Last month, the NY Post revealed that Chipotle founder Steve Ells is plotting a comeback with an automation-heavy restaurant concept called Kernel.
According to the Post, who viewed the startup’s pitch deck, Ells plans to build a chain of restaurants that makes the food centrally in a ghost kitchen and finishes the food in small-footprint retail storefronts. The centralized production facility and the restaurants will feature a significant amount of robotics and automation to produce the food and keep the overall employee count down. According to materials reviewed by the Post, the company states that they believe “a 3-person labor model can work.”
The company has already started building its production facility in NY and plans to launch its first restaurant in NYC in the fall of 2023. Ells is funding the company for now but is looking for investors (hence the investor deck).
As I wrote yesterday, robot-restaurant concepts have often struggled. But given Ells’ experience building a hugely successful restaurant chain, it’s worth asking: Will Kernel buck the trend?
I think they just might. Here are a few reasons Kernel might have a chance at succeeding where others have failed:
Ells is a Proven Restaurant Operator
Unlike the founders of Eatsa, Spyce and Zume, Ells is a restaurant operator with a proven track record of building a restaurant brand from the ground up. During his tenure as the company’s CEO, Chipotle pioneered the fast-casual concept and had one of the most successful IPOs ever for a restaurant chain. Clearly, he knows something about building restaurant concepts.
Ells Has An Intuitive Understanding of Food Unit Economics
During the early days of Chipotle, Ells focused heavily on the unit economics of the burrito business, calculating just how many he needed to sell daily to make a profit. It’s that kind of focus on the different cost-levers that is required when forecasting the cost of building an automation-centric restaurant business that will have higher up-front capex costs but, over time, should ultimately create more efficient restaurants with lower daily operating costs, and isn’t susceptible to the high employee turnover of employees.
The Hub & Spoke Model Can Work If Done Right
Some ghost kitchens have struggled for various reasons ranging from low-quality and high costs. However, fast casual brands have shown to be a logical pairing with centralized commissary kitchens, especially in high-rent markets like NYC (where Kernel plans to open multiple locations). Chains like Fresh&Co have grown fresh-forward concepts across metro areas like NYC through centralized batch cooking of ingredients and doing final-prep in smaller footprint storefronts. If Ells can leverage automation to take on the majority of food prep and save capital to invest in a greater number of smaller stores, he might prove this model as a recipe for the future.
Don’t Build It, Rent It
While many of the early venture-funded robotic food restaurant concepts spent most of their capital building out proprietary platforms, nowadays, a restaurant builder can leverage any of the available platforms to deploy in their food production and food service workflows. One has to look no further than a small operator like Andrew Simmons to see that restaurants can be built by piecing together systems that use robotics-as-a-service payment structures, which lower the overall capex required and allows flexibility to create a workflow over time as needs change and lessons are learned. My guess is Ells is planning on leveraging systems where others have paid all the upfront cost of development, and he can be a customer who benefits from a service and maintenance agreement.
There are still many unknowns about the Kernel concept, including what automation platforms they plan to use (or create) and just what the consumer experience will be like. But if Ells shows the brand-building prowess from his Chipotle days wasn’t a fluke and can be flexible in architecting a production workflow that carries a lower upfront capex hit than early robot restaurant efforts, he may be on his way to building one of the first true robot-powered restaurant chains.
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