Stop Building the Restaurant.

I spent years in foodservice, a wild industry, 24/7, teaching love for chefs, owners. For the sake of keeping it private, I'll focus on mostly US based businesses.

If you know me, there are 3 large foodservice suppliers in NZ, guessing odds are great.

Anyway, Sysco (not Cisco, I don't like modems) does $81 billion a year in revenue.

Eighty one, big, capital B, ones.

They move half a million SKUs through 340 distribution centres to 730,000 customer locations across ten countries.

They are, by a wide margin, the largest foodservice distributor on the planet.

Their operating margin is 3.8%.

That's $3.08 billion in operating income on eighty-one billion in sales. After the trucks, the warehouses, the cold chain, the drivers, the fuel, the spoilage, the insurance, the systems, and the 76,000 employees required to move all those cases, Sysco keeps less than four cents of every dollar.

The restaurant they deliver to?

Net margin of 3-5%, if they're good.

The menu consultant who redesigned that restaurant's menu last quarter?

Gross margin north of 60%.

The POS company processing the orders?

67% gross margin on the software.

The food safety consultant who wrote their FCP plan?

Charges $5K-$50K per engagement, nearly pure labour margin, or more recently, coughAItokenscough.

Everyone orbiting the restaurant makes more money than the restaurant.

Everyone orbiting the distributor makes more money than the distributor.

T̶h̶e̶ ̶H̶o̶n̶e̶y̶ Margin Pot

Every industry has a centre of gravity.

The thing everyone thinks of when they think of the industry.

In foodservice, it's the restaurant.

In construction, it's the builder.

In retail, it's the store, or sometimes if I'm lucky, ecommerce.

In logistics, it's the truck.

And in almost every case, the centre is a margin trap.

Restaurants run 3-5% net margins.

General contractors in construction run 3-7%.

Grocery retail sits at 1-3%.

Freight and logistics average 3-5%.

Broadline foodservice distribution, if we stick to Sysco's dance, runs under 4%.

These are the businesses everyone wants to start. The glamorous ones. The ones on the signs. The ones people describe at dinner parties. Hell, even working at one, it's the most proud of a job I've ever been, and that's coming from someone that hates having a job.

They're also, almost universally, the worst businesses in their own industry.

The best businesses are the ones nobody thinks about.

What I like to think of as satellites, or moons.

The services, software, and specialist companies that orbit the core without ever touching the low margin centre.

A Nice Little Margin Map

In New Zealand, the industry is structurally identical to anywhere else. You have your broadline distributors (Bidfood at roughly NZ$1.2 billion, though global reach, Gilmours at around NZ$800 million, and Service Foods currently gunning up the charts).

You have your restaurants, your cafes, your QSR chains, your hotels, your hospitals, your school canteens.

Every single one of them needs more than food.

And every single one of those "more than food" needs is a better business than the food itself.

Services Satellites

Spending time digging through Sysco's site when I first started in the industry, what struck me was not how slick their site is, but this little section tucked away in the corner, what they like to call 'Restaurant Solutions'.

Menu consulting and engineering. Sysco offers this through Sysco Restaurant Solutions. A certified 'menu consultant' analyses your dishes, costs every plate, redesigns your layout to push high margin items, and reengineers your pricing.

A full menu redesign runs $2,000-$10,000 for an independent restaurant. The consultant's COGS?

Their time.

Gross margins of 60-75%. Welcome to consulting, where the margins are obscene and nobody feels bad about it.

But why? Well, according to Sysco, restaurants that optimise their menus typically see 5-10% increases in average check size. That's real money. A restaurant doing $1 million in annual revenue picks up $50K-$100K from a $5K engagement.

The ROI is absurd.

The consultant gets paid.

The restaurant makes more money.

The distributor (if they're smart) sells more product off the back of the new menu. Everyone wins except the person who tried to compete by cutting case prices.

Food safety and compliance consulting. Every commercial kitchen in New Zealand needs a Food Control Plan under the Food Act.

That's not a suggestion.

It's the law, ya hear.

Higher risk businesses (which is most restaurants) need a written FCP based on HACCP principles, registered with their local council, and verified regularly. Lower-risk operations still need to register and comply under a National Programme. Either way, someone has to write the thing, implement it, train the staff, and make sure the kitchen doesn't fail when the verifier shows up.

In the US, the same pattern plays out at scale. Entire consulting firms have been built around nothing but FSMA compliance, SQF certification, and HACCP plan writing.

The acronyms change, the economics don't.

Compliance is structural demand. It doesn't shrink in a recession. People still eat, kitchens still need to pass inspection, and the rules only ever get more complex.

Business consulting and P&L coaching. Sysco literally employs Business Resources Consultants who walk restaurant owners through their profit and loss statements.

Think about that.

The distributor has decided that teaching their customers how to read their own financials is a good use of headcount. Why? Because a restaurant that understands its margins buys smarter, operates longer, and doesn't go bankrupt and stop ordering cases.

The consulting pays for itself in customer retention.

Independent firms do this too. Specialist hospitality accountants, fractional CFOs for restaurant groups, financial coaching programs. All services. All high-margin. All serving the same customer base.

Franchise development and site selection consulting. When a restaurant concept wants to expand, they need someone who can model the unit economics for a new location, evaluate the site, assess the competitive landscape, and project revenue. This is high-ticket consulting work. Engagements can run $20K-$100K+.

Pure expertise.

Technology Satellites

Distributor ecommerce platforms. Pepper is the clearest satellite play in the space right now. $110 million in total funding. Series C closed February 2026 at $50 million. They built a white-labelled ecommerce platform specifically for independent food distributors, the 25,000 businesses in the US collectively doing $1.4 trillion in wholesale revenue that aren't Sysco or US Foods. Pepper gives them branded ordering apps, sales rep tools, accounts receivable automation, embedded payments, and now an "Endless Aisle" dropship program that lets distributors expand their catalogue without holding inventory. Monthly SaaS fees. Software margins.

And here's the kicker: the distributor doesn't need to understand the tech. They shouldn't have to. That's the whole pitch. Pepper handles the code so the distributor can keep doing what they do. This is a satellite business selling picks and shovels to the gold miners. And it's growing fast because independent distributors are watching Sysco's $81 billion operation run on proper tech while they're still taking orders by phone and fax.

POS systems. Toast is the poster child here. Built specifically for restaurants. Revenue of $1.63 billion in Q4 2025 alone, growing 22% year on year. ARR of $2.05 billion. Their SaaS subscription gross margin is 67%. The blended margin is lower (around 26%) because payment processing is a big chunk of revenue, but the software side is a proper SaaS business with proper SaaS margins.

Toast started as a POS terminal. Now it's online ordering. Inventory management. Team management. Marketing and loyalty. Payroll. They call themselves "the restaurant operating system." And at $149/month for the core product, the price point is accessible enough that independent restaurants can afford it.

They serve over 127,000 locations.

Compare that to Sysco's 3.8% operating margin and tell me which business you'd rather build.

And that's before you get to the rest. Reservation platforms like OpenTable charging restaurants rent on their own tables. Recipe costing software like MarketMan, BlueCart, Crunchtime automating back-of-house. Loyalty tools, email marketing platforms, delivery middleware like Otter connecting restaurants to every food delivery app through a single dashboard. Every single one is a SaaS subscription. Every single one has better margins than the restaurant paying for it.

Physical and Recurring Service Satellites

This is where it gets unglamorous. But this is also where the cash flows like a river.

Kitchen design and fitout.

Sysco acquired Edward Don & Company specifically for this capability. Edward Don brought 1.4 million square feet of distribution space and the ability to design and build commercial kitchens from scratch. A full commercial kitchen build runs $15,000 to $100,000+. The design consulting fee is often applied against equipment purchases, which means the design work is effectively a customer acquisition tool for the equipment sale.

In New Zealand, this niche is thriving.

Southern Hospitality runs a full design-to-install operation with 13 showrooms across the country and an in-house team doing 3D CAD modelling, custom stainless steel fabrication, and project management.

Hostservice does the same thing out of fewer locations but with a more consultative approach, walking clients from spatial planning through to commissioning and staff training.

A hospitality fitout in NZ runs NZ$2,000-$5,000+ per square metre depending on complexity. That's real project revenue on every single new restaurant that opens, every renovation, every franchise rollout. And restaurants open and close constantly. The pipeline never dries up.

Grease and waste oil.

I love this example because it's the opposite of sexy.

I was reading about this in 2012.

Nobody starts a oil cleaning company because it sounds cool at a dinner party. But every commercial kitchen produces waste oil and needs their grease trap serviced regularly.

It's compliance driven, recurring revenue, route-based, and once you have the collection infrastructure, the cost of adding another customer is just fuel and time. Some waste oil collectors actually get paid twice: once for the collection service and again when they sell the oil to bio-fuel companies.

Pests!

Restaurants need pest control.

Not residential pest control.

Commercial food-grade pest control with documentation that satisfies health inspectors. It's specialised, it's recurring, and it's non-negotiable.

Linen and the button up uniform

Tablecloths, napkins, chef's coats, aprons.

Rental and laundering services on a weekly cycle.

Route-based, subscription-like revenue. In New Zealand, Alsco has been running this playbook since 1889.

They're in 14 countries.

Cintas built a $9 billion business on this model in the US across multiple industries.

Pick up dirty linen Tuesday, drop off clean linen Wednesday.

Repeat forever.

It's the most boring recurring revenue on earth and it absolutely prints.

Cleaning and sanitation services.

Deep cleaning, hood cleaning, extraction system maintenance. Regulated, recurring, and required for compliance.

The companies doing this work are usually small, local, and operating at solid margins because the work is specialised enough that general cleaning companies can't easily compete.

Financial Satellites

This section won't win any excitement awards but the economics are hard to argue with.

Equipment financing is the big one. Restaurant equipment is expensive.

Most new operators can't pay cash for a $60,000 kitchen build.

Equipment financing companies serve this gap, and because restaurants fail frequently, the risk premium is baked into the rates. Higher risk, higher margin. In Australia and New Zealand, SilverChef has carved out a niche doing exactly this for hospitality.

Rent-try-buy models on commercial kitchen equipment. They understand the sector's risk profile better than any generalist lender, and they price accordingly.

Hospitality-specific insurance is the same story. Specialised brokers who understand food contamination liability, liquor liability, event cancellation. Commissions on placement and renewals. Sticky once established. Nobody switches insurance brokers for fun.

Specialist hospitality bookkeeping rounds it out. Restaurant accounting is genuinely different. The cost structure, the tip handling, the seasonal labour, the inventory treatment.

Firms that specialise command premium rates because they save the client money on day one. A generalist accountant doing a restaurant's books is like a GP doing surgery. Technically qualified. Practically dangerous.

Data and Intelligence Satellites

Mystery shopping outfits send anonymous evaluators into chain restaurants and franchises to verify consistency.

Per-visit fees, recurring contracts, evaluators on contractor terms.

Foot traffic analytics platforms sell SaaS dashboards using mobile data to model who's walking past your door and when.

Hospitality recruitment platforms feed off an industry with the highest turnover rate going.

The churn is the business model. Sounds grim. Pays well.

The Hundred Million Blind Spot

I need to tell on myself here.

I managed the digital channel at one of these businesses.

Hundreds of millions in revenue flowing through ecommerce and digital ordering. Thousands of foodservice customers every single week. Restaurants, cafes, caterers, hotels, rest homes, schools. I talked to these people. My team talked to these people. Our reps were in their kitchens, in their walk-ins, watching them prep for service.

And you know what I never once heard anyone in the building ask?

"What else do they need?"

Not once.

We knew. That's the thing. We absolutely knew. You could see it. A cafe owner struggling to work out whether their eggs benny was making money or losing it.

A rest home kitchen manager who'd been winging their food safety plan for three years and sweating every inspection. A new restaurant owner who'd spent $80K on a fitout and was now staring at a POS system they didn't understand, connected to an ordering platform they didn't want, paying delivery commissions they couldn't afford.

We watched all of that happen. We had the relationship. We had the trust. We were literally in the building.

And we sold them another case of chicken breast.

We competed on price and delivery windows and credit terms. The same game every other distributor in the market was playing. Bidfood, Gilmours, everyone. Moving atoms for thin margins and hoping volume would cover the overhead.

Meanwhile, the POS company was extracting $149 a month. The menu consultant was charging $5K for a two-day engagement. The pest control guy had a standing monthly contract. The equipment finance broker was earning interest on every kitchen build we'd never thought to finance ourselves. All of them plugged into our customer base. All of them making better margins than we were.

I'm not bitter about it. I'm embarrassed I didn't see it sooner.

Sysco figured this out. That's why they acquired Edward Don for kitchen design and equipment. That's why they built Sysco Restaurant Solutions for menu consulting. That's why they have a full ecosystem of third-party partners covering POS, marketing, staffing, and operations.

They looked at their 730,000 customer relationships and asked: what else can we sell through this network?

In New Zealand, I've never seen a broadline distributor ask that question seriously.

That's a gap. And it's not unique to foodservice.

The Network Is the Asset

Here's the insight that makes this more than just "build a services business."

If you work inside a low-margin industry, you're sitting on top of a pre-built distribution network.

Not for products.

For attention.

For trust.

For access.

A foodservice rep who visits 40 restaurants a week doesn't just have a delivery route. They have 40 face-to-face touchpoints with business owners who trust them enough to hand over their purchase orders.

That's 40 warm leads for any satellite service, every single week.

The traditional move is to use that network to sell more of the same thing.

More SKUs.

Higher-margin private label.

Cross-selling from dry goods into fresh produce.

Sysco does all of this aggressively, and their private label brands are structurally more profitable than national brands.

But the real play is to use that access to deliver something entirely new.

I think about customer onboarding a lot.

Every distributor signs up new customers. It's usually a painful process: credit application, account setup, first order, delivery logistics. Boring operational stuff. But what if onboarding became a gateway? "We're setting up your account. Want our menu specialist to review your food costs while we're at it? Our compliance partner can do a health inspection readiness check. Our POS partner has a special rate for new accounts."

I pitched some version of this once. Got polite nods and a conversation about case volumes.

The thing is, nobody in distribution thinks of themselves as a platform. They think of themselves as a trucking company with a catalogue. That's the blind spot. Sysco has started to see past it. Their Solutions Partners program connects POS companies, loyalty platforms, marketing tools, staffing solutions directly into the Sysco customer base. Sysco captures value on the connection.

The distributor's margin on cases doesn't change. But the margin on the relationship explodes.

Up in the sky!

This isn't just "services have better margins than distribution." There are structural reasons satellite businesses around low-margin industries consistently outperform the core.

A foodservice distributor needs warehouses, trucks, cold chain infrastructure, and massive working capital for inventory. A menu consulting firm needs a laptop, a car, expertise, and normally a dude named Dave. The capital required to start and scale a satellite business is orders of magnitude lower than the core.

Distribution is a commodity. You compete on price, range, and delivery speed.

A food safety consultant who can guarantee you'll pass your audit on the first attempt can charge $20K for the engagement and the client will thank them for it. You can't commoditise knowledge the same way you can commoditise a case of chicken.

On top of this, many satellite services are inherently recurring. Pest control is monthly, Linen weekly. Software subscriptions are monthly or annual. Compliance audits are annual. The core business (distribution) is technically recurring too, but at razor-thin margins. Satellite services recur at 50-70% gross margin.

Switching costs compound, once a restaurant uses your POS, your inventory platform, your loyalty program, and your menu analytics, switching any single one is painful. Switching all of them is unthinkable.

Toast figured this out early.

Probably opened the Salesforce playbook, and said, huh, yes please.

They started with POS, then added online ordering, then payroll, then marketing. Each module increases the switching cost.

Each module captures more margin.

The best part about this is the exit in most cases, comes baked into the playbook. Sysco acquired Edward Don. They built Sysco Restaurant Solutions. US Foods has its own ecosystem of services. The core players in every low-margin industry eventually realise they need to wrap services around their product.

When they do, they buy the satellites. Your exit as a satellite builder is the core player who wakes up to the economics you already understood.

The AWS Exception

There's one case, and honestly many more, where the satellite principle breaks, and it's worth understanding because it's going to happen again with AI.

But the one that keeps me awake at night is AWS.

They runs at a $142 billion annual revenue pace. Operating margin around 35%. It generates 57% of Amazon's operating income from 18% of its revenue. Yes, after all these years as a FANGMAN, I still only focus on the A’s.

On the P&L it looks like SaaS. Software margins, recurring revenue, switching costs that would make Toast weep with envy.

But AWS isn't software.

AWS is concrete, fancy rocks and electrified sand.

Amazon's 2025 capex was roughly $128 billion. Most of it went to data centres, AI chips, networking hardware, and power infrastructure for AWS.

The ‘cloud’ is 300+ physical data centres running millions of servers, consuming gigawatts of electricity, cooled by industrial systems that would make a Sysco cold chain look modest.

This looks a lot like Sysco.

Capital intensive, infrastructure heavy, operationally complex.

So why does AWS print money at 35% operating margin while Sysco grinds away at 3.8%?

Scale that nobody else can match.

Amazon built the infrastructure at a cost per unit no competitor can touch. Once the data centres are built the marginal cost of serving the next workload approaches zero. Sysco can't do this with trucks and warehouses because physical distribution doesn't have the same scaling dynamics. Every new delivery route costs real money. Every new AWS customer costs pennies.

Switching costs that make restaurants look loose. Once a company builds its entire tech stack on AWS, migrating off is a multi year, multi million dollar project. AWS has them.

Forever.

And here's the kicker: AWS started as a satellite. Hell, you could even say it still is.

Amazon built it to handle their own retail infrastructure. Selling the spare capacity was originally a side hustle. It just happened to become the main game because Amazon was willing to throw unlimited capital at scaling it beyond recognition.

That's the pattern worth noting.

If you can spend $128 billion a year on infrastructure, you become the utility and capture the whole stack. The satellites that orbited your old core become tenants paying you rent. You're not avoiding the margin trap anymore. You've become so big you've bent the margin structure of an entire industry.

Microsoft's doing this with Azure. Google's trying. The AI foundation model companies are trying to do it right now too. For the 99.999999% reading this, that's not a playbook. You don't have $128 billion. Congratulations, you're a satellite, by definition.

That's fine.

Satellites can print money too.

Just know which game you're playing.

The Operator Advantage

Here's where it gets personal.

I spent many years inside ecommerce and B2B operations across FMCG, retail, and distribution. When I look at the satellite map around foodservice, I don't see abstract market opportunities. I see specific problems I watched go unsolved. Over and over and over.

I know that restaurant owners don't read their P&Ls properly because I watched them order product with no idea what their food cost percentage was. Literally no idea. Ordering premium cuts for a $22 steak that was costing them $19 all-in once you factored in the sides, the garnish, the plate waste, and the one in six that got sent back. They thought they were making money on it. They were subsidising it with their beer sales.

I know that compliance is a nightmare because I sat in audits where the person responsible for the food safety plan couldn't find the document. In their own kitchen. During an inspection.

I know that most independent restaurants have no idea what their tech stack is costing them because nobody ever added it up. $149 for the POS. $89 for the reservation platform. $59 for the loyalty plugin. $200 for delivery integration. $79 for the accounting software. That's nearly $7K a year in SaaS subscriptions, and half of it overlaps.

These aren't hypotheticals. I watched them happen. Repeatedly. In real kitchens with real operators who were too busy running service to fix the business underneath it.

That's the operator advantage.

You don't need market research.

You've done the market research.

You lived it.

If you've worked inside foodservice distribution, you know what every single customer struggles with beyond product supply. If you've worked inside construction, you know exactly where the builder's margins leak and what services could plug those leaks. If you've worked inside retail, you know what the store manager actually needs versus what head office thinks they need.

The mistake most operators make is pointing their experience deeper into the same margin trap.

Starting their own distribution company.

Opening their own restaurant.

Launching another retail brand.

The smarter move is to point that knowledge sideways.

Into the satellites.

Where the margins actually are.

Where the expertise you already have is the moat.

And here's the kicker: you're not cold-calling. Your first 50 customers are people you already know. The network is built. The trust exists. Your first client is a phone call away, not a marketing campaign away.

Beyond Foodservice

This pattern isn't unique to foodservice. It repeats in every industry where the core business is capital intensive, operationally complex, and margin-constrained.

Construction. General contractors typically operate at 3-7% net margins. The businesses orbiting them? Safety consulting. Building compliance and code consulting. Project management software (Procore was valued at over $9 billion, Tradify acquired for a hush-hush 8-figure deal). Specialist insurance. Equipment rental. Architectural and engineering design services. Every single one operates at better margins than the builder swinging the hammer.

Retail. The average grocery retailer runs at 1-3% net margins. The satellite businesses? Shelf analytics and planogram software. Loss prevention technology. Retail staffing agencies. Store design and fitout firms. POS and payments (Square, Shopify POS). Loyalty platforms. Retail media networks. Woolworths, via Cartology, figured out that selling ads to suppliers is better margin than selling groceries to customers. Let that sink in. The supermarket makes more money showing you a product than selling you one.

Logistics and freight. Asset-heavy trucking companies run 3-5% margins. Freight brokers who match loads to trucks run 15-20% margins without owning a single vehicle. Route optimisation software. Fleet management platforms. Telematics. Compliance and safety training. The further you get from the truck, the better the margins get.

B2B distribution broadly. I'm living this one now in business supplies distribution. Same structural dynamics. The distributor moves product at thin margins. The value-added services, the technology platforms, the specialist consulting that orbits the distribution core, all better economics. The B2B distributor who figures out they're actually a customer access platform, not a product pipeline, wins.

SaaS, ironically. Even in software, where gross margins are already 70-80%, the satellite pattern holds. Implementation consulting. Systems integration. Training and certification programs. The Salesforce ecosystem generates more revenue through its partner network than Salesforce itself earns directly. The satellite businesses around Salesforce employ more people than Salesforce does.

The pattern is fractal. No matter how far you zoom in, the margins are always better on the periphery than at the centre.

Stop Staring at the Core

Every industry has a centre of gravity that attracts all the attention, all the capital, and all the competition. And that centre almost always has the worst unit economics in the entire ecosystem.

The opportunity is in the orbit.

If you've worked inside one of these industries, you already have the unfair advantage. You know what the customers need. You know what they'll pay for. You know who signs the cheques. You have the network.

Don't start another restaurant. Build what it needs.

Don't start another distribution company. Build what its customers are begging for.

Shout out to all the legends I've ripped info from for this piece:

Sysco SEC Filings | Toast Investor Relations | Sysco Restaurant Solutions | Pepper | Bessemer Venture Partners | MacroTrends | Consulting Success | Kellerman Consulting | Southern Hospitality | Hostservice | Lightspeed | Bidfood NZ | Gilmours | Distribution Strategy Group