 9 from the Village Green Miniature Golf Course in Natick, Massachusetts, our Saturday lunchtime reward for a round well played. The aroma of a Quarter Pounder with cheese, the salty residue on the large fry, topping it off with something brick-like that passed for apple pie. Caution, filling is hot. But for those of us butting engineers and efficiency experts, something else was at play, the technology. You weren't being rung up at a register, your server was pressing buttons corresponding to items, your cash was being taken and a perfect tabulation of change due was spilling out a chute toward your awaiting palm. Going back to Dick and Mac McDonald, the Speedee Service System made this system possible, at least at the outset, serving as a catalyst for the brand's massive expansion. Today, McDonald's, that's NYSE ticker symbol M-C-D, boasts over 42,000 restaurants worldwide, with a projected 50,000 golden arches by 2028.
As the Speedee System rapidly churned out food, restaurant hospitality had to keep pace with us hungry miniature golfers. In response, PAR technology, NYSE ticker symbol P-A-R, developed the first point-of-sale terminal in 1978. This innovation supplanted the old cash register and automated restaurant operations from back of house to front of house, to eventually drive-through. In 1980, McDonald's adopted PAR's POS system, making it their exclusive product for the next two years. Today, PAR operates globally, offering a comprehensive suite of solutions, including point-of-sale systems, inventory and labor management, loyalty programs, omnichannel ordering, payments and hardware. PAR's unified approach aims to streamline operations, enhance customer experience, and foster growth opportunities for each client.
Leading PAR is today's guest, president and CEO, Savneet Singh, joining the board of directors in 2018 and soon after ascending to his current role, Savneet has transformed PAR from a company on the brink of bankruptcy to a leader in restaurant technology. In a minute, not longer than it takes to place an order from a big screen menu for a burger and fries, and tap a credit card on a Windows-based kiosk, Savneet joins us Inside the ICE House to detail PAR's story and its revolution. We'll explore recent acquisitions PAR has made, adding to their portfolio, and discuss opportunities for growth with some of the world's preeminent food service brands. Our conversation with Savneet Singh, president and CEO of PAR, is coming up right after this.
Speaker 6:
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Josh King:
Welcome back. Please remember to subscribe wherever you listen, and rate us and review on Apple Podcasts so other folks know where to find us. Our guest today, Savneet Singh, is the president and CEO of PAR Tech, NYSE ticker symbol P-A-R, a leading global provider of cloud-based point-of-sale software, hardware and service solutions for the restaurant, retail and hospitality industries. Savneet first joined PAR as a member of its board of directors in 2018, and soon after took over his current role. He previously worked at Morgan Stanley, that's NYSE ticker symbol M-S, co-founded GBI, a platform for buying, trading and storing physical precious metals, and remains involved in the FinTech based asset management firm, Co-Venture. Savneet, thanks so much for joining us Inside the ICE House. Welcome to the New York Sock Exchange.
Savneet Singh:
Thank you for having me.
Josh King:
You just had an experience down on the floor with our Judy Shaw doing a floor talk. Your first visit to the Exchange?
Savneet Singh:
Second.
Josh King:
What's it like walking in the building for you?
Savneet Singh:
Well, I think you get this aura of history combined with modern technology all at once, and for a company like PAR that's been listed for over 40 years, I was thinking back to what it would've been like when our founders first did this tour. And to still be around and still be here was somewhat sentimental, but I think exciting and exhilarating more at the same time.
Josh King:
Your installations at PAR span over 100 countries, with more than 500,000 PAR terminals deployed worldwide. It gets over 100,000 restaurants using your point-of-sale systems. Beyond the imagery that I just conjured in the introduction, for those not in the food service or the hospitality business, or that take for granted the hardware and software that serves up a burrito in the blink of an eye, what is PAR?
Savneet Singh:
PAR is a platform to run your restaurant. Restaurants today have changed dramatically since when we were kids living that memory that you just shared. If you just think back five, six, seven years ago, the vast majority of business at a restaurant was in a store. You'd walk in, and you'd have your meal and you'd leave, or you'd pick up, or you go to the drive-through. But in the last five or six years we've told our restaurants to say, "Hey, you still have to give me that amazing memorable experience that I had when I was a child, but I also want you to be amazon.com when I'm not there. And I want delivery, I want to track delivery, I want the quality of food, I want the same fulfillment. However, you need to do it from the exact same box." I like to juxtapose it to, if we went to Amazon and said, "Hey, out of your warehouse we need you to run five star dining in great restaurants," you never expect that from them.
And so, restaurants have this really challenging set of circumstances where they need to be Amazon on one level and your traditional restaurant at the same time. And to solve that, they've added a ton of technology. So, they've added mobile applications, loyalty, online ordering, catering, AI, drive-through, et cetera, et cetera. And they've done it in a really short period of time. And the idea was that, "Oh, the consumer today wants a loyalty app, let's give that to them. They want it in mobile, they want online," but the problem is when they added all that technology none of it connected together. And so, I always say that restaurants have gone from being experience managers to vendor managers. Now they sit there and they manage our company and 10 other companies, trying to create a great experience for you.
And so, what PAR does is we come in with a holistic suite of best of breed products from loyalty online ordering, all the way to back office payments and point-of-sale, and we give it to them in one platform so that we can help them take back control of that foundational layer of technology so that they can innovate on. And I think the important part there is that this innovation isn't going to stop. Digital commerce doesn't stop. Once e-commerce started, it never stopped. And with us as restaurant consumers, whether we like it or not we'll be probably placing more digital orders five years from now than we do today. And so, what we're really trying to do is simplify it for that restaurant so that they can focus on delivering to their end customers who inevitably will want more, and more, and more.
Josh King:
Who are some of your biggest brands, and the biggest customers and the well-known brands that we know?
Savneet Singh:
So, our core competency are emerging, fast-growing brands like a Sweet Green, a Cava, all the way up to a Burger King, a Dairy Queen, and obviously McDonald's, as you mentioned. And so, we really focus on that enterprise or soon to be enterprise chain. And what's critical there is that those are businesses that are making a tremendous investment in technology. If you were to look at the best performing stocks over time in the restaurant space, there's almost a perfect correlation to their investments in technology. The best performing restaurant stocks also happen to be really great innovators in technology. And so, we're trying to give those tools to the rest of the industry to hopefully have that same impact, but generally we serve that enterprise community.
Josh King:
You mentioned Cava. We had Ron Shaich, the founder of Panera Bread and the chairman of Cava in here. And as he and I were talking, the focus mostly was on the taste of Mediterranean food and how revolutionary that is in the quick serve restaurant or fast casual restaurant segment. We didn't go deeply into technology, but I know you mentioned Cava. You also have big deals that you've done recently I think with Burger King, Wendy's. When you're sitting in a conference room making the pitch, what do you think is the biggest selling point when you meet with these companies that allows you to succeed and come to agreement with some of these giants?
Savneet Singh:
It's a great question. And by the way, Ron is a board observer of PAR, investor in PAR. And I think if you peel the onion, he'd get to the technology side because he really believes in that. I think that was a big part of his success at Panera. But the PAR pitch is pretty simple. We sell to enterprises, and you have to pick the best product. So, I always say, "We could be the best salespeople in the world, we have the best marketing. It doesn't matter if the product doesn't hold up." And so, our best sales tool is actually the references of our prior customers. I always say, "Hey, I'm going to give you the biggest pitch in the world. I'm going to sell you, sell you, take you the best in our world, but in the end call our customers." But in reality, what we're going to them is saying, "What you're buying from us today is not a solution for your problems today, it's your solutions from your opportunities two or three years from now."
So we oftentimes go to these brands, show them our product, and we will stand up against every other product up there and usually we're the best product out there. But what we combine with that is a vision of the future, which is saying, "You're making this investment, you're disrupting your stores, you're putting new technology in, not so you can solve today's problems but what's going to happen next?" Because if you were to look at restaurants five, six, seven years ago, they maybe had five or six big software products running in their stores. Today that number is like 20. And I promise you in five, six years it's going to be 25, 30. Who knows what it is? And so, for them to keep up, we take that burden off of them. The other thing I sell, which I think is unique to PAR, is that we are, I think unlike any other company in our space.
We're 50-year-old company, as you mentioned, run by folks in their 30s and 40s. We are incredibly ambitious, incredibly intense, and so our culture tends to win. Our last few large deals, some of whom you mentioned, I think if you were to talk to those CEOs and CIOs they would say, "We love the products, products are great, but we wanted to work with that team because we know we can text the call center desk or the CEO at 2:00 AM and we'll get a call back at 2:01". And so, we sell this combination of best of breed products that are deeply integrated to make your life simpler, to help you create a vision in the future. But in the end, I often find times I'm saying, "Hey, our team just really wanted to work with you guys." And I take a lot of pride in that, because scaling that culture is probably the most important job that I have.
Josh King:
"We want to work with that team," a company like Burger King would say. That deal came together last October. They selected PAR as its exclusive point of sale software and services provider across North America, that brings it to about 7,000 locations in the U.S. and Canada. Savneet, that's a lot of hardware and software to deploy. How do you manage the process of rolling out the technology in a timely manner for each of those stores because they want to work with your team and they want you to do it successfully?
Savneet Singh:
The work is upfront. So, we go in there oftentimes with very detailed plans of how we're going to roll, how we're going to partner. And the key is that when you're rolling out software, not all software is the same. If you're adding a cool widget to your iPhone or a small widget to your store, it's not a big deal. But when you're installing point of sale software, as we're doing for Burger King, it is hypercritical you get it right, because if something happens your store is down. That means people can't come in your store, they can't order online, they can't use the drive-thru. And so, you can really screw up something really great by not getting that right.
It is like replacing a pacemaker, you got one shot. And so, it is incredible amount of upfront planning so that we can work in partnership with our event, with customers, because in the end we become their closest partner not their vendor in the end, that their success is as dependent on our success. And so, we do a ton of work upfront. We obviously staff-up appropriately, and then we are just relentless about the follow-up. Because listen, it's technology. There are going to be mistakes, there are going to be errors, and it's oftentimes how we respond to that that wins the day. But it's a ton upfront planning and just this idea of let's be partners, let's be partners, let's not have an adversarial vendor, customer relationship.
Josh King:
PAR's next generation Brink POS software and your MENU Link software are going to be provided to all of those locations. So Savneet, if I decide today that I want to go have lunch at Burger King, leave our location here at 11 Wall Street, walk down to the Oculus for a Whopper and an Original Chicken Sandwich, how do PAR's technologies make that process easier and more efficient, from placing my order to walking out with my sandwich?
Savneet Singh:
So, you would interact with our product in two ways. One would be you go to the restaurant and that cashier is typing on our system your Whopper, your fries, whatever it may be, on a point of sale system that we've built, designed and installed at that Burger King. And the core difference from our product to prior products is our workflow is built for Burger King. It's more efficient, it's faster, it makes your experience as the guest much smoother. It connects back to the fulfillment side of the restaurant. Think of the kitchen is almost like the fulfillment center now today, and it works smoothly, and hopefully you as a customer don't even notice. It's just ambient, it moves quickly and freely. But the other part of our product is, that you mentioned, is called MENU Link, which is integrating all the third party delivery aggregators into that point of sale system.
So, that might be you placing an order on DoorDash. It's taking the data from DoorDash, installing at the point of sale system, hopefully getting some guest records out of that, running that so that it feels as smoothly. And why that's so important, as that you've probably seen, there's this really challenging dynamic when you go to a restaurant and you're waiting to place an order, and they're filling all these bags for a DoorDash driver to pick up, and you're waiting 10 minutes to place your order. The driver hasn't even come yet, and then you place your order, and you finish your food and those orders are still sitting there. And so, then the DoorDash customer is pissed off because they've been waiting for their food. And so, by natively integrating these orders into the point of sale system, you can do all sorts of stuff like throttling, slotting your orders such that you, the in-store guest, has a great experience, but also the guy ordering from DoorDash or the gal ordering from Uber Eats has that same great experience.
The food comes out right when the driver's there, and they can go take it and deliver it. And so, that's the orchestration that we do. And it's hard sometimes to think about how complicated it is to run a restaurant. It seems simple because we're like, "Well, I can make a burger and put it in a bag," but you got to think that you got orders coming in the drive-through, on Uber, DoorDash, your own online ordering system, catering orders, people in the store. You got to manage all this labor, you've got to manage all the supply chain, all the food, you got to make sure there's enough buns, burgers. I mean, it is really, really complicated.
And as we, as consumers, have our kids start ordering from TikTok and Instagram, and all the things that they expect, they want us to track the supply chain of the food, they want to know where that cow came from, all of that is going to be solved with technology. And so, the real rub is that restaurants today are going to just be adding more and more software. When we took over PAR as a young set of naive kids, I think, I always joke, we didn't really know that, but the one thing we knew was that software was in the restaurant a lot faster than the restaurant realized. And the idea was that as that was happening, our point of sale product could be the foundational layer to make it simple. And I think that's what we endeavor to do, that's what we hope to do, but I think that's also what we pitch our customers is, "Hey, this is just going to get worse and worse. This is not going to stop. And so, let's find a way so that technology cannot be the wedge between you that you and your customer."
Because in the end, what I hate about technology in a retail experience is that it doesn't make you closer to that meal or that moment that you have with that brand. You want to have that magical moment you had in Natick, Massachusetts every single time. But today it's like, "Oh wait, my system's broken. I got to pull out my credit card. Oh, here's my loyalty card. Oh wait, here's my coupon." It's the technology's not bringing you closer. And so our dream is say, "Hey, how do we use technology to bring you closer to those meals and moments that you love? And so you're like, "Wow, that technology, that store actually made me love that store more than I did when I came in before."
Josh King:
It has to save a lot of labor too, at the end of the day.
Savneet Singh:
It does. The ROI is huge. And in the end, restaurants are really competitive. They are brutal businesses, and I think the key part that we have to deliver is ROI. If we can't show ROI to our products, we have no shot of staying in there. And so, the beauty of our products is that they're all built to deliver value. And we come in and we show that value over and over again. And what we oftentimes are able to do is say, "Here's what your stores look like before us, here's what they look like after us. And man, what could happen in the future if we did X, Y, and Z?" And so, our upsell process to our customers is not saying, "Let me go sell you this next whiz-bang thing." It's saying, "Hey, this is the ROI we've driven. We think we can drive this ROI with this additional product or this additional service."
And so, it has to drive ROI. And in today's world, where you've got minimum wage growth growing, you've got supply chain challenges, food prices, it is clear that our customers will only solve that environment through tons and tons of technology, whether it's robots in the kitchen, DoorDash delivery drones, it's just going to get more and more. And so your system, if you think about it as a technology system, has to be more extensible. There'll be more things plugging into your system. And so, that's what we're great at and that's what the future we're hoping to bring forward.
Josh King:
More accurate, less prone to error, that scenario that you just painted of the DoorDash orders waiting, and they're being filled while I'm sitting at the counter waiting for a human being to look at me in the eye and me saying verbally what I want, the order may be accurate, or maybe 98% accurate or something. But also, with these touchscreen order screens I just used at the airport the other day, let the customer do a lot of the work.
Savneet Singh:
Absolutely. And the United States has actually been behind the rest of the world as it comes to technology in retail and restaurants. They've taken their time, and I say they, the brand concepts, maybe it's us as consumers being averse to it, but it's been a very slow process to put kiosks, mobile ordering, AI, voice ordering, and it's taken a long time. But the pandemic really did pull it forward. And I think what's pretty clear is that I used to think it was generational, that those that are millennials like myself, or Gen Z and so on and so forth, we want to order on our phones, we want to order on a kiosk, we don't want to talk to anybody. But all the data would suggest that actually everybody prefers that to some degree. Now, that can be a sad-
Josh King:
If the screen can be attractive enough, the buttons can be easy enough and the whole process intuitive enough-
Savneet Singh:
And it's giving you time, right? I think the [inaudible 00:19:23] does it save you time? Does it make you feel like you got something out of it? Now, that's not the right fit for every brand, and I don't think we want to get rid of human beings and the hospitality experience, but it's clear that for restaurants to be able to deliver the experience of that in-person human being that you want to that community that wants it, the only way they can fund that is by investment technology to solve the rest of us who may just want to be running, grabbing a sandwich on our way to school, way to work, whatever it may be. And so, you have to do both. But you're absolutely right, which is if you don't make that investment in technology you're going to really suffer, particularly as you relate to your peers.
One of the things I always think is fascinating is restaurants took a long time to get into the loyalty world. McDonald's, the best restaurant company in the world, they really didn't get big into loyalty until 2021. Think about all the other businesses you've used that have loyalty, and that's because they didn't need to. But now when you've got the greatest brands in the world making tremendous investments in loyalty, you can't really say, "Ah, I don't want to loyalty up." Because in the end, that next consumer is going to get attached to your competitor's loyalty product and you're in trouble. And so, it's this really hard challenge of I want these amazing in-store experiences, I want a human being to smile at me, but I also need to deliver it to the other side of the world that doesn't want any of that and just wants efficiency.
Josh King:
PAR's history dates back to the 1960s when it was founded as a contractor for the Department of Defense, and conducted high-tech research on Air Force bases. And then 1978, PAR then creates the first point of sale terminal. Take us back in time, how did the invention of the POS system alter the company's direction and eventually lead to its listing here as an IPO?
Savneet Singh:
Well, it's a great story. Our founders originally started out doing defense contracting for the United States Air Force. And one of their mothers took some of the money they made in defense contracting and licensed a McDonald's store in upstate New York. And she kept complaining that the kids, as she would call them, at the register, were messing up the count. And she would say things like, she was an Italian immigrant so she get away saying this, saying, "They don't teach Americans how to do math." And she kept complaining. And her son, who was the founder of PAR, would say, "Mom, they probably overcharge sometimes, they undercharge at other times." And so, this amazing woman stood at the edge of the counter and literally watched every order go through for a week, and she would take the bag where the order was placed, calculate what was ordered, and then at the end of the day count what was taken out of inventory and be able to say, "Hey, today we lost five bucks. Yesterday we lost 10 bucks."
And what she realized was that if you're a regular customer and we overcharge you, you know right away we overcharged you. But if I undercharge you, you don't really say anything. And so, she used that data to convince her son to say, "Hey, why don't you build something? You guys are a bunch of techies, go build something." And so they got a wood box, they went to Radio Shack, put some circuits and some buttons, and built this point of sale device for their mother's restaurant. And they put it in there and very quickly realized, "Wow, we can save a bunch of money, we can be way more efficient, put orders through faster." And lo and behold, they took it to McDonald's and McDonald's said, "Hey, we didn't approve this. You can't do this, it's not working."
And fast-forward I think six or nine months, McDonald's came back and said, "Hey, we just spent a ton of money trying to make something like this with another big tech vendor. Could we use you guys?" And it's one of these amazing stories of American entrepreneurialism where our founders came from families that had no college education, to taking a company public on the exchange in their 30s. And this is back in 1982 when we went public. And so, it was an amazing transformation. And I think the critical part of that was without that transformation we would've been a small mid-size government contractor, stable business. But we all of a sudden became a government contractor, really a services business to a product business, and that really changed the fortune of the company in the early '80s.
Josh King:
It was getting there, but from the mid '80s to the early 2010s PAR experienced what might be called its rough years. In 2014, the company acquired a software product named Brink. I want to listen to a PAR announcement discussing PAR Brink POS.
Speaker 17:
PAR Brink POS is a cloud-based point of sale software designed specifically for quick service at fast casual restaurants. As a cloud-based solution, Brink POS is simple to use and install, PCI validated to ensure secure data, and also has enterprise level real-time reporting. Brink POS was developed with a guest experience as its focus. This means that every facet of Brink POS has loyalty at its core, from mobile and online ordering, to rewards programs.
Josh King:
So Savneet, while we talked about how the POS system changed PAR's path in the '80s, how did the acquisition of Brink serve as another turning point for the company in the years that followed?
Savneet Singh:
Yeah, so I'd say from the mid '80s till 2018 it was a challenging ride. We unfortunately got swimlaned as a hardware and services business. And so, we went from a high-growth technology provider to a hardware company. And as you probably know, building hardware in the United States, selling to retail and restaurants is a tough business. You would have these booms of revenue when customers and stores were updating their stores, and then five or six years of very, very slow revenue. And so, in 2014 the company acquired a software product with the idea of saying, "Hey, this is our chance to get back in the software game so we're not stuck as a hardware company." And the idea was that the cloud was coming and it was going to hit restaurants. And so, restaurants would be willing to go adopt something new and move forward, and that was a thesis.
We acquired the business in 2014, it was in 300 stores. In 2018, when I got involved with the company, we were in 5,000 or 6,000 stores. But underneath that success of going from call it 300 stores to 5,000 or 6,000 stores, was I think the challenges that got us near bankruptcy, where we ended 2018 with $3.4 million in the bank burning a million and a half to two million a month. And it was that success that led to those great challenges. And that was, candidly I think we grew so quickly, we had a team that wasn't really sure what they were doing, we were hardware guys trying to run a software business. And so we had great growth, but we were really starting to splinter and fall apart. And so it was a scary time, but luckily it's what put me in the seat. And so, I think what we realized is we had product market fit, we had a product that actually made sense, we just needed to figure out how to build a culture and a motion to commercialize it and actually serve our customers.
Josh King:
I mean, talking about being swimlaned and getting put in the seat, 2018 comes around, Savneet. Where were you at that point, and how did you get involved in restaurant technology?
Savneet Singh:
So I joined the board at PAR, I think in maybe March or April of 2018. And it didn't make a lot of sense. I was, I think 33 years old, I wasn't really ready to be on a public board. I don't think I deserved it, but I had a lot of passion around building software. I wasn't yet in restaurants, I didn't understand restaurants, but I understood how to build and chip software, I understood growth cultures. And PAR was this company that had a, call it $170 million hardware and services business, with a small few million dollar software business, Brink. And the board's idea was, "Let's add somebody that knew it." And I think when I got there, within literally two months of being on the board I got super concerned. We were under a lot of pressure. We had two different activist funds coming in demanding the sale of the company.
I went and spent a couple days with management in two different locations and I went back to the board and said, "Gosh, we got some problems. Our employee NPS is negative 60, I don't think it goes much lower than that. So, our employees aren't that happy. Our customer NPS is negative 50, so employees aren't happy, customers aren't happy. We're burning a ton of money, and we have all these distractions." We were under DOJ SEC investigations, just things that weren't taking us focused on the business. And so I, in the boardroom, started saying, "Hey, I think this might not be fixable. We might need to change, let's maybe push for sale of the company." And so, we tried to fight it out, we tried to find a new CEO. And so in transparency, when I became the CEO of PAR I wasn't really there to run the company I was there to sell the company, because we were really worried that we wouldn't find a way out of this.
And on the first day I started, I still remember it clearly, December 4th 2018, the CFO comes in at the end of the day and says, "Hey, I got some bad news. We've got $3 or $4 million left and we might not be able to make it long enough to sell the company. What do you want to do?" And I would say it was the scariest moment in my career. It was literally 5:00 on my first day. And you go around the first day, everyone's like, "Hey, you're amazing. You're amazing." And again, I was relatively young and naïve. And I brought the team in. I said, "Hey, we can find a way. We're not filing bankruptcy. This company's been around for 50 years, we're not going to let it go." And so, we worked really hard to restructure, get us some breathing room, push out our notes. Unfortunately did a large layoff, but we found a way to survive while at the time the bankers are trying to look for a buyer, and then from there it snowballed in.
Josh King:
But your first instinct after coming on the board, analyzing things and then getting into the seat was, "We better sell the company." Why was the answer no?
Savneet Singh:
We're located in the middle of nowhere upstate New York. It is a resilient place-
Josh King:
What town? Where?
Savneet Singh:
We're near Utica, New York. So, we are not in a hot bed of technology. I don't know if there's another technology business, there's definitely not one of size within 100 miles. And I think there is a resilientness that said, "Hey, we can find our way through everything." This is an area that I say is most analogous to the Midwest where lots of businesses have left, lots of manufacturing's left. And so, the people are resilient. And I actually remember the first week I became CEO, I had to lay off 25% of the workforce. It's a miserable thing to do. And I remember I went up on stage and I did the opposite of what I remember the head of HR and one of our board members says, "Don't go to the office that day. You're half the age of the people that work there, you look a little bit different. You're going to get knocked out."
And I remember saying, "Well, if I'm going to give the orders to terminate so many people, I got to treat people like they're my partners. And if I treat them like kids, they'll act like kids." And so, I went on stage and I did this whole presentation of, We have to let go all of these folks. But you know what? It's not their fault, they're not to blame. It's my fault and everyone in the first row's fault, because we didn't create a business to sustain them, and we should have never hired them, and that's on us. That's not on them." And I remember doing that because I wanted the executives to know, "Hey, you just destroyed the lives of 120 people for some period of time. If you get fired, that insecurity never leaves you the rest of your life, and we just did that to 120, 130 people, and we should take that really seriously."
And I did this presentation to the company literally in front of the entire company, and I got off the stage and I wasn't sure the reaction. I was like, "Am I going to get booed?" People actually went really silent. And I got half the audience was giving me a standing ovation and thanking me for telling them the truth. And this is after we just fired 25% of the workforce. And I remember I got off the floor, and I got back to the office and I called my wife, and I'm like, "There might be something here. There is a culture, there's a DNA that just needed to be led appropriately," and we were naive enough to think we could do it.
Josh King:
As I sit across the table from you, you don't look like a guy who got his start collecting, buying and selling baseball cards. How does buying and selling baseball cards lead to a life in investing, and a preparation for getting in front of that group that day?
Savneet Singh:
I think starting any type of business, no matter where you are, teaches you a lot about human beings. And I like to say, "All problems are people problems." Every business problem, it sounds complicated, strategic, financial, but in the end it's people problems. And starting a business at a young age, trading baseball cards to pay for a car, then pay for college and fun, it taught me about how to deal with people. It taught me what works, what doesn't. It taught me how to take responsibility at a very, very young age. I remember when our business, my brother and I started this business, and I had just got my driver's license. I was 16, and I remember that we'd go to the bank, get all these checks, go the bank, we're selling cards on eBay. We'd go to the bank and the first week it was like 100 bucks and it was 500 bucks.
And I remember a few months in, we went to the bank and the woman said, "Hey, you can't leave here." And she had the security guard stand next to us. And she called my mother and said, "Hey, I think your kids are dealing drugs." And the poignant moment that I experienced was I remember my mom coming to the bank and just tearing them apart and say, "How dare you accuse my kids. They're entrepreneurs, they want to be ..." And it was those types of experience as a kid give you a lot of confidence of, "Hey, I can deal with adults when I'm a child," and so on and so forth. And so, it was fortuitous.
And again, I didn't come from a family that business, my grandparents were social workers, my mom, it was just a natural thing that happened. And so, to me it got me interested in commerce, and then I got obsessed with Warren Buffett and investing, and I stumbled into PAR. And I always say PAR was not by intelligent design. It was the last thing I thought I'd be doing, but when you jump into a problem you can ... I got passionate about it and I think, "Hey, we can go build something really big here," and that's-
Josh King:
We're going to get deep into PAR in a second, but I got to linger on this for a second because people wonder this. Can you still make a decent margin buying and selling baseball cards?
Savneet Singh:
It's very hard now. The market's gotten really thin. And so, where the market has moved to is on other collectibles. So coins, magic cards, Pokemon cards. But really I think where money is made is on the '90s of basketball, the heyday of Garrett and Kobe, but also finding old cards that haven't even been graded. So, it's not nearly as simple as it was, but what I think is the coolest thing about cards is it's cool now. When I used to do this, it was like, "Oh, my kids are doing something now." Today everyone's into collectibles, and so it was a fun journey.
Josh King:
And then from Cornell, what was your experience moving from Loudonville out to Ithaca, to Cornell, down to New York City for Morgan Stanley? What's that experience like in Ibanking in those days?
Savneet Singh:
Everyone says they hate their Ibanking experience. I truly loved it, because I was a kid that came from a small town that didn't have anyone in my family even in business, let alone finance investing. And I remember while the hours were challenging, being super grateful of like, "Oh my God, I got to see X, Y, Z CEO in the office." But for me, I got into investing because my dad, when I was a sophomore or junior in college, sent me the Roger Lowenstein, Warren Buffett book, The Making of An American Capitalist. And from that moment on I said, "I want to be this guy." And so I got obsessed, and everyone said, "Go do investment banking."
And for me it was not so much I learned how to invest, or build a model, or do all this traditional finance stuff, it was that exposure to see how Wall Street worked and realizing really quickly that I wanted to be on the other side of the table. I remember three or four months in sending my dad an email and said, "Hey, I'm having a great experience. I'm making all this money that I never thought I'd make at such a young age, but I want to be on the other side this table. I want to be the one coming up with these strategic plans, making those decisions." And so, for me it was more valuable because it showed me what I did want to do, but I loved it. I mean, I was truly grateful for every minute that I spent there.
Josh King:
So, you got on the other side of the table, you got in as the CEO, you made some really tough decisions as you came in. And then, before long PAR's problems begin to resolve and optimism begins to return among the leadership and the employees, the company seemed to have avoided this disaster by 2019. After that point, what vision did you and your leadership team establish for PAR to ensure that the struggles of the past wouldn't be repeated?
Savneet Singh:
It's a great question. So, I'll answer it differently in the sense that what we actually lined on were a set of values first, which was when we were on the operating table, people ask me all the time, "How did you avoid bankruptcy? You were literally six, seven, eight weeks from having to run out of money." And they always assume that the answer's going to be, "Oh, we created this amazing plan and I'm an amazing genius," and blah, blah. I'm like, "I had nothing to do with this" What we did was we said, "We need to find the right people to solve this problem. And importantly, we need to get people to leave who are not." And so, we created the time three values, it's since evolved to four, but those first three values were speed, ownership, and winning.
So, when you see those three values, and that's all there are, those are pretty intense. And I always say, "If you've got a company, you've got 10 set of values on the wall, everybody fits." You're like, "Yeah, eight or nine I'm pretty good with, maybe one I don't like but I'm going to fit." At PAR you saw speed, and ownership, and winning, you knew what you were getting into. There wasn't free cold brew coffee and lots of beanbags to hang out on. This was like, "Hey, we're here to win and we're here to find a way out of it." And it was that culture that actually I think has created the moat around PAR, because we have literally gone from fighting bankruptcy to a company that nobody cared about, being located in the middle of nowhere Upstate New York, not Silicon Valley, and we have pushed our way through to be an industry leader in a really short period of time.
And we've done it with great humility, but I think more than anything else it's been this intensity on we need people who care about the business as owners, who work with great haste, who have tons of focus on what they're doing, and they believe in winning together. And so, that was really the change. Now from the strategic perspective, I think what we saw is what I mentioned in the beginning, which was even back then in 2019, before the pandemic, it was very clear to me at least that restaurants were being eaten alive by software. They didn't really realize it yet. They were starting to see each part of their workflow have a little bit of software added, a little bit of software added. If you worked in accounting you're like, "Oh wow, all these reports are coming digitally now." If you worked in the back office or HR you said, "Oh, I can now manage my labor through a mobile app so I don't have to log on anymore."
You were starting to see bits and pieces of technology. And what I got excited about was I said, "Wow, in most industries you don't have 25 software vendors solving that industry's problems, you have a couple." And I thought that the point of sale system, what we operated Brink, that the video you played, was actually going to be our future, was that was going to be the fulcrum of everything. And so, we went in all on that bet. And what's funny and a bit ironic was that's very much still our thesis today, which was our disbelief that in unifying the technology of the restaurant, we can actually help serve our customers.
And I think the great win for us over time will be that we can change our customers from being these really large vendor managers to being experienced creators. And so, the strategy really became how do we build products but also acquire products so that we can be more than just one product to you and help you solve that greater problem of not let me be the best point of sale system, let me be the best platform so that you can serve your guests better?
Josh King:
After the break, Savneet Singh and I are going to continue talking about PAR's journey, dive deeper into PAR's first quarter earnings call back in May, and explore the innovations and products that have positioned the company at the forefront of the restaurant technology industry. All that and more is coming up right after this. But before we go to break, Savneet, just have to ask, did you hold onto any of the very valuable cards? What's your most prized possession still in your collection?
Savneet Singh:
So, I have the terrible story of I sold everything and then I bought everything back in 2021. It's like buying tech stocks in '21, I was super excited. I'm a huge basketball fan, my son and I are. And so, we've got a LeBron refractory rookie that's graded a 9.5, amazing card. And my brother and I always had two dreams of cards we wanted when we were kids and we couldn't afford it. One was a Wayne Gretzky rookie card, and one was a Michael Jordan one. So I bought the Jordan one, and hopefully down the road we'll get the Gretzky one.
Josh King:
We'll get the great one before your turn at PAR's up. So much more coming up after the break, we'll be right back.
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Josh King:
Welcome back. If you're enjoying our conversation, want to hear more from guests like Savneet Singh, president and CEO of PAR Technology, that's NYSE ticker symbol P-A-R, please remember to subscribe to Inside the ICE House wherever you listen to your podcasts. And if you would, give us a five star rating and a review on Apple Podcasts. And before the break, in addition to talking a little bit about sports trading cards, Savneet and I were discussing PAR's evolution from a Department of Defense contractor to a leader in restaurant technology, and the struggles and successes the business faced in between. So Savneet, we talked a little bit about your lineage and progression toward PAR. When we were preparing for this discussion, reading your email to the PAR team on New Year's Eve, you mentioned Jeff Bezos' day one mentality a lot, something that has become a Silicon Valley mantra. I want to listen to a little bit of the Amazon founder as he discusses the concept, and why it's never day two in the company he founded.
Jeff Bezos:
Day two is stasis, followed by irrelevance, followed by excruciating painful decline, followed by death. And that is why it is always day one.
Josh King:
That's Jeff Bezos, stasis, followed by irrelevance, followed by painful decline, and then ultimately death. How do you follow the same mantra at PAR?
Savneet Singh:
Every day is day one. And the reason I wrote that letter to our team was that I started to realize that when you have a company that grows, too often the refrain is patting on the back about things that happened in the past, and you get comfortable. And I was noticing that even I was getting comfortable. People are going to me and say, "Hey Savneet, we went from near bankrupt to a billion dollar market cap in two and a half years." And our software revenues were from, back then it was less than 10 to 100 and something, and it went so fast. And then I started realizing that there's really small things that I wanted to go change. I'd be like, "Ah, it's fine. I'll deal with it." And I wrote that letter because I said, "Hey, this is stasis. We're going to hit stasis if we don't keep that intensity up on what we're doing."
And at PAR, the reason why I obsess over day one is we can't lose sight of the fact that in the end we are serving customers that are restaurants, and food service businesses, and fuel stops. And they're in a business that is super intense, super hard, and if we don't put ourselves in their shoes all the time ... You know what it's like when you go to a restaurant and you see somebody? It's tough. And so, we've got to be there. And what I worried about was not that we would miss the big product cycles, we still have a hard [inaudible 00:40:07] culture. It's that we wouldn't fight those annoying battles. Like, "Gosh, that HR policy is kind of dumb but I'm going to deal with it. Oh, that compliance thing."
It was those small things that you're just kind of like, "I don't want to deal with it, that's too many phone calls." I'm like, "No, I want to fight those battles." And one of the things I take a ton of pride in just is that every single week I have a dozen people tell me how much of an idiot I am. And when new people come to PAR, they're always a little taken aback, which is like, "Wow, your leadership team critiques you a lot." And every single employee at PAR has my phone number, has my Slack, I encourage people to give me feedback all the time. And part of the reason I do that is one, it keeps me super humble, which is like, "Okay, I'm actually not that great and I'm lucky to be in this seat."
But two, you get to really quickly figure out how is the organization feeling about tackling a challenge? And as I mentioned, business to me is about dealing with problems, it's not about dealing with the fun stuff. And as I observe people come to me with problems over the years, it went from, "Oh my God, this is broken. Oh my God, this is broken," to, "Oh my God, this is broken and here's how we can solve it." And I love that about our team and our culture, and I want to continue and spawn that. And so for us, day one means that when there's a problem we do not avoid it, we run headfirst into it and we solve it, and we own it to its fruition, but it's really not getting caught up in stasis and being like, "I can deal with that later."
It's like, no, no, no, I want to push that forward now.
Josh King:
Is there anything that you do to hive yourself away to find some way to recharge, to find the energy you need to tackle another day?
Savneet Singh:
I get energy from business. For me, Friday is not like, "Oh, thank God it's the weekend." I can't wait to come into the office on Mondays. I enjoy working, I enjoy problems, I enjoy seeing our team grow. And one of the great bits of pride that I have is seeing when our stock does well, our employees do well, our shareholders do well, but watching that growth. And so for me, I don't find work draining. I get excited by the next big challenge, the next big problem. And I think one of the things that has come forward is I think that the team believes that too. And so, they're not shy to share the problems with me and dive into it, but that's that.
Now, if I really need to recharge I've got a couple things I love. I am relatively obsessed about working out and staying regularly fit. And so, I'm on a basketball league, all of my kid sports. And another thing is I love Japanese Koi fish. I don't know if you've ever seen them, but I've got a Koi pond. And so, me and I guess my family, really me, we grow them, we breed them, and it's a really fun, completely disconnecting experience from the world.
Josh King:
Where do you get your fish?
Savneet Singh:
Japan.
Josh King:
I get mine from, I think Zetts Fish Farm in Pennsylvania?
Savneet Singh:
I'm aware of it, yeah. Well, total non-sequitur but it is really hard for some reason to breed fish outside of Japan, and they don't really know why. But I remember doing a tour of a Japanese fish farm, and you just see their sea grade quality fish and you're like, "That's the best thing you could ever have in America." And so, it's a quirky hobby. What I like it gets you outside, it gets you disconnected, and there's a cult of people that are obsessed with this type of stuff.
Josh King:
As you watch them swimming around the pond, how does their behavior teach you?
Savneet Singh:
I think what I learned more about it is one, I feel really grateful to be a human being, because sometimes I see what's going on and I'm like, "Gosh, it's very lucky that somehow I'm there and they're there." But I think the other thing I observe is resiliency. These are resilient animals, and we can go on vacation for a week and not forget to tell the neighbor to feed the fish, and they're still alive. I like that sense of resiliency. And there's a beauty and elegance in how they operate. When I was a kid, my dad and I built a Koi pond and we had other types of fish in there. And there's a grace in the way that Koi operate versus the rest that I think it's this lineage from Japanese heritage. But I enjoy that kind of grace with ... I'm a Sikh by faith, and there's a great line in the sense that be the lotus flower that swims across dirty water, and you can build a great flower on top of it, even though beneath you is a bunch of dirt.
And I think Koi are like that, because you can see these beautiful fish and you're like, "How are they surviving in this total mess?" And so, I enjoy that beauty out of this potentially dirty environment.
Josh King:
Talking about finding some sense of beauty in a chaotic environment, I want to look a little bit into the key takeaways from your first quarter earnings call. PAR has a comprehensive portfolio with offerings spanning point of sale, restaurant operations, payments, hardware, loyalty, order and delivery. How do you unify these categories to create that streamlined and cohesive solution that best serves restaurants and their customers?
Savneet Singh:
That's a critical question, and it's an amazing question that I rarely get asked. The critical part of what we do is not saying, "Hey, we have built or acquired different products, go buy them all from us." Because in the end, that's not that interesting to our customers. That's just having five different vendors that happen to be in one. But we work really hard to say is, "When you buy a product from us, they should be integrated tightly such that you, the end consumer, aren't sacrificing functionality, but getting something better than you could at one time." And so, all of us have had unique experiences when you integrated an app on your phone and you're like, "Oh my god, I can manage my thermostat and my security system all from the same app," you have this kind of wowzers experience. And for us, we want to deliver that for our customers.
And so, what we do is that when we acquire a product, in our last call we talked about two acquisitions we made, we try very quickly to integrate the people, then the product, sorry, then the sales, and then we quickly try to figure out how do we get the products tightly integrated so that they give it this unique experience. And I always say, when I go to a customer I actually say, "I don't want you to buy our product just because we consolidate your vendors, that's the lowest bar of all. I want you to buy it because you think when you buy two products from us, you're getting an experience you couldn't get if you bought them from two different vendors." And every product we sell, it creates a flywheel because you get more tied to our products, you have a better experience and you want to buy more, and we're trying to create this Amazon-like flywheel in the enterprise environment.
Josh King:
You talked about the two acquisitions. March, PAR completed its acquisition of Stuzo Holdings, a software company that provides digital engagement tools, and also entered into an agreement with TASK. What do each of these acquisitions add to PAR, and how do they impact your long-term growth plans?
Savneet Singh:
So, one of the things we've observed over time is that the restaurant industry is changing. United States, we hear a lot about being over retail, but we're also over restaurant. The next set of new restaurants you see aren't going to be a new box built on an empty piece of land with a logo of your favorite brand. It's likely going to be in an airport, in a fuel stop, in an EV charging station, in a non-traditional location. And we were seeing this happen overnight. You're seeing the closure of very famous big brands closing a freestanding store and opening it tied to three other stores or the gas station, and we needed products to address that. The other trend that we saw was that our customers are these fast-growing U.S. brands, or these very large U.S. brands, and in the very large U.S. brand market where we really do a great job, almost every single brand there is growing more outside the United States than inside the United States.
And for us, did it matter to us? Not necessarily, we could still win our deals in the U.S., but what worried us was that over time the decision makers and the influence would move offshore and not be here in the United States. And if we didn't have a product to sell over there, we would really be at risk of losing our influence on those brands. Not to mention that all of these brands want us to be their international vendor. And so, what TASK brought us was an international product to help us serve that international market which we didn't serve today. And what Stuzo brought to us was this ability to service in fuel stops and convenience, where we were naturally going to, but we were stumbling into it and we weren't really focused on it. And so, it's really growing where the food service market's growing, and hopefully skating to where the puck is going to be, to use the Gretzky analogy.
Josh King:
You said you sold off one of your segments of your business, but then you bring in these two. How do you integrate an acquisition into a company that has this unique culture up in Utica?
Savneet Singh:
I would say the thing that we do best at PAR is the integration of the culture. Most M&A deals fail, and it's not lost on me. My first two years of my career as an investment banker, and MA is this really false positive. You do a deal, everyone applauds you, Wall Street says, "Great job, you bought it at a good price," your employees get exhilarated. We're a bigger company, you get paid more because now all the surveys say you get paid more, and it's this really false positive like it's going to work, but in the end it crumbles. And the reason why I think it crumbles is that when you are buying a startup or a company that has an impassioned CEO or founder, most people on that team have subscribed to the church of that CEO, whoever she or he may be.
They've said, "Hey, I'm buying that person's vision." And then all of a sudden that CEO is like, "Hey, now we're going to go buy this, guys," switch the church to that person. And that's really hard, and it doesn't really work that well. Not to mention that they're all getting paychecks and they're like, "I don't need to work this hard anymore." And so, we go buy a company, we actually go there first with saying, "Hey, is this going to be a cultural fit? Do their values look a little bit similar to ours? Is the speed at which they operate, the care in which they take care of their customers, how they take care of their employees, is it going to be a fit?"
And there have been deals we've been like, "That would be nice, but man, the cultural friction would be huge." Then we think about, "Okay, if the cultures fit, what's the culture plan? How are we going to integrate?" And that is literally the fine details of, "Okay, our email systems need to connect, but hey, our swag has to be the same. You can't be on that team and get better swag than this team." And then it's the bigger stuff of how are we going to do that? Then the second thing we do is once we align on culture is an organizational design. Who reports into who? One of the great mistakes I see businesses make when they do M&A is they take too long to figure out what's your organizational design, what are the reporting lines?
And overnight if you're telling somebody, "Hey, you used to be the COO of the startup, but guess what? Now you're three layers down," you better do that now and you better do that quick. And then we put together the financial plan and the objectives that we expect everybody to hit, and we have to get, again, the culture, organizational and financial plan all have to work for us to say yes to want to do a deal.
And so, we obsess over it, we spend a lot of time upfront, and we tell you coming in it's going to be like this so you're not surprised when you come in. And again, when we walk into a room everyone's as high energy, as intense, and so you know what you're getting. It is not like we're coming in and tricking you, we really do get you to want to believe in our vision. And if you don't, we'll tell you right away it's not the right fit. And I think the last thing that we do is we rip the bandaid. I learned this early on, but you oftentimes do an MA deal and everyone's like, "Hey, don't worry. Everything's going to change. Nothing's going to change, it's all going to be the same. You're just now working with another logo, another brand."
And that's literally the worst thing you can do, because in the end everything's going to change, your benefits are going to change, your email address is going to change, how people perceive you're going to change, your LinkedIn's going to change. And so again, a lot of this is planning up front, but going through a very, very detailed plan up front so you, that employee coming in, know what you're getting. And what I think our integration team and our broader team takes great pride in is our retention of team after acquisition is crazy high, and that's why I think they've worked.
Josh King:
You acquired Punchh in 2021, Menu in 2022. As you look at other potential acquisitions, are you looking for broader geography or broader technology as you go forward? I mean, you've mentioned convenience stores a couple times, convenience stores are very different animals than restaurants. So, how do you figure out what you're going to need to serve an even broader market?
Savneet Singh:
If we were to do it more M&A, and we just did two big deals so I don't think it's top priority, but if we did, it's almost always been product focused. We did one geographic acquisition, which is our leg into non North American markets, but it'd be product led. And every M&A deal we've done has been a company that was not up for sale with the bankers, that we chased down usually for well over a year, and convinced them to believe in our vision. And so, literally all those deals you listed, those were ... TASK, the company we just acquired, that was a three or four year courtship. Punchh, the loyalty business, that really I think galvanized PAR and changed PAR, that was a multi-year courtship.
And so, we go in heavily focused on product first, and the vision is really simple. If we take that product, can we combine it with our existing products to create a differentiated customer experience, where we're creating more value for the customer such that we can capture more value ourselves? And that's where it starts. And so, we have a target list of companies in our industry that we think would fit better with our products, and if one of them comes up for sale or if we feel we've got a big hole, we will go after it. And so, it's completely product led, not so much geographic led.
Josh King:
You're talking about Punchh, and you mentioned that it galvanized PAR and changed PAR. I want to pause on loyalty for a second, because one brand that I think you and I have both seen a lot of in Upstate New York is Stewart's Shops, and they do great ice cream, great shakes, and they give you your little actual punch card for your ice creams and your shakes, and if I buy nine I'm going to get a free shake. Talk to me about the technology of loyalty beyond that old card and that punch.
Savneet Singh:
So it's changed a lot, and I think we, as PAR, serve something like 45 of the top 100 restaurants in the world from a loyalty program. So, small chains all the way up to Taco Bell. And I think what we've learned over time is that the key for loyalty is personalization and creating an immersive experience so that you actually feel something different than you did before. I think the first version of loyalty was a punch card, it was discounting, it was everybody gets the same benefit no matter who you are. And what I think all brands have realized is that it's really about how do I maximize the LTV of you, Josh, over what you were before, and not necessarily this category as a segment of customers? And so, when I talk to our brands I don't want to go in there and say, "Here's all the segments you should run on the campaign."
It's like, no, no, our goal is to create more ROI for you by maximizing the LTV for Josh. So as an example, if you are an everyday coffee drinker at one of our customers at 2:00, I probably should not be sending you a 2:00 coupon for coffee. Versus myself, if they're like, "Hey, he never comes in after lunch. Let's send him a coupon to see if he comes in," and I come in, now I'm a net new customer and that's worth it. And so, we should be getting different promotions, different ideas. And what I think is going to happen over time is that, particularly with artificial intelligence coming into this market, we as a brand or a platform will be able to customize every single loyalty program on a per customer basis. Now, that's crazy.
Two thirds of Americans have an app on their phone in their pocket that we run, which is an incredible amount of human beings, but that's where we should be going to where every single experience is personalized to you, and then working from there, how do we make you stick here, and so on and so forth? And so loyalty has changed a lot, but it all started from that punch guard and that's why we're called Punchh. And that's the science behind it, which is it's not about giving a discount, it's not about a blanket promotion, it's about how do I target you and make you more loyal to my brand, such that I'm delivering you value and you're delivering me value versus me just discounting a bunch of stuff for you?
Josh King:
And talking about delivering value to shareholders, Savneet, in your first quarter calls PAR reported total revenues of over 105 million, which I think represented a 5% increase on its year ago quarter. What factors do you think contributed to that revenue growth, and how does this performance perhaps shape expectations for investors for the rest of the year and into '25?
Savneet Singh:
Yeah, and the key part of our growth is our software business, which is we call subscription services, and that grew 25% year over year, and that's really the focus. The rest of our revenue lines include this government contracting business, which we sold off, and hardware and services business. And so, it was a phenomenal quarter, 25% growth in software at a company our size. We're the top 5% of software companies right now from a growth perspective. And so, that was amazing. We actually grew faster this quarter than we did our last few quarters, so we actually accelerated growth on a bigger base. And so, I think for our shareholders, they're super excited to see, "Wow, the growth of this company is continuing," even as we've gotten larger.
It's very rare for a company to grow faster as they get bigger, and that's what's happening to PAR. At the same time, we guided to getting to EBITDA break even in Q3, and this belief that we're creating a cashless spigot that we can create more reinvestment opportunities. And so, Q1 was a really great quarter for us because we delivered great growth, we guided to, I think strong profitability, and obviously we completed these acquisitions, which really changed the scale and size of PAR.
Josh King:
You talked about the goal of increasing subscription service gross margin to over 70%, it was 66% in the first quarter. What strategies are in place to achieve that goal, and how confident you'll get to the 70% target?
Savneet Singh:
So for us, it's scale. We had historically actually been all the way up at 71 or 72 just a year, year and a half ago, but we acquired a product called Menu that is online ordering, that is just the infancy of it scaling. And so, we're taking all the cost, if you will, but not the revenue. And so, that business along with a super fast growing payments business, as those get scale we will easily hit that number, and we feel really, really confident about that as we go forward. So, there's a nice margin story there too.
Josh King:
PAR Pay, mentioned frequently as becoming a native infrastructure across all products, leading to high growth and a strong pipeline. How are you leveraging PAR Pay and its potential across different verticals, whether it's the fast food chains or the convenience stores?
Savneet Singh:
It's a huge part of our future. Early on, what we were thinking about was, "Hey, since we're your point of sale system, or your loyalty product, or your online ordering, we'll just process payments for you. We can do the same thing everybody else can do." But early on when we were running our payments playbook, I started to have this belief that that is not value. We're just a processor, and there's lots of different processes out there. How do we create a product around payments that actually makes you feel like you've got a differentiated experience? And so, we've been working really hard on something called single scan flow, which is a really, I think, magical experience if you're a regular restaurant customer, where today, if you go to your favorite restaurant and you're a loyal customer, you'll pull out your phone and say, "Hey, here's my coupon for my free french fries," or my free drink.
Then you'll pull out and say, "Here's my loyalty number so I can get credit," for what we call earn in your rewards, "And here's my credit card to pay." So, you have these three scans, and it's annoying. And we created something called single scan flow, because we're the loyalty company, and because we're the point of sale system and we're your payments product, you can scan once and it burns the coupon you may have, it earns the points and it pays in one. And so, it's this really awesome experience where we can make the guest experience faster. You, as a loyalty customer, "Well, that was pretty cool," and obviously get more people through the door. And so, we're trying to create innovations around payments as opposed to just giving you processing. And so, it's going to be a huge part of our future. The business is going to grow, I think well over 100% this year, and hopefully continue that for a long time.
Josh King:
At the beginning of our conversation, Savneet, we dwelled a little bit on the big Burger King deal, and they selected you as their exclusive point of sale software and services provider across North America. How do you think the partnership is going to influence your efforts to attract other major clients to your platforms?
Savneet Singh:
It's a big deal. It's our largest restaurant customer. It's an influential brand, not just in the United States but globally. It's an organization of RBI, Restaurant Brands International, that owns multiple chains. And our ability to deliver there does a few things. First is I think it proves to the rest of the, call it older, larger brands, that PAR can scale to their size. That really matters in this industry, because as I mentioned, if you screw up the point of sale system everything is down. And so, I think it gives us brand validation, referenceability at scale that nobody else in our industry has. The second thing it does is, and I think this is as important, is it creates that internal mojo which is like, "Holy crap, we took down one of the two or three biggest brands in North America."
It gives us the confidence that we can deliver more. And I think lastly what it does is it helps, I think really cement this change in PAR. Remember five years ago we were thinking of filing bankruptcy. We weren't a going concern, and today we won one of the largest point of sale deals ever, maybe the largest deal ever from a SaaS perspective in our industry. And so, I do think it shows us what could be done going forward. And when we won that deal, we celebrated for a couple hours and said, "Okay, where's the next one? And how do we deliver it to Burger King so that they want to come back to us over, and over, and over again?" So, short answer is absolutely it help us win more business, but it's as much an internal sense of pride than it is an external validation.
Josh King:
To that mantra, where's the next one, Savneet? As we begin to wrap up, how are you and the team addressing the competitive landscape that the restaurant technology sector is facing, ensuring that PAR is going to continue to be a leader in the industry and provide best in class products?
Savneet Singh:
It all comes down to people. I'm one of those obsessive CEOs that worries about everything. I worry about every little startup, I worry about every big company coming after us. I assume the end is right around the corner if we don't keep our eyes focused on where we're going. But it's that obsession of culture. If we just had an executive offsite, and if you had come to that, we had a set of new folks of the people that came from the acquisition, and one of the young men that was there, he said, "Man, I feel like I just joined a cult and I'm so excited about it." And I said, "Well, that's not a good thing. We don't want this to be a cult but we do want you to be a believer, because in the end if we can get you to believe in the systems and culture of PAR, it doesn't matter what our competitors do, we will find a way to win."
And so, what I obsess about is not the what, how do we beat X, Y, Z customers is actually not what I'm obsessed about. I'm focused on the who, which is how do we get the right people here to operate in a way that we will find that next problem? And so as an example, if our product falls behind our competitors, yes, I'm stressed about where are our shortcomings, but it's more about, okay, who's the person that's going to do that 10 times better than I ever could and deliver on that? So to me, the simple answer is we focus way more internally than externally, and it's really about how do we get the right people with the right DNA, put them in the right spots and then get the heck out of the way and let them dominate?
Josh King:
Savneet, we started this conversation talking about Dick and Mac McDonald in San Bernardino, California. We segued to Josh King across the Village Green in Natick, Massachusetts getting his Quarter Pounder with cheese. We've painted a picture of what it's like at the Burger King today near the Oculus. Give us a glimpse of the future, where is this world headed and what role does PAR play in it?
Savneet Singh:
Well, I think as it relates to the restaurant industry, it's really clear to me that whether we like it or not, digital transformation of restaurants aren't going to stop. And I think the way we are heading is relatively simplistic actually. I think the goal in the end for every technology company is to not exist, is to be ambient, so that you, the guests, actually don't even know. I always dream of a scenario where you walk into a restaurant and it's like, "Hey, Josh. I got the vegan menu for your wife, I got the kids' menu for your kids, and I already know what you want." You get your food and you walk out, because it already has your credit card, already has your loyalty, and you don't have to think twice. And it's just this beautiful experience that you can ... Again, the mission of PAR is to bring people closer to the meals and moments that they love.
And I think that we can deliver that by making technology more of an ambient experience as opposed to this wedge and stuff in between. The restaurant itself is going to evolve. It is inevitable that artificial intelligence will be impacting everything from how you place your order, how that order is received, and how that order is fulfilled through robots and everything else in between. But I think one thing that I'm really passionate about is that that doesn't mean the end of hospitality, that doesn't mean the end of that personal relationship. All it means is that we have to change and enhance that relationship to serve the customers that we live in today.
And I feel very lucky we get to serve restaurants who employ an enormous number of Americans, where we can build a product that actually makes their life a little bit easier, and we don't have to have those crappy videos on TikTok of people screaming at store managers. And I think that's the vision of the future, which is how do you create an environment that is very tech heavy, but still makes it seem like you're having this ephemeral, visceral experience of a great meal with a great server, and all the while you feel like you've gotten all the technology experience that you were hoping of?
Josh King:
The meals and moments that we love. Thanks so much, Savneet, for joining us Inside the ICE House.
Savneet Singh:
Thank you for having me.
Josh King:
And that's our conversation for this week. Our guest was Savneet Singh, president and CEO of PAR technology, NYSE ticker symbol P-A-R. If you like what you heard, please rate us on Apple Podcasts so other folks know where to find us. And if you've got a comment or a question you'd like one of our experts to tackle on a future show, or to hear from one of our CEOs like Savneet Singh, make sure to leave us a review. Email us at [email protected], or tweet at us at ICE House Podcast. Our show is produced by Lance Glenn, with production assistance, editing and engineering from Ken Abel. Pete Ash is the director of programming and production at ICE. And I'm Josh King, your host, signing off from the library of the New York Stock Exchange, thanks for listening. We'll talk to you next week.
Speaker 1:
Information contained in this podcast was obtained in part from publicly available sources and not independently verified. Neither ICE nor its affiliates make any representations or warranties, express or implied, as to the accuracy or completeness of the information, and do not sponsor, approve or endorse any of the content herein, all of which is presented solely for informational and educational purposes. Nothing herein constitutes an offer to sell, a solicitation of an offer to buy any security, or a recommendation of any security or trading practice. Some portions of the proceeding conversation may have been edited for the purpose of length or clarity.
