Delivery-only concepts are the new food frontier
In 2004, in the city of Chicago, two starving web developers were working on the next multi-billion dollar concept. Matt Maloney and Mike Evans are best known today as the founders of Grubhub, the app that started the ball rolling for the world of online food delivery platforms. A decade later, Doordash and Uber Eats had entered the market and together they made it into a $ 10 billion business.
We are now witnessing the next stage in the evolution of restaurant e-commerce. It wasn’t that long ago that the idea of a delivery and pickup-only restaurant would have seemed like a bad “Shark Tank” pitch, but that’s exactly what is proliferating in the United States today. Virtual restaurant brands and ghost kitchens have grown in popularity during COVID-19 shutdowns, and they’re not just pandemic fad – they’re rightfully part of the restaurant business that’s here to stay.
For those unfamiliar with it, a virtual restaurant brand is a restaurant concept that does not involve a physical eating place, operating entirely on delivery and pickup services. When it comes to ghost kitchens, Melissa Wilson of foodservice management consulting firm Technomic puts it best:
“You could look on your delivery app in California, where Wow Bao [a virtual dining concept] does not have brick and mortar locations. But you can order Wow Bao products because Sizzler is licensed with Wow Bao, and they prepare and serve Wow Bao products for delivery only from Sizzler locations, ”Wilson told Modern Shipper.
Ghost kitchens, sometimes referred to as cloud kitchens, can operate from other brands’ locations, like Wow Bao does with Sizzler’s kitchens, or they can be fully stand-alone operations that only process delivery orders from a traditional restaurant or a virtual catering concept. But whatever the layout, they help restaurants and brands feed more hungry people by bringing delivery closer to the customer.
Not just pandemic fad
Believe it or not, many brands were following the ghost kitchen trend even before the pandemic began. For many, they were a great way to meet growing consumer demand for delivery orders or enter a new market without spending time and resources on a physical store.
“In a lot of cases it was about offloading production for offsite orders because the restaurant was so busy and offsite it was stressing those locations,” Wilson said. “Other operators are using ghost kitchens to test new markets. You see companies like Sweetgreen or Halal Guys or even Chick-fil-A participating with third party ghost kitchens in markets where they didn’t have physical locations, as a way to be present in those markets and build awareness. before investing in brick and mortar installations.
Other brands have launched after the COVID-19 blow, looking for new sources of revenue to replace their restaurant segments. Since then, ghost kitchens and virtual restaurant brands have exploded in popularity, but perfecting them is an art.
“You have to talk about operations, menu engineering, marketing, food costs, just like you would a regular menu at any regular restaurant,” said Alp Franko, founder of the restaurant franchise model. Virtual The Local Culinary. “You have to select the right packaging, you have to get the right contents of the food. I can’t deliver a chateaubriand, but maybe I can deliver, I don’t know, a piece of meat.
A successful veteran of the European restaurant industry, Franko came to Miami four years ago with the goal of bringing a new kind of catering to the United States. One of the biggest challenges he and his franchisees face is educating consumers about this vision.
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“The hardest part is that we don’t have word of mouth and we don’t have customers coming. So we have to replace that kind of marketing, we have to create the buzz, maybe through the packaging or the bag or the concept or through social media, ”Franko told Modern Shipper.
But just like with delivery apps before them, ghost kitchens and virtual brands will weather this storm.
“When third-party delivery started, what a lot of people don’t realize is that it wasn’t until a few years later. after third-party vendors started to develop and it really took off. I mean, in 2016 Uber Eats was only present in 10 markets, ”Wilson said.
Counter the trend
Right now, virtual catering concepts are in their infancy, but the sky is the limit. Although they are an unknown model to many restaurateurs, they are remarkably quick to set up and just about anyone can create one, even a professional sports team.
The Milwaukee Bucks proved it in 2020 when they founded Cream City Cluckery, a virtual restaurant concept operating outside of the team’s stadium, the Fiserv Forum. The team were looking for a new source of income with the stadium closing due to COVID-19, and after about a year of preparing chicken for hungry basketball fans, the results have been huge.
“The feedback on the product has been tremendous,” Michael Belot, senior vice president of business and development for the Bucks, told Modern Shipper. “And therefore, you know, we thought, ‘It’s not just a pandemic business – it’s a real business, and let’s build it up and go further.'”
It’s been so successful, in fact, that the Cluckery is moving in a direction few restaurants have ever taken: from virtual to brick and mortar. Last week, the Bucks announced they would be establishing a second restaurant in Mequon, about 20 minutes outside of Milwaukee, while maintaining the location outside of the Fiserv Forum as a delivery and pickup-only ghost kitchen.
The level of success Belot and the Bucks have experienced shows how easy it is to build a virtual brand. After conceiving the idea, Belot says, it took him and his team less than a month to put the concept into place.
“There was very limited risk because we opened it in 30 days, and we could close it in a day if we weren’t happy,” Belot said. “Fortunately, it far exceeded all of our expectations.”
With a virtual concept, restaurateurs don’t have to worry about spending massive amounts of time and money building a physical location. Instead, they can quickly turn an idea into an essay without having to call in the demolition team if it fails.
Spread their wings (and other foods too)
This minimal risk and high benefit is what makes virtual concepts and ghost kitchens such attractive investments for restaurant brands, even after the pandemic. Wilson warns there could be a slight post-pandemic slowdown due to uncertainty surrounding consumer trends, but ghost kitchens and virtual brands can increase profits even when they aren’t selling.
The value is not necessarily in the kitchen or the concept itself. Rather, it comes from the ability to test new ideas and new markets and increase brand awareness – which is exactly why companies were establishing them before the pandemic-induced surge in delivery demand.
“Consumers demand the convenience and ordering food online for delivery or pickup at a satellite location fulfills that desire,” said Kelly Hensel, senior digital editor of the Institute of Food Technologists. “When combined with the benefits for restaurateurs, including the added flexibility and the ability to launch a new concept for thousands of dollars instead of millions of dollars, it’s no surprise that the ghost kitchen concept is here to stay. “
This value proposition is causing the big players in the food industry to lick their chops. According to Franko, who regularly attends conferences and events with food industry insiders, and Wilson, who works alongside them regularly, the big chains have had success with the early forays into ghost kitchens, and they want to. enter.
“There’s been a lot of buzz around ghost kitchens and virtual brands, I mean, a tonne of buzz over the past year and a half, and that’s understandable. And there are virtual brand providers that have evolved very quickly, ”Wilson said.
Franko is probably even more optimistic than Wilson, boldly predicting that in a few years, ghost kitchens and virtual restaurant brands will account for 85% of the breakfast and lunch market in the United States. We’ll see. But one thing is certain: whether they cover 1% or 100% of the market, ghost kitchens and virtual catering concepts are not going to disappear.
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