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The Spoon

Daily news and analysis about the food tech revolution

Cloud Kitchens

Back to School for Virtual Food Halls

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We’ve said it once (actually, a lot more than once), we’ll say it again: university towns are the ideal testing ground for new meal delivery-related endeavors. Little wonder, then, that when launching its next virtual food hall, hospitality platform C3 (Creating Culinary Communities) chose Graduate Hotels, which operates more or less exclusively across America’s major college towns.

C3 specializes in delivery-only restaurant brands that cater to many different food types, from burgers to caviar. For this latest partnership, it will take over kitchen operations at Graduate Hotel properties, effectively turning those spaces into ghost kitchens for its virtual restaurant brands from which customers can order digitally.

A key piece of this news is that food will be available to the entire community, not just guests of the Graduate Hotel. For restaurant brands under the C3 umbrella, that means exposure to tens of thousands of individuals from student body populations, many of whom are already partial to digital ordering when it comes to how they get their meals. Just ask companies like Aramark, which acquired order-ahead app Good Uncle in 2019, Grubify, which was developed by Columbia students, and robot delivery company Starship’s college-centric user base. There are also, of course, the usual suspects: third-party delivery services like DoorDash and Grubhub.

Universities, and university towns with them, are an obvious testing ground for meal-related tech. Companies like C3 and those above have something of a captive audience, given that most campuses feature lots of bodies in a relatively small geographical area, people eating at all hours of the day/night, and a younger audience that has grown up using technology. Add faculty, staff, local residents, and hotel guests to that list, and that’s a massive potential customer base for C3 and its restaurant brands to reach when it launches at Graduate Hotels.

That we haven’t seen more of these virtual food halls on college campuses isn’t surprising, since students have been largely absent from their campuses — and therefore from college towns — for nearly a year because of the pandemic. However, as of last check, many colleges plan to reopen in the spring. Behaviors around how consumers get their meals has already shifted towards more digital ordering and to-go-friendly formats like delivery. By the time class is actually back in session, these behaviors will be even more firmly cemented into daily routines.

Side note: it would not be surprising to eventually see a virtual food hall like C3 team up with a robot-delivery company like Starship to further streamline operations, get deliveries out faster, and make them more socially distanced. 

Given all that, it seems C3 picked an optimal time to launch its virtual restaurants in the college town market — before everyone else rushes to do the same.

The Automat Comeback is Getting Legit

Another obvious meal-delivery concept that will in all likelihood hit college campuses one day soon is the net-gen Automat, a point underscored by the recent launch of Automat Kitchen in Jersey City, New Jersey.

These new versions of the mid-century staple are just as they sound: high-tech versions of the old cubby-style system a la Horn & Hardart. The difference nowadays is that instead of dropping a nickel into a slot to retrieve a meal, users can order ahead via an app and use a digitally delivered code to unlock the cubby door.

Towards the end of 2020, I wrote that the Automat would make a comeback thanks both to technology and to the industry-wide change towards takeout meals the restaurant biz has absorbed.

The Automat is well-suited for the pandemic era (which will probably last longer than the actual pandemic) because of it’s quick, cheap, and truly contactless nature. There is no human-to-human interaction involved with either placing a meal in a cubby or scanning a code to remove the food. And as ghost kitchens, delivery-only brands, and virtual food halls proliferate (see above), the Automat format looks increasingly attractive. 

Automat Kitchen’s version of it is a hardware/software combo that features made-to-order meals meant to be healthier takes on the comfort foods of yesteryear. It’s located in an office building connected to a shopping mall, so as the population ventures back to physical workspaces and stores, this location will see a lot of traffic.

Automat Kitchen joins the likes of the forthcoming Brooklyn Dumpling Shop as well as Minnow and Starbucks in bringing the automated cubby system to the restaurant experience. Expect plenty of other implementations to emerge this year.

Starbucks is considering more drive-thru-only stores with zero seating, the company said in its recent earnings call. Other possible future formats include significantly smaller location sizes and the ever-popular double-drive-thru lane concept.

Chipotle is testing out carside pickup at 29 of its locations in California. Customers order via the Chipotle app and, upon arriving at the restaurant, hit the “I’m here” button to get their food.

Mealco, a company that helps chefs create delivery-only brands, raised $7 million in seed funding. The round was led by Rucker Park Capital along with FJLabs and others.

Automat Kitchen Launches a 21st Century Automat in Jersey City

A digital-age reimagining of the Automat opened this week in Jersey City, New Jersey that combines high-end comfort food via touchless, contactless tech. The company in question is called Automat Kitchen, and according to a press release sent out this week, its first Automat location is in the the Newport Tower, which houses office space and is connected to a shopping mall.

It’s the latest development in the slowly growing movement to reinvent the Automat, which was a mainstay of to-go eating throughout most of the twentieth century. Back then, the coin-operated cubbies contained hot and cold foods, and the server-less concept provided meals for thousands of diners every day.

The march of time put an end to the concept in the 1990s. Tech and a global pandemic have brought it back in the 2020s.

Automat Kitchen’s version is a hardware/software combo. Users order ahead of time at the Automat Kitchen site and select a pickup time. They can also order at the physical location by scanning a QR code posted to pull up the menu. All orders are done digitally. Once the order is placed and paid for, the user receives a code with which to unlock one of the stacked cubbies. 

Besides the the obvious difference of ordering and paying digitally instead of unlocking a cubby with a nickel, the other major change in Automat Kitchen’s system is the food itself. Originally, Automat food was pre-made, so you weren’t exactly getting the freshest burger on the block. Automat Kitchen notes its meals are cooked to order and are meant to be a fresh, healthier take on comfort foods. Actual humans cook the food, but there is no customer-to-staff interaction in Automat Kitchen’s process. 

The pandemic has created the perfect setting in which this type of meal format could become hugely popular. The entire restaurant industry has shifted its focus to off-premises meal formats, with pickup being a major one of them. Menus are simplifying to save on costs and ensure travel-friendly foods. Major restaurant chains are designing the dining room out of their plans, or at the very least minimizing its presence. Finally, a vaccine being circulated doesn’t mean we’re all going to rip off the masks and hit the Golden Corral in droves come spring. Safety and a lessening of human-to-human interactions in the restaurant will be a concern for a lot of customers as they trickle back into some semblance of normality.

Another notable revamp of the Automat is the Brooklyn Dumpling Shop, which will open its first location this year and feature a similar temperature-controlled cubbies accompanied by tech. Further south, in Colombia, ghost kitchen network RobinFood has pickup cubbies at its locations, too. Digital cubby systems, meanwhile, have popped up now and again for years in the restaurant industry from the likes of Brightloom, Minnow, Ubo, and others. The list of companies updating the Automat will in all likelihood get much longer this year.   

C3 Will Launch Its Virtual Food Halls Inside Graduate’s ‘College Town’ Hotels

Food and bev platform C3 (Creating Culinary Communities) this week announced a new partnership with Graduate Hotels to launch the Graduate Food Hall digital kitchen concept. For the venture, C3 will bring its ghost kitchen and virtual restaurant hybrid to Graduate Hotels, which are located in America’s college towns, in the first quarter of 2021. 

C3 operates a number of virtual restaurant brands, including Krispy Rice, the delivery-only version of Umami Burger, a collaborative plant-based concept with Impossible, and a caviar bar. The company prepares all orders in its own network of ghost kitchens, which is steadily growing. For instance, C3 just acquired 22 former locations of the now-shuttered chain Speciality’s and plans to convert those into kitchen spaces. 

For the Graduate partnership, C3 said it is effectively taking over onsite food operations at Graduate properties. Graduate’s hotel kitchens will be converted into “multi-brand kitchens” that can house several C3 restaurant concepts at once. Both hotel guests and those in the surrounding community will be able to order delivery meals and those for takeout. There will also be some seating in hotel lobbies and gathering areas.

The U.S. hotel industry had its worst year on record in 2020 in terms of both lows in occupancy and revenue because of the COVID-19 pandemic. Data provider STR noted that hotels passed the 1 billion rooms unsold mark in 2020, the highest in the industry’s history, and that the first half of 2021 will likely be similar (though conditions are expected to improve in the latter half of this year).

Setting up a virtual food hall that can serve both hotel guests and surrounding homes, schools, and businesses opens up potentially more revenue opportunities for Graduate. At the same time, Graduate’s locations, which are all in major “college towns” around the U.S., will expose C3 and its virtual restaurant brands to a huge number of potential users because of the proximity to universities. 

The first implementation of the Graduate Food Hall is expected to debut in Berkeley, California as well as Richmond, Virginia and Tempe, Arizona. Additional locations will follow.  

Choco Rebrands, Launches New Feature For Multi-Unit Restaurants to Manage Their Kitchens

Choco, a mobile platform that digitizes and optimizes the relationship between restaurant kitchens and suppliers, announced today it has added a new feature specifically meant for multi-unit operators. 

The company’s platform is best known at this point for its ability to directly connect restaurant kitchens to suppliers in order to make the ordering and management of food inventory easier and more streamlined. Besides helping kitchens waste less (in terms of both money and actual food), Choco’s system promises to keep restaurants in the flow of their day-to-day work instead of puzzling over inventory.

Building on this idea, the new feature translates this optimization to restaurants with multiple locations or even multiple brands. Via the feature, which now comes baked into the Choco package and can be accessed from a mobile device, owners and managers can oversee their entire inventory and list of suppliers across all of their locations. They can view the entire list of suppliers for any given location as well as which team members are involved in ordering process and which specific suppliers they communicate with.

As Chelsea van Hooven, Global Industry Advisor at Choco, explained over to me over a call this week, the goal is to give restaurant groups a more comprehensive overview of not just what they’re ordering but where it comes from and who is in charge of that relationship. For a single restaurant or a small chain, this might be a fairly straightforward process. However, the more units a brand has, the more room for errors, redundancies, and unnecessary purchases in the restaurant kitchen.

Multi-unit restaurant brands comprise about 30 percent of the businesses in the restaurant industry, and make up 40 percent of Choco’s current user base.   

In addition to the new feature, Choco has also recently undergone a brand revamp. The company started out pitching food waste reduction as its main tagline, and doing so through digitizing restaurant kitchens. While fighting food waste remains an integral part of Choco’s mission, optimizing the restaurant kitchen so it runs more efficiently will be at the heart of the company’s work now. 

Building a more efficient kitchen is top of mind for a growing number of restaurants nowadays. Part of this is in response to the pandemic, which has decimated revenues and forced restaurants to operate off lean margins and even leaner operations. But van Hooven pointed out that we’re also now at a time when restaurants are more willing to explore new technologies that can improve business operations. The restaurant industry, once reticent to make any technologial upgrades, might have been forced into digitization, but now it’s the number one priority for most. Back-of-house tech, in particular, will see significant growth and investment this year.

Choco’s new feature is available as part of the overall software package at no extra cost.

Wow Bao’s Virtual Restaurant Concept Will Grow to 1,000 Locations in 2021

Wow Bao’s partner kitchen program, which lets other restaurants make and serve its food products, will reach 1,100 locations by the end of 2021, up from 150 now, according to a press release from the company. The anticipated milestone highlights another format of virtual restaurant emerging as restaurants take more business off premises.

Via the partner kitchen program, restaurants cook some of the Wow Bao brand’s signature items — buns, bowls, potstickers, etc. — then sell them on the usual third-party delivery channels. Wow Bao CEO Geoff Alexander told me last year that the idea is to provide any type of restaurant with a relatively easy way to add some much-needed revenue.

“We believe we have created something restaurants can survive with,” he said at the time.

Restaurants pay a flat fee to participate (~$1,000) that covers supply chain, marketing, and any extra equipment needed. From there, Wow Bao’s food is marketed on third-party delivery platforms via an entirely separate menu from the restaurant’s own. The restaurant makes the food and sends it out for delivery. Today’s press release notes that restaurants maintain about 40 percent of the revenue from each order, even when factoring in things like packaging costs and third-party delivery fees. 

Wow Bao’s idea for the partner kitchen program actually predates the pandemic’s widespread presence in the U.S. However, the concept is an appropriate one right now, given the wreckage COVID-19 has brought to the restaurant industry in the form of dining room restrictions and lost sales. 

The ghost kitchen and virtual restaurant concepts have, in general, proliferated over the last several months. But for restaurants that don’t have a ton of extra money to spend on a major lease with a more traditional commissary, an option such as Wow Bao’s partner kitchen is a promising alternative that doesn’t require a lot of physical space or operating costs.

Wow Bao said in today’s press release that these partner kitchens are especially successful in rural areas, where “food variety is more limited than in metropolitan areas.” Most restaurants, rural or otherwise, have surpassed the expected sales mark of $2,500 in six weeks. 

A new partnership with digital marketplace Franklin Junction will add another 50 Wow Bao partner locations around the Northeast and Mid-Atlantic, while a nationwide expansion is expected to take place in the first half of 2021.

Top 3 Tech Trends for QSR Redesigns

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The “next-generation” restaurant format isn’t new, as QSR brands like Dunkin’ and McDonald’s can attest. But the restaurant industry’s sudden and in many ways irrevocable shift to off-premises formats in 2020 certainly increased both the number of restaurants revamping their store formats and the speed at which they are doing so.

Those revamps come in many forms and features: BK’s floating kitchens, Applebee’s adding drive-thru lanes, everyone’s near lack of dining room space, to name a few.

And since everyone from Sonic to Del Taco seems to be announcing some kind of format revamp — physical, virtual, or both — these days, I thought it’d be worthwhile to round the top common denominators up to get a hint at which tactics will likely become widespread across the restaurant biz in the near future.

Herewith, are my top three QSR redesign trends:

More Curbside Pickup Spots

Digital order/payment capabilities are a must-have for restaurants now, and this technology coupled with curbside pickup is something we will see a lot more of in the near future. 

For many restaurants, offering curbside pickup options is cheaper than building out a drive-thru lane and window. Outside of the technology, all a restaurant needs is to dedicate a few parking spots close to the building, some signage, and a staff person to run the orders out. Bigger brands may have the money to retrofit their existing stores with drive-thru, but for many mid-size and smaller restaurants, curbside is a more realistic option when it comes to fulfilling more off-premises orders.

For customers, digitally enhanced curbside pickup is increasingly seen as a cheap, fast alternative to delivery, which is getting more expensive for customers. (More on that in the next section.) 

Curbside tech itself is getting some improvements to make the method faster and more efficient, Panera’s geofenced curbside initiative from 2020 being the obvious example. While efforts like these are the anomaly right now, more chains will adopt them and other curbside tech in the coming months.

Drive-thrus, Cruise-thrus, Chipotlanes

On the other hand, those that can swing the cost of adding a drive-thru should do so. 

Some chains, like Applebee’s, are testing out the drive-thru concept for the first time. Chipotle is another good example of a restaurant chain that never offered the format before and has now shifted its entire strategy to accommodate more “Chipotlanes.” Ditto for Sonic, a restaurant better known for drive-ins than drive-thrus, and Pokeworks forthcoming “cruise-thru.”

Others, like QSRs that have always offered drive-thru, are expanding the format. Literally. Double, and triple drive-thru lanes, with some dedicated solely to mobile orders. are becoming the norm at the KFCs, Dunkin’s, and BKs of the world.

The common denominator of this common denominator is that tech is integrated into most of these drive-thru concepts, whether that’s through accommodating more mobile app orders or uses of artificial intelligence to improve order accuracy and upselling.

Mobile-Only Zones and Dedicated Delivery Areas

As anyone who’s been in a drive-thru line lately knows, restaurants are struggling to fulfill the influx of off-premises orders quickly. Many restaurants are addressing this by dedicating certain drive-thru lanes to mobile orders and for delivery drivers picking up orders. Some, like Dunkin’, have done this for years. Others, like Shake Shack, are new to the concept. Still others, namely Pokeworks, have taken the concept one step further and do not accommodate onsite ordering in the drive-thru lane at all.

Meanwhile, to keep third-party delivery drivers waiting on orders from taking up all the curbside spots, many restaurants are also building dedicated areas for delivery pickups. Del Taco, for example has both dedicated drive-thru lanes and pickup shelves for delivery orders.

None of the redesigns discussed above have been widely deployed yet; we can expect more of that in 2021. At that point, new standards for store designs will start to trickle down from the major brands listed here to mid-sized and smaller ones, further cementing the role of off-premises across the restaurant industry.

Postmates: the Latest Delivery Service to Raise Its Prices Post-Prop 22

After saying prices would remain the same for customers following the successful passing of Proposition 22, Postmates has now raised those same prices as high as $2.50 per order.

Postmates’ about-face follows similar price increases from Uber and DoorDash, according to a report from Eater San Francisco. It’s also a contradictory to the tagline these companies were pitching in the ramp-up to the Nov. 3 election—that Prop. 22 passing would allow them to continue operating in California and that prices for customers would not increase.  

Prop. 22 passed in a 58 to 42 percent vote, which allows gig-economy the aforementioned companies to continue classifying their workers as independent contractors. Translation: Uber et al. do not have to pay worker benefits like healthcare, workers comp, and sick leave.

The delivery companies said that they would offer their own benefits package to workers that include a stipend for healthcare. The recent price hikes appear to be geared towards paying for those benefits. For example, the Postmates website calls it “the California Driver Benefits fee” and says that it “helps us fund the new benefits offered to drivers thanks to the passing of Prop 22.” 

All of this feels pretty inevitable, to be honest. After all, one could hardly expect companies that are now infamous for predatory and dishonest business practices to subsidize workers’ benefits out of their own pockets. It’s just a shame more voters didn’t reach that conclusion before clicking “Yes” on the Prop. 22 measure.

Restaurant Tech ‘Round the Web

Part of the plan President Joe Biden has issued to combat coronavirus includes providing clear, national guidelines for restaurants on how and when they can operate. Clear national guidelines would be developed around the safety of workers as well as things like restaurant capacity restrictions.

Olo partnered with customer feedback tech platform Tattle in order to improve the process of collecting restaurant guest feedback for off-premises orders. Tattle will integrate with the Olo platform to provide restaurant guests with a digital survey they can take after ordering from a restaurant.

Pathogen control tech company UV Angel has partnered with McDonald’s franchisees in Texas and Illinois to equip locations with proprietary ultraviolet light surface and air technology. UV Angel says its tech targets pathogens at the room level (as opposed to at the building level), which the company say is more effective in fighting airborne and surface-borne bacteria, viruses, and fungi.

What’s After Ghost Kitchens? The Ghost Bar, Of Course

With ghost kitchens now a mainstay in the restaurant biz, it’s only ever been a matter of time before someone took the concept and applied it to the bar scene. Two NYC restaurant owners did just that recently with the opening of Ghost Bar, an online cocktail bar now available to certain parts of Manhattan.

In a press release sent to The Spoon, Ghost Bar’s owners said the point of their concept is to provide specialty cocktails users can get delivered to their own homes in roughly the same amount of time (or less) it would take to get an order from, say Grubhub.

Speaking of Grubhub, users can either order drinks from that service, Postmates, and HungryPanda, or from Ghost Bar’s own website. Where the ghost kitchen concept comes into play is with the bar’s centralized (and undisclosed) location, where cocktails are made and bottled to order before going out for delivery. The concept isn’t terribly different from ordering a juice or smoothie and getting it delivered to your doorstep, something New Yorkers have done for years.

Ghost bar menu items range from classics (old fashioned, sidecar) to in-house specialty drinks, to some beer and wine. Drinks start at $12, which is on par with what you’d pay for a well-crafted cocktail at a Manhattan bar. However, this being a delivery-only operation, users will also need factor service fees and tip into the cost of their drink. Ghost Bar also adds a $5 delivery fee. Whether the bottle sizes are larger than the average cocktail is unclear, as Ghost Bar doesn’t list bottle size in ounces.

That’s not a cheap way to grab a couple of cocktails, so if you’re planning on drinking a lot in a single evening, consider other options. However, for smaller gatherings or random Tuesday nights when you just want a freshly made fancy drink, the concept could prove popular, at least with the folks that can afford to spend $30-plus bucks on a couple drinks.

Currently, Ghost Bar delivers to 66th Street and below in Manhattan from 11:30 a.m. to 10 p.m. daily. The concept will expand to all of Manhattan and tri-bourough areas in the coming months.

Black Box Intelligence: December 2020 Restaurant Sales Were the Lowest Since July

The fourth quarter of 2020 was bad for restaurant sales, with December being “the worst month” since July, according to the latest data from Black Box Intelligence, which shared the information in its monthly Nation’s Restaurant News update.

By December, same-store sales growth fell to -13.3 percent year over year, while same-store traffic growth clocked in at -18.6 percent. In comparison, same-store sales in November were at -10.3 percent and same-store traffic growth at -16.3 percent.

Black Box noted that multiple factors contributed to poor sales numbers for restaurants in November and December. Those included a hike in COVID-19 cases and new dining room restrictions as a result of those rising case numbers. It being wintertime, colder weather limited or eradicated outdoor dining options in many parts of the country, further contributing to lagging sales numbers.

Despite the poor sales numbers, Black Box suggests that restaurants “were successful” in raising guest sentiment for their brands in December. 

Ambience, which in this case relates a lot to cleanliness and transparency around safety procedures, saw the largest improvement in terms of guest sentiment: “Meeting or exceeding [guests] expectations for safety is rewarded with positive feedback online.” 

Somewhat tricker is sentiment around the actual food. Food sentiment “dropped considerably” from November to December. This occurred simultaneously alongside a rise in off-premises orders and a slowdown in dining room sales due to the aforementioned restrictions. As Black Box states in this latest report, sentiment around food has “always been significantly lower” than food in the dining room. 

Restaurants have grappled with the challenge of maintaining quality food in a takeout environment since the pandemic first shut down dining rooms nearly a year ago. Tactics for better to-go food include things like paring down menus to the basics and completely redesigning menus to feature delivery-friendly fare.

Off-premises orders are now the major money-maker in the restaurant biz, and will likely continue to be for some time. The simultaneous rise of ghost kitchens only adds to this focus on delivery and takeout formats. All of which is to say that restaurants must continue to improve their to-go food, regardless of what happens to same-store sales over the next few months.

Glovo Lands Real Estate Deal to Expand Its Ghost Convenience Stores

Barcelona, Spain-based food delivery service Glovo has inked a deal with Switzerland-based real estate firm Stoneweg. The latter will invest €100 million (~$121 million USD) to help Glovo expand its network of ghost convenience stores. 

As part of the deal, Glovo will occupy the Stoneweg real estate locations for an unspecified period of time. Stoneweg will build and refurbish these real estate locations in key Glovo markets to help the delivery service expand its reach with these delivery-only convenience stores. Right now include Spain, Italy, Portugal, and Romania, with other European countries planned for the future. Glovo intends to have 100 different locations by the end of 2021. It has just 18 right now.

Glovo launched convenience store delivery in 2019 as a way to stand out from other Europe-based competitors (e.g., Delivery Hero). The company’s promise is to deliver goods one might find at a convenience store in 30 minutes or less to customers’ doorsteps. To do that, the Glovo operates these dark convenience stores from which customers can only order online.

The company’s increased focus on quick convenience store delivery — what it calls “Q-Commerce” — is at least partly in response to the pandemic’s impact on how consumers get food items and household goods. Certain countries, such as Spain and Italy, have had far stricter lockdowns during the pandemic than many U.S. states. Those restrictions around leaving one’s house have in turn created an environment where it makes more sense to order groceries, snacks, and household goods for delivery, rather than venture out oneself. 

That said, Europe isn’t alone in this shift towards ghost convenience stores. Most Notably, DoorDash began operating its own version of the concept in the U.S. in 2020. In South Korea, customers can even get convenience store goods delivered by robots courtesy of LG. 

For its part, Glovo believes these dark stores are the future of retail, hence the company’s new deal with Stoneweg. According to Bloomberg, Glovo’s Q-commerce orders have grown 300 percent from one year ago, and the company plans to hire 500 people for the Q-commerce business by the end of the year. 

Deliveroo Raises $180M, Nabs $7B Valuation

Deliveroo announced this week it has raised over $180 million in Series H funding from existing investors. The round was led by Durable Capital Partners LP and Fidelity Management and Research Company LLC. With it, Deliveroo is now valued at over $7 billion, according to an official company statement. 

The new funds come ahead of Deliveroo’s initial public offering, which is expected to happen in the next few months.

The London, U.K.-based company said it would use the new funds to “further drive growth and enhancements to its services for restaurants, riders and consumers.” Examples of those areas include expanding Editions, Deliveroo’s delivery-only kitchen sites, expanding its grocery delivery service, and expanding its Plus subscription service. The company also said it would offer more restaurants its Signature service, which lets customers order via a restaurant’s own website.

It’s a shift from several months ago, when Deliveroo had to cut 15 percent of its staff in response to the pandemic. Also around that time, U.K. regulatory watchdog the Competition and Markets Authority approved Amazon’s highly scrutinized investment into Deliveroo, saying the delivery business could collapse without the funds. 

But, like other third-party delivery services around the world, Deliveroo has wound up faring very well so far throughout the pandemic. Will Shu, Deliveroo’s founder, told The Guardian in December that COVID-19 had “accelerated consumer adoption of food delivery services by about two or three years,” and that order volumes for the service in the U.K. and Ireland were double those of 2019. In the same interview, Shu also said his company had been profitable “at the operating level” for about six months.  

Currently, Deliveroo operates in 12 countries, including a number of Western European nations as well as Singapore, Australia, and the United Arab Emirates. Its main competitor, Just Eat Takeaway.com, operates in many of the same markets.

Restaurants Hate Third-Party Delivery Services, Actually

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When it comes to talking about the year 2020, one of the things third-party delivery services like to say is that they were “a lifeline” for restaurants that might have otherwise had to shutter permanently due to dining room closures and restrictions. 

Plenty have disputed this over the last several months. But perhaps no one has lately been more to-the-point about the matter than Recode’s Kara Swisher, who hosted Uber CEO Dara Khosrowshahi on her Sway podcast this week.

“You’re not allowed to get away with saying you’ve been a lifeline to restaurants,” she told Khosrowshahi early on.

Swisher noted the oft-cited figure, that delivery services charge restaurants commission fees of up to 30 percent of a single transaction for use of their services. Khosrowshahi countered by saying Swisher’s math was “incomplete” and that the 30 percent is “untruthful” when it comes to representing what restaurants are actually on the hook to pay delivery services. According to his math, restaurants pay Uber Eats 13 percent per transaction “net of the courier.” If restaurants want to use their own couriers, the commission cost is “about 15 percent.”

But as Swisher suggested, even those lower numbers are harmful to restaurants, which typically operate off margins that are about 3 to 5 percent. That irreconcilable math is one of the reasons cities across the U.S. have introduced mandatory caps on commission fees, some as low as 10 percent.

Pre-pandemic, the argument was that if a restaurant took issue with high commission fees, they could simply opt out of doing delivery. That argument holds no water now, though, since the pandemic essentially forced restaurants into doing delivery and most do not have the money or expertise to build an in-house delivery business. Actually, most can’t even afford their own courier fleet.

It’s also worth pointing out that while Khosrowshahi called the 30 percent commission fee “untruthful,” he never actually offered a hard number around how high an Uber Eats commission fee reaches when a restaurant is using a courier, as most are. If anything, his cagey response of “13 percent net of the courier” seems to confirm the 30 percent commission fee’s existence.

Uber Eats had a big year in 2020. It more than doubled its revenues and even acquired a competitor, Postmates, towards the end of the year. Khosrowshahi himself said the service had a $40 billion-plus run rate and would be larger than the company’s mobility business in 2021.

Conversely, the restaurant industry has lost $240 billion in sales and is still 2.5 million jobs below pre-pandemic levels, according to the National Restaurant Association. A total of 110,000 restaurants in the U.S. have closed, which is about 17 percent of the nation’s restaurants total.

Khosrowshahi defended his company’s approach to restaurant commissions, using words like “reasonable” and “fair” to describe them. To which Swisher simply pointed out that most restaurants she speaks with disagree, and only use the Uber Eats and Caviars of the world because the pandemic has forced them to.

“They hate you,” she concluded, flatly, before using the phrase “menace economy” to describe the environment in which restaurants must now operate to stay in business.

Here’s How the Restaurant Biz Survived 2020

I know most of you would rather forget 2020 ever happened, but it never hurts to look back before going forward, which is just what the National Restaurant Association did this week. The trade group published a list of top trends it says kept many restaurants in business last year while the pandemic wreaked havoc on the industry.

The 10 trends that made the list were based on those found in a survey The Association did of more than 6,000 restaurants and 1,000 adults. The majority of the trends on the list are directly related to helping restaurants “keep their businesses open and employees on the payroll,” as The Association puts it.

The full research post is worth a read. This being The Spoon, I’ll highlight a few items that made the list that illustrate how tech-forward the pandemic has made the restaurant biz in recent months:

  • “Streamlined menus.” Part of this is related to the actual food: restaurants needed a way to reduce inventories and fulfill items faster, and “pare down your menu” became a mantra for many early on in the pandemic. However, streamlined menus also have to do with offering food that travels well, for pickup and delivery orders, and not overwhelming digital customers with choice paralysis as they view menus via their own mobile devices.
  • “Off-premises foodservice takes precedence.” The Association noted that before the pandemic, 80 percent of full-service restaurant traffic was on-premises. The change restaurants were forced to make to delivery and takeout formats in March, when shutdowns first started, rippled across the entire industry and is now more or less ingrained in operations. Which is to say, even when restaurants are operating at full dining room capacity once again, off-premises will be an important part of any restaurant’s strategy. 
  • “Selling groceries.” This started early in the pandemic when restaurants began selling inventory unused because of shutdowns, and doing so via off-premises channels like delivery and drive-thru. The Association’s survey found that “more than half of consumers” would consider buying grocery staples (produce, dairy, meat) from restaurants themselves if those items were offered. Little wonder, then, that third-party delivery services like DoorDash and Uber Eats added grocery delivery to their businesses in 2020.

Other trends in the restaurant industry — ghost kitchens, virtual restaurants, better back-of-house tech — are woven into the more general trends on The Association’s list. For example, a shift to off-premises foodservice will inevitably mean more ghost kitchens. Pull up a virtual restaurant menu from just about anyone these days and you’ll find it’s decidedly streamlined. 

“We now know that three things are certain: the pandemic tested the limits of operator creativity and knowhow, accelerated tech adoption and emerging trends, and confirmed that customers sorely miss their restaurant experiences,” says the report.

With a widespread vaccine still months away (at least) and restrictions still in place for the majority of dining rooms, these trends that helped us survive 2020 will also start to shape 2021 and beyond. 

Restaurant Tech ‘Round the Web

Panera is the latest major chain to announce plans to go all-in on ghost kitchens. The brand said this week it also has mobile kitchens, redesigned drive-thru lanes, and a virtual catering business in the works.

Fat Brands, meanwhile, is doubling-down on its existing ghost kitchen strategy. The company said at an ICR presentation this week that it plans to open a dozen ghost kitchens in 2021.

Restaurant tech provider Perfect Company raised $6 million for its solution that brings automation to the front of house, back of house, ghost kitchens, convenience stores, and other foodservice areas. 

Kitchen United Plans a Massive Expansion for Its Ghost Kitchen Network

Kitchen United will expand its ghost kitchen network significantly in 2021, the company said during a talk at this week’s ICR conference (h/t Restaurant Dive). Michael Montagano, KU’s CEO, said he expects the company to grow its number of locations from its current four to 20 by the end of the year, which would equal 500 percent growth for KU in total units.

The company currently operates ghost kitchen facilities in Pasadena, California and Chicago, Illinois, as well as in Scottsdale, Arizona and Austin, Texas. According to Montagano’s ICR presentation, Kitchen United’s 2021 expansion will include new facilities in those existing “high-volume” markets as well as kitchen facilities in completely new locations, like New York City and the San Francisco Bay Area.

Plans for this massive expansion come as restaurants continue to struggle with closures and capacity restrictions brought about by the pandemic and the industry continues shifting en masse to off-premises formats like ghost kitchens and virtual restaurants. And even when those limitations are lifted, general consensus is that meal formats like takeout and delivery are here to stay, which means more restaurants will continue seeking kitchen space in which to fulfill those orders.

Underscoring the demand for more kitchen space, Montagano said during ICR that Kitchen United’s existing facilities are full, and that existing customers want to continue growing with the KU platform. To date, Kitchen United’s facilities have served most known brand names, including The Halal Guys, Dog Haus, and Wetzel’s Pretzels. A move to more and different parts of the country may allow more regional chains to take advantage of the company’s kitchen infrastructure, too.

In larger cities like New York and San Francisco, Kitchen United will have plenty of competition. Zuul is already an established player in New York City, with plans for expansion around the five boroughs. San Francisco has the super-secretive CloudKitchens, Reef, which raised a whopping $700 million last year, and, in the Peninsula area, DoorDash Kitchens.