Knowing the DNA of the restaurants most likely to buy from you is often the easy part. Finding precisely how many restaurants credibly share that DNA can, unfortunately, be quite a bit trickier.

Whether you’re a nationwide food and beverage distributor or a SaaS start-up collecting your first few logos, there are 2 proverbial “gates of truth” that most companies come to when segmenting the industry and building out their teams:

1. Whether you like it or not, you most likely do not have a product or service that you can sell to every restaurant in existence, and
2. Your ability to quickly find similar Ideal Customer Profiles (ICPs) will directly impact your go-to-market, speed-to-market, and speed-to-revenue strategies

After consulting dozens of companies through a typical TAM-SAM-SOM exercise, I’ve noticed a few themes that may be helpful as you begin assessing how to strategically focus your sales and marketing teams on the segments of the industry that are the most relevant to your business.

[01] Over half of the industry are hard-to-reach independent operators

No matter the data source and no matter what number they provide you (700k, 850k, 1.2m), one thing is abundantly clear: the majority of the US restaurant industry is made up of independent “mom-and-pop shops” with less than 20 employees, razor thin margins, and a penchant for the status quo.

Realistically, many companies quickly exclude the idea of selling into the independent long-tail, knowing that the required sales, deployment, and support resources are simply too expensive to manage internally without significant investment in service automation or hands-off optimizations.

In a nutshell, I keep hearing:

“If they reach out to us, fine, but we’re not actively targeting them.”

It’s seemingly still too difficult to sell into this space at-scale (aka without extra headcount). Why? Because you simply cannot reasonably source good contact information for single-unit operators that marketing can then automate sales-play and nurture campaigns against. Thus, many companies decide to focus their efforts on the multi-unit space to get the biggest bang for their buck.

[02] A decent portion of the industry has one (or more) characteristics that make them difficult to sell into

When assessing which locations have the highest probability to purchase, quite a few characteristics lead companies to rapidly disqualify prospects. Restaurant seasonality, food trucks/kiosks, difficult ownership hierarchies (we’ll talk about this more below), or even a restaurant’s primary language can knock out tens of thousands of units in a snap.

Have a Software-as-a-Service charged monthly that’s currently only available in English? All 4 criteria above could drastically reduce the total number of restaurants who may be interested in learning more.

[03] Franchised locations are often intentionally excluded

If independent operators are sometimes too small to manage for many companies, giant LSR concepts who heavily franchise propose an equally difficult challenge to dissect.

Subway, with over 24,000 locations in the US and Canada at the time this article was written, would require some companies to seek the cooperation of over 7,000 LLCs to effectively sell into and across the brand. And they’re not alone, either. Nine out of the top 10 biggest brands in the US heavily franchise their operations, where Starbucks, as they seem to always be, is the outlier.

This unique challenge is often described as “too difficult to do business with at this moment in time” for smaller organizations without feet-on-the-street operations to collect hundreds of signatures. Like independent operators, franchise organizations can be equally difficult to find, as there is little or no online footprint for contact and location information.

[04] Everyone is fighting over the remainder

If you’ve made it this far, you’ve probably already come to the same conclusion. Once you remove the independents, 24k food trucks, and the franchisees, you’re left with the same ICP as the majority of the other companies selling exclusively to restaurants.

Your ICP probably sounds something like this:

“Our company sells to non-franchised^[1], not-too-big^[2] multi-unit restaurant concepts^[3] in the US and Canada^[4] who are not afraid of technology, embrace change, and have a strong online presence for us to target both quickly and efficiently^[5].”

^[1] Avoiding fractured LLCs
^[2] Avoiding top enterprise deals
^[3] Avoiding single-unit operations
^[4] Location and language dependency
^[5] Misc. buying persona preferences

If you tighten your ICP even further, say to 6-100 unit Concepts with no parent organization who also don’t heavily franchise, you’re down to about 3,700 Concepts totaling 60.5k locations, a mere fraction of the overall industry.

Conclusions

Selling to everyone isn’t the goal, and it doesn’t have to be. As of Q4 2021, Olo has just over 80k locations deployed, and Toast has under 50k installs, yet both are billion dollar corporations.

Having a laser focus on the segment where you can sell the best deals the fastest is a good thing, and should be your goal. Just make sure that as you dig into the details and map out the growth of your revenue org, you avoid over- or under-evaluating just how big the restaurant industry is, and what it will take to sell into all parts of it both now, and in the future.