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Daily news and analysis about the food tech revolution

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KFC Is the Latest QSR to Ditch the Dining Room in Favor if Digital Drive-Thru

KFC unveiled two new designs today for future stores that emphasize off-premises order formats and minimal dining room space, according to Nation’s Restaurant News. The Louisville, Kentucky-based chain is the latest major QSR to revamp its store format in response to the pandemic’s impact on the restaurant industry.

One design is for an “express” store format with no indoor dining space. Clocking in at about 1,300 square feet, the design is intended for use in crowded urban locations where space is both limited and expensive. This is a tactic also used by chains like Starbucks and, most recently, Chipotle. 

KFC’s other design is all about the drive-thru, which the company said grew 60 percent year-over-year in Q3 of 2020. The format includes multiple drive-thru lanes, including those dedicated to mobile orders, a small outdoor seating area, and designated parking spots and entrances for customers and delivery drivers picking up digital orders.

These new prototypes have actually been in development since last year. Chief Development Officer Brian Cahoe told NRN today that the company hit the “pause” button on these projects when the pandemic hit in order to learn and apply new requirements the pandemic would bring to the restaurant experience.

More obvious safety measures are one thing. The new KFC stores will include automatic doors and more space between tables. And of course, with the emphasis on digital ordering, a more contactless pickup or drive-thru experience is also on the menu. The company said some stores would also have a digital cubby system in future.

The QSR has in the last couple months become ground zero for testing out new restaurant tech. Besides digitizing the drive-thru, which everyone from McDonald’s to Tim Horton’s is doing, brands are introducing features like geofencing, conveyer belt meal delivery systems, and AI-powered menu boards to the restaurant experience. Many are also ditching the dining room in favor of drive-thru-only locations and ghost kitchen facilities. 

KFC will open three new restaurants based on these prototypes in 2021. 

Square Moves Into the Restaurant Back of House With Square KDS

With COVID-19 restrictions putting the future of the restaurant front of house in question, many restaurant tech companies are turning to the back of house as the next area for innovation. Case in point: Today, Square, a company best known for its payments system, unveiled a kitchen display system that organizes and displays the flow of tickets coming into the back of house from multiple different sales channels. The feature is available to new and existing Square for Restaurants subscribers, according to a press release sent to The Spoon.

Dubbed Square KDS, the system replaces paper tickets and can process orders coming from multiple different ordering sources — of which there are many these days. With restaurant dining rooms either closing again or operating at reduced capacity, more customers are ordering via delivery platforms (e.g., DoorDash) or restaurants’ digital storefronts, in addition to the business’ in-house POS system. The idea is to do away with humans having to manage these multiple order streams by automating the organization of each ticket and in the process speeding up the time it takes to receive, cook, and prep an order and get it out the door.

According to today’s press release the KDS system can also track how long the kitchen is taking to prepare orders at each step of the process. The feature is available to Square for Restaurants customers as of now, with the option to try the product free for 30 days. 

Square’s new system is tackling the same challenge delivery integrators like ChowNow, Chowly, and Ordermark have been doing for some time now. The big difference is that Square is also a payments processing company with an existing suite of restaurant tech including a POS system. In theory, at least, that means adding one less piece of tech to the stack for restaurants that are already using the Square for Restaurants system, of which KDS is now a part. At a time when restaurants have an overwhelming number of options to choose from when it comes to technology, a simpler setup could be enticing. 

Square’s move into the back of house is also wise considering the demand these days for ghost kitchens and the number of restaurants shifting from brick-and-mortar locations to delivery-only business models. In many cases, the days of the traditional restaurant dining room are gone as businesses evolve to stay relevant with the (highly turbulent) times. Restaurant companies must do the same, which is what Square looks to be doing with this latest product.

New Restaurant Restrictions Put the Value of Restaurant Tech to the Test

States and cities across the U.S. have imposed new restrictions and in some cases lockdowns that will once again shutter indoor dining. As they’ve done in the past, these restrictions once again call into question how restaurant tech can help restaurants pandemic-proof themselves and stay in business.

A stay-at-home order for Chicago residents goes into effect today. Restaurants must close by 11 p.m. each night and may only offer delivery, takeout, and outdoor seating. The city didn’t completely shutter indoor dining; it’s allowed so long as tables are within eight feet of an open window. But given Chicago’s typical wintertime temperatures, neither that nor patio seating will likely be popular options for diners right now.

New Mexico, and Oregon have imposed far tighter restrictions. Effective last week, Oregon restaurants and bars must return to takeout- and delivery-only service. New Mexico has similar restrictions as residents shelter under a two-week-long stay-at-home order.

Likewise, restaurants in Washington State and Michigan must halt indoor dining and stick to takeout and delivery models. Other states, including Minnesota and New York, have imposed curfews on restaurants, and for everyone, the threat of another lockdown looms large.

One difference this time around is that unlike in March, restaurants have more tools at their disposal when it comes to fulfilling off-premises orders. Since the early days of the pandemic, most restaurant tech companies have offered so-called “contactless” solutions that minimize human-to-human contact. Some parts of those packages, like QR-code-based ordering for the dining room, will be of little help right now, since there is no dining room in many places. But other features, such as software to power online order processing, could help restaurants fulfill takeout tickets faster and in a more organized fashion. Elsewhere, delivery integrators a la Chowly and ChowNow are now more widely used than in March and help restaurants manage delivery orders coming through multiple sales channels (DoorDash vs. Uber Eats vs. Caviar, for example). 

The option to go virtual is also more widely available. That point was underscored recently in the massive $120 million sum Ordermark raised for its NextBite platform, which pairs restaurants with kitchen space to help them develop and operate virtual restaurant brands. Along those lines, countless options for ghost kitchens have sprung up from the likes of Zuul, Virtual Kitchen, ShiftPixy, and many others. Still others, like restaurant chain Wow Bao, offer creative takes on the ghost kitchen/virtual restaurant concept that could benefit not only themselves but other local restaurants.

These and other tech solutions will undoubtedly help restaurants as they navigate new lockdowns and restrictions. The unknown factor is whether they will be enough. Big-name QSR brands have the deep pockets to turn their drive-thrus into digital innovation centers and reinvent their physical footprints, and restaurants with a certain level of demand will find ghost kitchens useful for pandemic-proofing operations. 

The indie restaurants will, however, struggle more than any other restaurant type. These are businesses that have neither the money to invest in sophisticated tech solutions nor the demand to justify a big ghost kitchen operation. Fee caps may help as far as delivery orders go: cities across the country have implemented mandatory caps on the commission fess third-party delivery services can charge these businesses, and if stricter lockdowns ensue, other municipalities may do the same. 

None of this guarantees a future for independent restaurants. One thing that hasn’t changed, not yet anyway, between previous spikes in the pandemic and this one is that off-premises remains a lifeline for restaurants, not the lifeline. Many restaurants still grapple with the fact that they were built — from the food they serve to the atmosphere they provide — for an on-premises experience. Developments to turn on-premises experiences into those suited for takeout and delivery are moving fast. Unfortunately, the pandemic is moving faster. Seen in that light, restaurant tech’s big priority right now should be helping smaller restaurants complete the transition from the dining room to the living room.

Chipotle Finally Launches Its Own Take on the Ghost Kitchen Concept

QSR brand Chipotle is a known leader in the restaurant industry’s current transition from dining room to off-premises formats, but the company has for the most part been quiet in the conversation around ghost kitchens. Up to now, that is. The company today revealed its Chipotle Digital Kitchen a pickup- and delivery-only restaurant that is essentially its own homegrown take on the ghost kitchen concept.

The new restaurant, located in Highland Falls, New York, will open this coming Saturday (Nov. 14). Chipotle said in today’s press release that the Digital Kitchen is meant to drive business in “non-traditional locations” such as dense urban centers that can’t hold a full-service restaurant.

While the restaurant does feature a small lobby with a few seats, there is no assembly line from which to order food and no cashier to ring orders up. Instead, customers must place orders digitally via the Chipotle app or website, or through a third-party delivery platform. Guests retrieve their orders from the aforementioned lobby that is “designed to include all of the sounds, smells and kitchen views of a traditional Chipotle restaurant.” The location can also fulfill larger catering orders.  

Chipotle’s news comes the same week McDonald’s unveiled plans for its own to-go-centric store format that will consist of a kitchen surrounded by drive-thru lanes and parking spaces for curbside pickup. Since Chipotle’s Digital Kitchen is, initially, at least, focused on urban settings with space limitations, it does not accommodate a drive-thru lane. That said, the company has been very public about its intentions to incorporate that format into its stores, and today’s release notes that the new store format “allows for flexibility with future locations.” Drive-thru may not be part of this first location, but it’s undoubtedly on the way as the company opens more of these new store concepts.

With the future of the dining room still very much unknown, there’s something of a mass exodus from that format happening among well-known quick-service brands. Burger King, Wendy’s, Dunkin’, Popeye’s, and Tim Horton’s are just a few names on the growing list of restaurants changing up their store formats.

Chipotle has been trekking towards this shift for some time. In December of 2019, the company announced a few different store format designs for to-go, drive-thru, and delivery orders. 

Make sure to join The Spoon’s Ghost Kitchen Deep Dive event on December 9th. Register here!

Robots: Hot or Not? And Ghost Kitchens, Real Money

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Well. It’s been a week of ups and downs, hasn’t it! The question right now is just how much the news from the past few days will impact our vision of the future.

I’m talking, of course, about robots. (Did you have something else on your mind?)

It’s been a will they/won’t they type of week for robots and automation:

In other words, news indicating the future of food robots was all over the (non-electoral) map. In its press announcement, Picnic said, “Interest has also increased around a contact-free, high-hygiene food preparation, due to COVID-19, therefore intensifying customer interest in Picnic’s solutions even further.” We actually saw this type of COVID-assisted demand in action last week when White Castle added 10 more Flippy cooking robots to its roster. So food-related robots are doing well!

But then Walmart abandoned shelf-scanning robots, throwing a wet blanket on robo-prospects. According to The Wall Street Journal, Walmart had discovered that as more people shopped online, stores were using more human workers for picking and packing orders. There were efficiencies then, by combining store workers’ shopping for orders with other tasks like inventory monitoring as well as other automated systems.

But the WSJ also reported that Walmart was concerned about how robots were interacting with humans. Walmart was using Bossa Nova’s ‘bots, which are six feet tall and autonomously wander store aisles. Perhaps this was too off-putting for other people shopping.

Will other retailers follow Walmart? Both Schnuck Markets and Woodman’s Markets in the midwest recently added a shelf-scanning robots to a number of their locations. Will they too, discover the same results and kill these programs?

But the bad robot news pendulum swung back to good news with Ocado’s purchases. The difference between Walmart and Ocado is that Ocado’s robots are relegated to automated fulfillment centers, so they don’t interact with everyday shoppers. Ocado’s dual robo-purchases reinforce and improve existing workflows when it comes to grocery order fulfillment. It’s not adding anything new, just ideally making its current systems faster and cheaper.

If there’s a thread to be found among these news stories, perhaps it’s that the future of food robots is more about behind the scenes, rather than out mingling with everyday people. At least when it comes to restaurants and retail. Now we’ll have to see how other businesses eyeing robots and automation vote with their dollars.

Invest-a-Palooza 2020 is here for ghost kitchens

As demand for delivery orders has gone up, so too has the amount of cash flowing into the ghost kitchen and virtual restaurant space. The last couple weeks have brought a couple eye-popping investments, the latest being Reef Technology’s $700 million fundraise announced Monday. While that massive figure reflects Reef’s entire business, which is more than just ghost kitchens, company co-founder and chief executive, told TechCrunch that ghost kitchens “will be a significant part of non-parking revenue” in the future.

Reef’s mega fundraise and the company’s confidence in its ghost kitchen business echos the overall growth of the sector. Since July, when Euromonitor predicted the ghost kitchen market would be worth $1 trillion by 2030, there has been an almost-non-stop flow of investment dollars into the space. To give a sense of just how much money is flowing into this sector, here’s a look some of the significant investments over the last few months:

  • In July, Zuul grabbed $9 million in funding to expand its ghost kitchen concept across NYC. The company’s current facility, in Manhattan’s SoHo neighborhood, is home to brands like Sweetgreen and Junzi. Zuul also recently launched its own virtual food hall.
  • In August, Dubai-based iKcon raised a $5 million pre-seed round for its ghost kitchen network, which currently has 10 locations across the United Arab Emirates. Notably, iKcon also operates its own proprietary tech stack in the kitchens.
  • Virtual Kitchen, a company founded by two ex-Uber employees, raised $20 million in September, bringing the San Francisco-based company’s total funding to $37 million. It is expected to expand its “delivery-only kitchens” with the funds.
  • Also in September, Yummy Corporation, based in Indonesia, raised a $12 million Series B round for its ghost kitchen network in Jakarta. The company is expanding into other cities and has raised a total of $19.8 million so far.
  • Last month, restaurant tech company Ordermark raised $120 million to expand its network of virtual restaurant brands. Unlike the others on this list, Ordermark does not actually operate its own kitchens. Rather, it pairs restaurants with available kitchen spaces as it help those eating establishments transition to off-premises formats. 
  • Reef raised $700 million in part to expand its ghost kitchen business as a key part of its “neighborhood hubs.”

It’s an understatement to say that the pandemic has accelerated the growth of both ghost kitchens and virtual restaurants. What’s in part driving this massive influx of cash lately, though, is that said pandemic hasn’t subsided (the opposite), therefore dine-in rooms at restaurants haven’t re-opened, at least not in its former capacity. That fact is unlikely to change for a long time, and restaurants, restaurant tech companies, and investors alike may be finally accepting that the future for many restaurants is inside the ghost kitchen, not the dining room.  

More Headlines

California Passes Prop. 22, Leaving Gig Workers as Independent Contractors This was a big win for profit-seeking third-party delivery services.

Meat-Tech 3D Closes $7M Funding Round, Files for IPO – The funding announcement comes about one week after Meat-Tech 3D said it had started the process for an IPO in the U.S. (The company is traded on the Tel Aviv Stock Exchange already.)

Muji Releases a Line of Shelf-Stable Plant-Based Meat Items – The products are available right now to Muji customers in Japan via both the company’s brick-and-mortar stores and its website. Dishes include plant-based versions of a burger, minced meat, meatballs, and a thinly sliced meat.

Bits x Bites Closes $30 Million for Its New China Agrifood Tech Fund – The company has invested in a variety of future food themes ranging from cell-based meat (Future Meat) and Food AI (Analytical Flavor Systems) to CRISPR (Tropic Biosciences).

 

Reef Technology Raises $700M to Reinvent the Neighborhood, Including Ghost Kitchens

Reef Technology, which turns underutilized urban space into what it calls “neighborhood hubs,” announced today it has just raised a $700 million syndicate investment to further that vision. TechCrunch first reported the news. Softbank and Mubadala led the round, along with Oaktree, UBS Asset Management, and Target Global. This brings Reef’s total funding to $701.9 million.

Reef started its life as ParkJockey with the goal of more efficiently managing parking lots. Over time, however, the company has evolved from disruptor of parking lots to a real estate business that provides infrastructure for retail spaces, clinics, and cloud kitchens, among other ventures. The idea is to turn these underutilized spaces in cities into hubs for local neighborhood businesses. Think town square of olden days, only in this version it’s equipped with shipping containers that hold kitchens and stores and powered by software.

According to TechCrunch, Reef will use the new funds to scale from about 4,800 locations to 10,000 locations around the U.S. Ari Ojalvo, the company’s cofounder and chief executive, said ghost kitchens “will be a significant part of non-parking revenue” for Reef. 

These ghost kitchens are housed in Reef’s mobile trailers that can be parked virtually anywhere there is underutilized real estate. Restaurants wanting to offload delivery orders or those launching virtual concepts can rent the spaces. Right now, the kitchens house a mix of local and national brands across the country, including Saladworks, Wow Bao, and BurgerFi. Customers order meals via the major third-party delivery apps (DoorDash, Uber Eats, etc.).

Reef’s gargantuan fundraise comes a time when ghost kitchens, virtual restaurants, and virtual food halls are becoming an integral part of the restaurant industry. The future of the restaurant dining room still hangs in the balance — especially with winter coming and COVID-19 cases rising. That in turn is forcing restaurants, restaurant tech companies, and infrastructure providers like Reef to rethink the formats in which customers access to-go and delivery meals.

Euromonitor recently predicted the ghost kitchen sector will be worth $1 trillion by 2030, and there are investment dollars a plenty to support that projection. Ordermark just raised $120 million to build out its virtual restaurant network, which will utilize ghost kitchens. NYC-based Zuul raised another $9 million for its Big Apple-based concept. And outside the U.S., Yummy Corporation (Indonesia), iKcon (Dubai), and Zomato (India) have all raised capital in the last few months.

In Reef’s case, its kitchens also provide employees to prep the food in addition to physical space. The company has over 100 kitchens across 20 markets in North America. Between the ongoing pandemic and the new influx of investment, those numbers will rise quickly in the coming months. 

If you’re interested in diving deep into ghost kitchens, you won’t want to miss The Spoon’s upcoming ghost kitchen virtual event on December 9th.

Mobile Servers and Menu Innovation: Crave’s Virtual Food Hall Brings Fine Dining to the Delivery Realm

A new concept is taking shape in the world of virtual restaurants: the fine-dining virtual food hall. That idea might have been outrageous one year ago, but it’s practically necessity now, thanks to the pandemic-induced meltdown of the restaurant industry. In response, third-party hospitality and restaurant tech companies are emerging to assist these high-end concepts with the makeover they need to exist — and, more importantly, thrive — in an off-premises-centric world.

One such concept comes from Crave Hospitality Group, which will officially launch its first ghost kitchen-meets-virtual restaurant initiative in Boise, Idaho next month.

On a call last week, Crave cofounder Devin Wade talked me through the details of the operation, which he says is “hard to categorize” but probably closest to a “virtual food hall” in name. The Boise facility will house 16 restaurant concepts, including ones from James Beard nominee Lincoln Carson, Food Network Pizza Champions Challenge gold medalist Tony Gemignani, and award-winning restauranteur Michael Mina.

Chefs and their culinary teams cook and prepare the food, assisted by a tech stack that manages order fulfillment and deliveries. On the consumer-facing side, guests ordering through the Crave app can mix and match their menu choices, bundling different meals from different concepts into the same order. Food is delivered via Crave’s own fleet of drivers, and there is also a pickup option. 

The official launch of the Boise location comes as full-service restaurants, including fine and higher-end ones, faces more permanent closures and, in some cities, new restrictions. The most recent numbers from the Independent Restaurant Coalition note that revenues for these businesses still “remain 60 percent lower on average than last year’s levels, with many remaining closed at a 100 percent reduction in revenue.”

The high-end restaurant experience faces an additional challenge: it is designed for a dining room, not a to-go box.

That’s a problem Wade said he had been thinking about long before COVID-19. As delivery and ghost kitchens grew in popularity over the last few years, he kept returning to the issue that delivery as-is would not work for high-end dining, and that there had to be a model where the relationships between chefs, their restaurants, kitchen providers, and delivery services was based on collaboration rather than the obsession with speed and efficiency. 

Menu design was one major consideration. Award-winning chefs are “known for certain dishes,” according to Wade, which had to be accounted for on the menu. At the same time, Wade pointed out the inherently creative nature of chefs, and that this asset led the company to work with its chosen restaurant concepts on new menu items “designed to travel.”

Crave also built its own proprietary tech stack to power the Boise facility that includes everything from order processing for back-of-house management, like designating fire times for each individual food item in process. Wade says the goal of Crave’s technology is “Using tech not to dominate and push [chefs] away but to extend their food outside their restaurants.”

Part of that extension, of course, is getting the food through the actual last mile of delivery. Here, too, Crave is aiming to replicate the fine-dining experience in a to-go setting. Instead of using DoorDash or Uber Eats drivers, Crave employs its own couriers, which it calls “mobile servers.” They are W-2 employees, and many are former servers out of work because of the pandemic. They work regular hours, earn server-level wages, and follow many of the same processes they would inside a brick-and-mortar restaurant. For instance, servers meet before each dinner service so chefs can go through the night’s features. “They should know customers names, suggest a follow-up item [to customers],” says Wade, adding that the whole point is to mimic the customer-server relationship that takes place in a restaurant. 

The concept is practically unheard of in the world of delivery, where nowadays many customers hit the “contactless” option in their delivery app and expect food to be dropped on the doorstep. The idea of getting to know your delivery driver seems counterintuitive to social distancing, but the decision to go this route also seems like something of a long-term play for Crave and its restaurant partners. Fear of human-to-human interaction won’t permeate the restaurant experience forever. Delivery, on the other hand, is here to stay. Over time, Crave’s efforts to mimic the server-customer relationship for delivery orders could be a bridge between those two factors.

We will have a better idea of the concept’s short-term success over the next few months. The Boise operation, which Crave has been piloting since June, just moved into its permanent space and will have its grand opening on November 17. From there, Crave plans to scale quickly: Wade says the company already has the next 15 locations mapped out, with four deals already well underway, two in the Dallas, Texas area and two in Salt Lake City, Utah.

Right now, Crave doesn’t have any real competitors in terms of operating a virtual food hall like a fine-dining restaurant. Lunchbox recently teamed up with C3 for a high-end food hall, but the higher-end part of that concept exists mostly in the food itself.

That makes Crave a rather unique player in an increasingly crowded world of ghost kitchens and virtual food halls. If its approach to delivery proves profitable for those involved, full-service restaurants may discover they have one more option when it comes to keeping the lights on during the ongoing fallout.

Ordermark Raises $120M to Build More Virtual Restaurants

Restaurant tech company Ordermark announced today it has raised a $120 million Series C round led by the Softbank Vision Fund with participation from existing investor Act One Ventures. According to a press release sent to The Spoon, Ordermark will use the new funds to “help more restaurants transition to online ordering during the COVID-19 pandemic and beyond.”

Ordermark has been helping restaurants incorporate off-premises orders into their operations since long before the pandemic. The company’s hardware-software combo consolidates all order tickets (delivery, takeout, in-house, etc.) into a single channel to make the management of these tickets easier for restaurant staff.

The company has also been something of a trailblazer in the world of virtual restaurants through its Nextbite platform, which is Ordermark’s portfolio of delivery-only brands. Most recently, Nextbite launched rapper Wiz Khalifa’s Hotbox restaurant concept, much to the delight of munchies fans everywhere.

Ordermark/Nextbite relies on underutilized kitchen space in restaurants to fulfill orders for these virtual brands, which gives the restaurants themselves a chance to build up some incremental revenue. While today’s press release did not specifically name new brands or restaurant partners, the company is clearly looking to build out this virtual restaurant portfolio. Jeff Housenbold, Managing Partner at SoftBank Investment Advisers, said in the release that Softbank will “support [Ordermark’s] mission to help independent restaurants optimize online ordering and generate incremental revenue from under-utilized kitchens.”

Alex Canter, Ordermark’s cofounder and CEO, added that restaurants “must get creative by embracing technology and new sources of revenue generation to reach customers outside of their four walls.”

Ordermark said that since the start of the COVID-19 pandemic, Nextbite has launched 15 brands and has added over 1,000 delivery-only restaurants nationwide.

DoorDash’s Launches Its ‘Reopen for Delivery’ Program for Independent Restaurants

Today, the third-party delivery service DoorDash announced its Reopen for Delivery program. Through it, restaurants that were forced to close due to COVID-19 can “re-establish their foot print in their city” by reviving their businesses as virtual restaurants run out of ghost kitchens, according to a press release sent to The Spoon.

The program will select restaurants that were forced to close because of the pandemic and pair them with ghost kitchens and virtual restaurant facilities around the country. For example, Chicago-based Krazy Hog BBQ, the first restaurant to join the program, is operating its delivery-only concept out of virtual kitchen company Á La Couch’s space. Á La Couch is also home to restaurant brands like Wow Bao and Mac’d.  

DoorDash said it will use this model of pairing restaurants with kitchen providers for other businesses, though it hasn’t named any besides Krazy Hog at the moment. DoorDash operates its own ghost kitchen facility in Northern California but has not said whether the location will play a part in the Reopen for Delivery program.

In addition to kitchen space, restaurants will also have the option to cook and fulfill their own orders or outsource that work to the kitchen facility’s existing staff. DoorDash will, of course, provide the technical logistics for order processing and the drivers for the last mile of delivery. 

The program is reminiscent of Deliveroo’s “Restaurant Rescue Team” initiative from 2019, where the UK-based service would nab struggling restaurants and rebrand them as delivery-only concepts under Deliveroo’s ghost kitchen program. 

Like Deliveroo’s program, Reopen for Delivery is one way restaurants can continue serving customers without incurring some of the high overhead costs of running a full brick-and-mortar location complete with front-of-house space and staff. 

The deal, of course, comes with some compromises. Since DoorDash is powering Reopen for Delivery, restaurants that sign up with the program are to some degree locked into the delivery service’s infrastructure. And they’re presumably still going to pay the high commission fees that have caused so much controversy of late.

For many, though, there may be no other options right now. Ghost kitchens and virtual restaurants are currently being hailed as a lifeline for many restaurants struggling in the wake of the pandemic. But setting up a ghost kitchen operation requires a certain amount of demand and capital not every business has. Having a third party like DoorDash facilitate that process is, for better or worse, a cheaper, faster way to fulfill off-premises orders while we wait for the restaurant biz to get back on its feet. 

In-House Delivery Needs to Disrupt Delivery

Some of the talk at last week’s Smart Kitchen Summit revolved around two newish concepts that are especially compelling when it comes to thinking about restaurants: in-house delivery and disrupting third-party delivery. Together, the two could substantially shift the the off-premises meal journey of the future.

Technically, in-house delivery — also called “native delivery” or “direct delivery” — is a decades old practice championed by Domino’s, Jimmy John’s, and other restaurants that have always used their own staff to ferry orders to customers’ doorsteps. But ever since customer demand for delivery went through the roof and then some, most restaurants have found it more economically feasible to offload delivery operations to third-party services like DoorDash and Uber Eats. 

As we cover ad nauseam around here, third-party delivery comes with its own lengthy catalog of grievances, and many restaurants don’t actually make money from those orders. On top of that, they lose control of customer relationships and oftentimes their own branding. 

In-house delivery 2.0, then, is all about restaurants bringing some of that control back under their own rooftops. One SKS panelist mentioned fast-casual chain Panera as a pathbreaker in this area, as the chain still uses its own drivers for many of its orders and only offloads the technical logistics of processing an order to third parties. Bloomin’ Brands, parent company of Outback Steakhouse and Carrabba’s, also handles many of its delivery orders in-house, and Panda Express recently launched its own program that handles the entire delivery journey, from order processing to food transport.

Simultaneously happening is the rise of services like ShiftPixy, which use their technology to power custom-branded websites for restaurants that can process ordering and payments. ShiftPixy also works with restaurants to provide them with drivers, erasing third-party delivery from the process.

All of these approaches to in-house delivery were mentioned during SKS. In a discussion about the rise of ghost kitchens and virtual restaurants, one set of panelists agreed that in the future we will see a wider range of restaurants — major chains and independent mom-and-pop stores — gravitate to in-house delivery as a way of controlling their customer relationships and branding, to say nothing of dodging predatory commission fees from third-party services.

The mention of mom-and-pop shops is important to note. Right now, most can’t afford to build out their own mobile ordering and payments system and pay employees to deliver the food. That territory currently belongs to the Paneras and Panda Expresses of the world, which brings me to our second point: disrupting third-party delivery.

At SKS, more than one person I spoke to predicted that the act of unseating third-party delivery apps’ dominance over restaurants won’t come from imposing more rules and regulations, but from someone bringing a better, cheaper solution to the table. As more restaurant chains with deep pockets take back more of their delivery stack, those solutions might very well surface in the process. 

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Del Taco Is Launching a Drive-Thru-Only Concept

Following in the footsteps of KFC, Chipotle, Burger King, and other chains, Del Taco is doubling-down on the drive-thru as an important source of sales in the future. The Lake Forest, Calif.-based chain announced on its recent Q3 earnings call it will build a drive-thru-only prototype that can be placed at Del Taco locations with a smaller physical footprint. CEO John Cappasola said during the call this prototype will include “a modernized design, improved functionality, and other operational enhancements,” though he didn’t get more specific than that.

If this story sounds somewhat familiar, it’s because other chains have made similar announcements in the recent past. Most notable among them is Burger King, who several weeks ago announced its own drive-thru-centric design prototype meant to take up less physical space and serve more drive-thru orders in a shorter amount of time. 

Drive-thru has been the most important sales channel for QSRs during 2020’s lockdowns and continued uncertainty over the dining room. However, QSR Magazine’s recent 2020 Drive-Thru Study found that drive-thru times are nearly half a minute slower than they were last year, so it’s not a surprise more chains are redoubling their efforts to make the experience faster and more efficient. With winter fast approaching, outdoor dining is about to get way less appealing to consumers in many regions. Chains will need every order they can get from drive-thru, curbside, and other off-premises channels to make up for lost sales in the dining room/patio over the next several months.

Restaurant Tech ‘Round the Web

A wider slowdown could erase up to 2 million jobs restaurant and retail, according to new research from Gusto cited by Restaurant Dive. The losses could total roughly $190 billion.

Following openings this year of three off-premises stores in Chicago, P.F. Chang’s will expand its to-go-concept to 27 locations by 2021. The company is also testing an in-house delivery service at 10 of its locations in the U.S.

As we reported this week, Burger King is piloting reusable cups and sandwich containers in New York, Portland and Tokyo next year. The program is being done in partnership with TerraCycle’s Loop, which is also doing the McDonald’s reusable cup trial in the U.K.

SKS 2020: Ghost Kitchen’s Changing Tech Trends

The definition of “ghost kitchen” is changing rapidly as more restaurants go off-premises and even non-restaurant food entities, like grocery stores, hop onboard the trend.

But as was discussed during our ghost kitchen strategy panel at SKS 2020 this week, the common denominator beneath all shapes and sizes of ghost kitchens is the technology powering them. As Ashley Colpaart, CEO of The Food Corridor, said on the panel, ghost kitchens are all about “going direct to the consumer through technology platforms.”

Joining Colpaart and myself were Michael Schaefer, global lead for food and bev at Euromonitor, and Bolt Kitchen CEO Nick Avedesian. Everyone agreed there is a lot of technology being thrown at restaurant owners and ghost kitchen operators nowadays. This makes sense because, as Schaefer said, more of our dining experiences are getting mediated by the smartphone. Keeping that in mind, panelists pointed to a few different areas of tech that are especially important to the ghost kitchen operation right now.

One is software that can integrate the many different channels orders flow through from customer to kitchen. Most restaurants, large and small, work with more than one delivery partner, which causes a deluge of different orders from different channels in what’s commonly referred to as “tablet hell.” Using a delivery integrator (Olo and Chowly are two such companies) lessens the chance of an order getting lost in translation on its way to the kitchen and, Avedesian said, creates “a better experience for your staff.”

It’s not just the back-of-house that needs optimizing, though. Colpaart mentioned the need for “the shopping experience” — that is, the experience a customer has finding and ordering from a restaurant — to be as easy as possible. Along the same lines, restaurants themselves will need technologies that can help them become more visible in this brave new world of online delivery marketplaces and virtual food halls. Some solutions, like Lunchbox, are working very closely with restaurants on this visibility and marketing aspect.

Then there’s delivery, one of the restaurant biz’s most controversial topics right now. Among the (many) griefs with third-party delivery services a la Uber Eats and DoorDash right now is that restaurants can’t control their own branding or customer experience through these platforms. Some white label delivery services, like DoorDash Drive, are emerging to address this. Avedesian said said we will see a lot more of these white label, custom-branded solutions in future.

We may also see more delivery go in-house at restaurants. That trend was actually happening long before the pandemic, with Panera being a notable early adopter of the practice. Now, panelists said everyone from large enterprises to mom-and-pop shops are considering the native delivery experience. One group we may see doing this in large numbers in future is QSRs like the aforementioned Panera or Panda Express, which recently launched its own delivery program. 

Not discussed on the panel but something that sprang to my mind is this: Is this shift to native delivery creating an opportunity for restaurant tech companies to improve the in-house delivery experience? And will those innovations be enough to disrupt third-party delivery as we know it?

Stay tuned on that one.

Augmented Reality Bites

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Virtual food hall, meet the augmented-reality restaurant menu. You’ll soon be best friends.

Hear me out.

Over these last few weeks, multiple news bites around virtual food halls have surfaced. These food halls are collections of restaurants that exist online and where meals are only available for delivery and pickup. They are in many ways a natural effect of the pandemic shutting down dining rooms and the restaurant biz going off-premises.

The latest one comes from Lunchbox. This week, the company integrated its online digital order platform into C3’s virtual restaurant brand ecosystem to bring a bunch of different delivery-only eateries under one virtual umbrella.

Being able to order a plant-based burger, chicken, and maybe a rice dish through a single digital interface sounds great until you zero in on that word digital. One of the potential problems with this new wave of virtual food halls is that customers will never have the chance to actually visit these restaurants in person. Your introduction to their food comes in the form of 2D thumbnails you have to scroll through on your phone and squint at to even get an inkling of what you’re about to order. If you’re familiar with the restaurant that’s less of an issue, but most virtual food halls and brands are new, and ordering from them is something of a culinary gamble.

Enter augmented reality (AR), a technology some say is the next great innovation for restaurant menus. Modern Restaurant Management ran a piece this week exploring the possibility of customers using their own smartphones to display 3D models of the food they are about to order. With AR, instead of a small, flat, 2D image, a user could “see” how the dish looks on their table, zoom in on it and view it from multiple angles to get a much better idea of what they’re about to buy.

I should note that the Modern Restaurant Management Post was authored by Mike Cadoux of augmented reality platform QReal. In other words, Cadoux’s has skin in the AR game.

But he makes a good point when it comes to thinking about AR in the context of the new off-premises reality in which restaurants now operate: “Early adoption of AR was hindered by the problem of getting the experience to the customer. People are loath to download apps, and delivery platforms had to service thousands of restaurants, most of which wouldn’t have access to 3D models. Now a restaurant or brand can push their own content to the customer. They would be wise to utilize all the smartphones capabilities and showcase their food with the next-generation of content.”

Spoon Editor Chris Albrecht actually spoke with Cadoux back in August, when QReal released a study with Oxford University’s Saïd Business School that found participants were more likely to order an item if they could view options in AR. “It’s like a test drive for a car,” Cadoux told The Spoon at the time. “Same way when you buy food, you want to think about what it’s like to eat it.”

The tech makes especially good sense for virtual food halls. As I said, these restaurants do not have dining rooms, so customers are relying solely on the digital realm to learn about the food. If, for the sake of argument, Lunchbox and C3 were to integrate AR into their ordering platform, they could better showcase the “fine dining” aspects of their food and in doing so make their meals more appetizing. Everyone else, from Zuul’s virtual-only sandwich chain to Steve Aoki’s pizza brand, could also reap the benefits of AR in the virtual restaurant realm.

AR is not yet mainstream, and its presence in the restaurant industry is still largely forthcoming. But since one pandemic year seems equal to five normal ones, an AR-powered food hall may be closer than we think.

Uber Engineer Says “No” to Uber’s Prop. 22

Californians, take note. One of the things those in the Golden State will vote on come November is Prop. 22, a $180 million ballot measure that would allow third-party delivery services to classify drivers as independent contractors. The measure would effectively override California’s Assembly Bill 5 (AB 5), which was signed into law last year and dictates that Uber, Grubhub, and other gig-economy companies must classify drivers and couriers as employees. 

Classifying them as independent contractors means delivery drivers would lack access to workers comp., paid sick leave, and other benefits W-2 employees receive. It goes without saying that a lot of folks are against Prop. 22. One of them is an employee at Uber.

Kurt Nelson, who’s been a software engineer at Uber since 2018, penned an op-ed at TechCrunch this week that argues drivers should be classified as employees. Nelson, who still makes deliveries for app-based companies in order to understand the gig economy, writes that Uber “refuses to obey” AB5 and instead prefers to “write a new set of rules for themselves” with Prop. 22. 

Among many other notable lines, there was also this gem about the gig economy: “I’ve met drivers who have to sleep in their cars, risk financial ruin over a single doctor’s appointment or go without life-saving medication. There’s no way around it. Uber’s Prop 22 is a multi-million effort to deny these workers their rights.”

You can read the piece in its entirety here. Uber has yet to make any public response to Nelson’s op-ed, so stay tuned.

Restaurant Tech ‘Round the Web

Kitchen United CEO Jim Collins has stepped down to “focus on personal endeavors,” according to Nation’s Restaurant News. Collins played a major role in turning KU into one of the leaders of the ghost kitchen space. Michael Montagano, KU’s former chief financial officer and treasurer, has been named CEO.

Mobile POS platform GoTab launched an integration with hospitality labor management system 7shifts. The combined offering gives restaurant owners/operators the ability to view sales and labor data from the same interface.

Meal prep software company Meallogix announced a partnership with DoorDash this week. A press release sent to The Spoon notes that the deal gives Meallogix’ customers the option of using the third-party delivery service to manage their routes for the last mile of delivery.