MarginEdge, a restaurant management software company, raises $18M

MarginEdge announced Monday it raised $18 million in Series B funding to give restaurant operators a real-time view into their costs.

Co-founder and CEO Bo Davis founded the company with Roy Phillips and Brian Mills in 2015. Both Davis and Phillips are veterans of the restaurant industry: Davis was previously the founder of conveyor belt sushi restaurant chain Wasabi, while Phillips was an executive at Bloomin Brands.

What they recognized with independent restaurants was that they struggled with workflow like invoices and tracking food costs and were either building internal tools to help them stay on top of things or were still operating with pen and paper or spreadsheets.

“We focused on building something our friends would like,” Davis told TechCrunch. “We spent three years on the product and worked with 20 restaurants to use the software and focus on getting it right instead of rushing to market.”

MarginEdge’s tool is a restaurant management app that works with a business’ point of sale to streamline inventory, cost-tracking, ordering and recipes to eliminate the paperwork. It also captures all invoices, receipts or bills and converts them to line-item details within 24 hours. It is designed for independent restaurant owners that have under 50 units, Davis said.

Since launching its app in 2018, the Virginia-based company is seeing its platform used in over 2,500 restaurants. It raised a Series A in 2019, then an A2 in 2020 and with the latest round, led by IGC Hospitality, has raised $25 million in total.

IGC Hospitality, which operates restaurant properties, is not only an investor, but is also a customer, said Jeffrey Brosi, founder and managing partner. The company was using some different technology platforms to manage inventory and sales, but was looking for something to manage its whole inventory process.

“Bo came in and did a presentation, and it was amazing,” Brosi added. “The biggest thing for us is [being] user friendly. MarginEdge also has great customer service. We’ve invested in a few companies in the hospitality industry, and know the pain points and what we want to fix. If it makes sense financially, we will invest. This was one pain point that we didn’t have, and Bo filled that void.”

Like all restaurants over the past 18 months, Davis said the global pandemic caused MarginEdge to step back and evaluate. Despite many restaurants going out of business, he credits his business taking off again to restaurants rethinking their processes.

“We were lucky enough to be in a good position with capital that we could keep our team,” he added. “Revenue decreased for the first time, but we grew 45% even with COVID and as of Q1 was seeing 200% annual growth.”

MarginEdge has over 400 employees and its platform processes 45,000 invoices a week. Davis intends to invest the new funding in building out the leadership team, product development, building new features for the back office and on data science, an area he just received an advanced degree in, he said.

The company is using benchmark data around sales, food costs and labor costs and would like to provide more insights to its customers as it relates to inflation, which affects all of those aspects, and as a result, the menu prices.

“A lot of it is using data to understand menu pricing and what other people are doing so you are not pricing yourself out of the market or operating on margins where you can’t survive,” Davis added. “It will be all about predicting rather than reporting. The two things in the kitchen that are hardest are the startup prep list and the inventory late at night, and we make both easier.”