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If you've recently frequented a local restaurant, there is a good chance you've come across Toast's (NYSE: TOST) point-of-sale system when paying your bill. After all, the company's system is now in more more than 100,000 locations across the U.S. and growing. However, that is just one part of Toast's restaurant platform.

The real beauty of the Toast platform is that it lets restaurant owners run their entire businesses more easily. The company offers modules for a range of needs from employee payroll and supply chain management to digital ordering and loyalty and marketing programs.

A history of innovation

Toast has had a strong history of innovation since the company was founded in 2012. Originally a point-of-sales platform based on Android tablets, the company has been at the forefront of restaurant tech since, consistently introducing new software and hardware solutions to help better serve its restaurant customers.

Recent offerings include Toast Delivery Services, which allows restaurants to dispatch local drivers through an on-demand network for delivery orders; Toast Invoicing, which creates and sends digital invoices that can be paid online; and Toast Mobile Order & Pay, which allows guests to scan a QR code to browse a menu, order, and pay from their mobile devices.

Why is this important? There are a few reasons. One is that Toast's innovative and integrated platform has helped it become one of the top restaurant tech platforms in the industry, which leads to new restaurant customers. The company added about 27,000 new locations to its platform in 2023.

Many of Toast's services are meant to help restaurants drive sales. As a payment processor, Toast takes about 0.45% from each transaction it processes. As such, the more sales a restaurant makes, the more revenue Toast generates. This allows Toast to participate in the success of its clients.

Each module is not free, so the more modules a restaurant takes, the more money Toast makes. At the end of 2023, 43% of restaurant locations using Toast had six or more add-on products. That was up from 41% a year ago.

Long runway of growth ahead

While Toast is in more than 100,000 restaurants, it still has a lot of potential growth ahead, as there are about 750,000 restaurants in the U.S. alone. Toast has traditionally focused on local and regional full-service restaurants, but it has also been expanding into adjacent areas. The company has released specific modules designed for coffee shops and bakeries, hotel restaurants, and quick service restaurants. It has already won deals with Marriott and Choice Hotels in the hotel space, and Caribou Coffee in the coffee shop space.

Toast has also begun laying the groundwork to expand internationally. It ended 2023 with about 1,000 locations in the U.K., Ireland, and Canada. The company has said it sees similar competitive dynamics in Europe to what it sees in the U.S., although there are more locations that have older, legacy systems in place. This looks like a large opportunity for Toast.

The company has also talked about increasing prices, given the enhancements to its platform over the years. It will look to roll this out in the second half of this year, which will help drive growth more in 2025. However, Toast's management doesn't view this as a one-time increase, and thinks it can improve its take rate and pricing over time. Price increases not only help drive revenue -- they should drive profits even more, given that there should be little, if any, offsetting increase in expenses.

A great buy for long-term investors

Toast has been growing quickly, as evidenced by its 42% revenue growth in 2023. While many fast-growing software companies are valued based on a multiple of sales, Toast is a little more tricky, as much of the financial technology revenue it reports is pass-through revenue that goes to payment processing networks.

Toast reports a metric called annual recurring revenue ("ARR"), which is its high-margin software subscription revenue and the gross profits of its financial technology services. This basically takes out the pass-through element of its financial technology revenue.

On this metric, the company saw its ARR grow 35% to $1.2 billion in 2023. It is projecting ARR to grow between 23% to 25% this year totaling $1.30 billion to $1.32 billion. With a market cap of around $13 billion, the company is trading at about a 10x forward price-to-sales multiple.

Toast isn't the cheapest stock, but great growth companies rarely are. With a solid history of innovation and a long runway for growth, Toast should be a long-term winner for investors.

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Geoffrey Seiler has positions in Toast. The Motley Fool has positions in and recommends Toast. The Motley Fool recommends Marriott International. The Motley Fool has a disclosure policy.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.