Square launches a service to run restaurant operations, and suddenly its 'Caviar' acquisition makes sense

Key Points
  • Square launches software designed to run all of a restaurant's operations.
  • That may help to explain why Square bought food delivery service Caviar four years ago.
Square launches a service to run restaurant operations

Payments processor Square said Tuesday it is launching Square for Restaurants, a software platform for restaurant operations designed to bring more small businesses into the Square ecosystem.

The software — which Square calls its most sophisticated software yet — ties together in one place all of a restaurant's operations, from booking tables to managing the after-meal check.

And with the launch, the company's 2014 acquisition of on-demand food-delivery business, Caviar, finally makes sense.

Shares of Square rose more than 4 percent following the news.

Not only does the new platform integrate Caviar — a food delivery service — into the restaurant's system, but it provides Square an opportunity to sell other products — like loan packages and accounting software.

Square has long faced questions about Caviar, which it bought for a reported $90 million.

Square successfully grew its business through payments and hardware. Takeout food delivery is a capital-intensive business that has attracted such players as Uber and Amazon, with far bigger driver networks and logistics experience. Some investors and analysts have questioned Caviar's strategic position within Square.

In recent years, Square has been moving beyond hardware and deeper into financial services, even applying for a banking license. Square Capital — its loan platform for vendors — has become a contributor to the overall business and, according to management, drives greater merchant engagement across the entire Square ecosystem.

Caviar has also been a way for the company to further integrate small businesses into its growing ecosystem. In the company's 2017 shareholder letter, CEO Jack Dorsey wrote: "Square's expertise in point of sale, order management, and services ... help sellers grow differentiates Caviar from food delivery services."

Now, Square is making it official with a dedicated platform that aims to be the only software restaurants need. Square says the software has the ability to update menus and floor layouts remotely while also offering performance tracking, tip splitting and fraud protection.

Square for Restaurants is the company's third point of-sale-offering, joining Square for Retail and Square Appointments for service-based businesses.

Dorsey is also CEO of Twitter.

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