My biggest concern is how important is it to differentiate myself? The competitors have had a working and refined product for months or years so chances are they'd have a better product. They charge monthly with no upfront hardware costs and have small trial contracts with Applebees, Chilis, etc.
I realize there's 100 companies that make toilet paper and most survive, I'm just not sure if that is an appropriate analogy.
toilet paper industry and software industry works differently . They have very different dynamics. You can not conclude anything in general from traditional industry for software industry.
That being said, I know personalized and better support is worth a lot.
Is it OK to flat out say that the plan is to be bought out by competitors because the products are similar?
I would not worry about too much competition. I would rather look at how much piece of the pie is potentially available (depending on the answer to the question about market size above). For example, you say that there are 5 national competitors for that particular idea you had but locally, there might be opportunity. So why not start local and talk to your potential customers ? Again, depending on what your target audience is and their market size, it could be very likely that there still is a big piece of the pie left for you.