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The Spoon

Daily news and analysis about the food tech revolution

Ghost Kitchens

A Tale of Two Ghost Kitchens: Why Wow Bao Wowed and MrBeast Bombed

This week, James Donaldson, known online as MrBeast, sued Virtual Dining Concepts, the company behind his virtual restaurant brand.

In the lawsuit, MrBeast and his legal team claim that “Virtual Dining Concepts was more focused on rapidly expanding the business as a way to pitch the virtual restaurant model to other celebrities for its own benefit, it was not focused on controlling the quality of the MrBeast Burger customer experience and products.”

The complaint goes on to say that low quality products have resulted in thousands of negative reviews and viral social media posts, including this Reddit article which showed photos of undercooked ground beef.

Above: Picture from Reddit post complaining about BeastBurger

Through its lawyers, VDC has dismissed Donaldson’s claims as “riddled with false statements and inaccuracies” and says that he is attempting to use “bullying tactics” to force VDC “to give up more of the company to him” and is using the lawsuit to “undermine the MrBeast Burger brand and terminate his existing contractual obligations without cause.”

While it’s too soon to tell how all this will shake out, there’s little doubt that the Beast Burger brand will suffer from its namesake celebrity creator publicly complaining about the quality of the food. While VDC has shown no intent to relent and shut down the BeastBurger brand, the current trajectory for the world’s most famous virtual restaurant brand doesn’t appear sustainable.

Ever since I first wrote about MrBeast’s growing disenchantment with the BeastBurger project, I started to think back to a conversation I had this spring with Wow Bao CEO Geoff Alexander. Like BeastBurger, Alexander’s company ventured into the virtual restaurant business a few years ago. However, unlike BeastBurger, there is no celebrity discord to deal with, and from the looks of it, Wow Bao’s ghost kitchen business appears to be thriving. In fact, according to Alexander, the company had just expanded its virtual restaurant footprint by over 106 restaurants in about four months, which brings the total number of virtual WowBao locations to over 700 at the time of our conversation.

So why is Wow Bao succeeding while BeastBurger struggles? From what I can tell, the two brands have three significant differences: Quality control, partner monetization, and product niche.

From a quality control perspective, Wow Bao and BeastBurger are very different. Unlike BeastBurger and lots of other virtual brands which rely heavily on its various restaurant partners to source and make the food, Wow Bao simplifies the process by delivering ready-to-steam products to the restaurants.

“We ship frozen products around the country,” Alexander told me. “If you can steam the product, you can make the product.”

That’s right; no cooking burgers, fries, or other foods, no assembling different ingredients with varying results. Hearing Alexander explain it, the Wow Bao model is the restaurant kitchen equivalent of me bringing home a bag of frozen dumplings from Costco and throwing them in my Instant Pot.

Another difference is the monetization model. According to Alexander, Wow Bao’s restaurant partners only pay Wow Bao for the cost of the food, a vastly different approach from many virtual brand management companies that take a cut of the overall revenue (while also leaving the cost of food and labor to the restaurants). After deducting labor and food, the third-party delivery fee, and a cut of the revenue to the virtual brand partner, there’s often not enough of a financial incentive for the restaurant operator (which usually has its own branded business to worry about) to give the love and attention a brand like BeastBurger needs.

The third big difference is product niche. Asian food’s popularity has skyrocketed in recent years but is still somewhat underrepresented in quick service chains compared to more standard American fare. A typical midsize suburb town in the US might have five to ten burger joints and a similar number of pizza places but may only have a couple of Asian restaurants (and often very few fast-casual or fast food variations). Wow Bao’s dumplings and buns are more likely to face less competition on third-party delivery apps than other categories.

Finally, one other difference is worth mentioning: Wow Bao is an actual restaurant chain complete with its own restaurants, while BeastBurger was born in the virtual world as a business concept, built around an online celebrity made famous not by food, but by playing video games and tracking his life via almost daily videos uploaded to YouTube. There’s something to be said for food born from an actual restaurant with an actual menu to one born out of a business plan to create a non-core business brand extension.

Beast Burger’s problems are not unique. Over the past year, it became clear that many ghost kitchen and virtual restaurant brands that rolled out in recent years would likely not survive. After Uber Eats and DoorDash began to more closely regulate and cut back on the virtual brands on their platform and chains like Wendy’s started to pare back their plans for virtual locations, it became clear the end of the wild west era in ghost kitchens was near. Now, with MrBeast’s efforts to shut down BeastBurger, we have what looks to be a definitive end to the first chapter of the ghost kitchen industry story.

The good news is some companies like Wow Bao and Hungry House are showing that there are other ways to operate ghost kitchen models and make it a win-win for both the ghost kitchens/virtual brands and their restaurant partners.

As for Wow Bao, it appears they will soon expand beyond their restaurant business and take a page out of MrBeast’s book by bringing their starting their own packaged goods business. This week, Alexander teased the release of Wow Bao retail products with a post on Linkedin.

2023 Restaurant Tech EcoSystem: Nourishing the Bottom Line

In collaboration between TechTable and Vita Vera Ventures, we are pleased to share an updated 2023 Restaurant Tech Ecosystem map.

We all saw that the pandemic brought a wave of experimentation in the restaurant tech space, but we also know that tech-driven change is not always linear. 

In early 2022, we made bold predictions about the restaurant tech environment in 2023, as we anticipated numerous acquihires ahead (acquisitions primarily driven by tech talent vs strategic tech value). This was due to the tight tech labor market (at the time) and the increasingly challenging funding and interest rate conditions. 

However, with the recent wave of macro tech layoffs, the tech labor market is no longer tight, and we believe more restaurant tech companies may be forced to shut down rather than finding a soft landing through acquisition. We’ve already seen a strong reset on requirements for capital efficiency and valuations of startups in the sector. This macro shift may create potential for rollup opportunities, but many early-stage assets across the sector are overfunded single-point solutions and still subscale.

This is ironic as the need for tech-driven solutions has never been stronger, but companies without the right growth metrics will likely struggle to survive. The inflationary environment is also forcing harder decisions for operators, which may further dampen their willingness to engage with new solutions.

With that in mind, we are pleased to share our 2023 Restaurant Tech Ecosystem, which serves as a current heat map of the broader ecosystem within the US (and is clearly not exhaustive). 

Click here to enlarge/download image of map. Click here for downloadable PDF.

The Journey from Point Solutions to Comprehensive Tech Stacks

While single-point solutions for things like online ordering, loyalty programs, and delivery were popular during the pandemic, we have reached a moment now with perhaps too many point solutions in the market. 

Tech stacks that require too many logins are now in fact creating a cognitive burden for employees, rather than the intended promise of efficiency and ease of use. As a result, operators are beginning to seek integrated systems and smaller tech stacks that can do more. (See commentary in the previous section about rollup opportunities!) 

Restaurant tech advisor David Drinan succinctly identifies the near-term priority for most operators: “The restaurant industry is thirsty for technology innovation that will deliver high margin, incremental revenue.”

On the operational side, managers are still struggling with certain areas such as scheduling and inventory management. These tasks can be time-consuming, especially for independent restaurant owners who have limited resources. As a result, we have seen a growth category of solutions that can automate these functions and provide real-time data to help operators make informed decisions.

Help *Still* Wanted   

The labor shortage in the restaurant industry has been a major challenge for operators in recent years, and labor optimization is still at the top of every operator’s mind. The pandemic caused many workers to permanently leave the hospitality industry, leaving restaurants short-staffed. 

According to the National Restaurant Association, almost two-thirds of US restaurant operators say they do not have enough employees to support existing demand. Instead of replacing this lost workforce, many operators are turning to tech to automate more functions and reduce the need for human labor. 

From digital menus and ordering kiosks to automated kitchen equipment, there are many ways that technology can help restaurants operate more efficiently with fewer employees. By automating basic tasks such as taking orders and processing payments, operators can free up their staff to focus on more complex tasks that require human expertise, such as customer service and food preparation.

Another trend the restaurant industry is grappling with is the changing expectations of younger workers when it comes to the employer/employee relationship. With more emphasis on work-life balance, career development, and job satisfaction, younger workers are looking for more than just a paycheck. 

To meet these expectations, operators are looking for workforce management solutions that can help to improve engagement, development, and rewards for their employees. This includes tools for tracking and managing schedules, as well as innovative solutions for tip outs and other compensation mechanisms. By investing in these solutions, operators can not only attract and retain top talent but also improve the overall efficiency and productivity of their workforce.

Finally, it is worth noting that basic scheduling and labor management tools can have a significant impact on profitability by reducing labor costs and improving operational efficiency. By automating scheduling and timekeeping, for example, restaurants can reduce the likelihood of overstaffing or understaffing, which can be costly in terms of wasted labor or lost sales opportunities. 

In the end, the ability to leverage technology to optimize labor is critical for restaurants to remain competitive in a challenging operating environment. While kiosks and text ordering have shown promise in the QSR space, there are many other opportunities for technology to make a positive impact on the industry as a whole.

Ghost Kitchens: It’s Even More Complicated

In our 2021 restaurant tech retrospective, we had a lot to say about this growing subsector, including the challenges for success (a.k.a. profitability) within the confines of a ghost kitchen business model.  

Now, as the concept of virtual and ghost kitchens continues to evolve even further, it’s important for operators to understand the complexities involved and navigate these challenges to build successful ghost kitchen operations.

One major obstacle has been the potential for tension between virtual brands and existing businesses, where adding virtual brands can lead to direct competition with their own existing businesses. Finding the right tech and operational partner to balance between these two is key.

Additionally, ensuring food safety and maintaining quality standards across multiple brands can be a challenge. Many of the generic virtual brands have lacked distinct value or clear taste standards, leading to underwhelming food quality issues and removal from the major third-party delivery platforms.

Last Mile Magic

Making the economics work for restaurant delivery is a growing priority for the industry. This includes better interoperability between POS/Kitchen systems and delivery providers, better routing and batching systems, localized kitchens, and of course even the mode of transportation for delivery.

We are tracking over 20 companies in the North American unattended last mile category, but it is still early days with most (all?) of the solutions operating in limited geographies and customer trials. So we have left this slice off the infographic for 2023, but don’t forget to keep your eyes on the sky, as we’ve seen recent growth of backyard drone delivery companies which are proving to be faster and better for the environment (if they can outweigh the noise and regulatory concerns).

GenAI on the Menu

Tech entrepreneurs have long dreamed of personalized food recommendations, but few have succeeded in creating true personalization beyond dietary concerns, allergens, or ingredient likes/dislikes. 

However, we have now reached a unique moment where new technologies like ChatGPT will be able to create meaningful and personalized interactions with guests. This has always been the premise of a variety of AI-driven restaurant tech startups, but the ability to leverage the underlying data to engage and interact with guests in a truly personal and conversational manner is game-changing. 

By using data from previous orders and interactions alone, ChatGPT can help to create a more tailored experience for guests, from recommending menu items to offering personalized promotions. ChatGPT can become a critical part of a restaurant’s marketing team by creating content, with the ability to easily translate to different languages as well. This could give operators a crucial competitive advantage as consumers demand more personalized experiences. We have only begun to see the capabilities of ChatGPT with free templates being offered to restaurant operators already.

Moreover, conversational AI like ChatGPT can also be a valuable tool for restaurant operators seeking to understand their own operating metrics. By integrating ChatGPT into their tech stack, operators can ask natural language questions and receive real-time responses, empowering them to make informed decisions about their operations.

Emerging Restaurant Tech Concepts to Watch

  • Chat/AI across marketing and operations
  • Tech-enabled employee support and training (for example, personalized perks, tip-out options, or language choices) 
  • AI for scheduling to free up managers
  • Dynamic pricing
  • Reusable containers + tech-driven circular economy for foodservice 

Looking ahead –  As always, we welcome your thoughts and reactions, and look forward to continuing to follow this sector together in the coming years. Reach out to us: Brita@vitavc.com and hello@techtablesummit.com. 

This Restaurant Tech Founder Thinks The Value of Virtual Brands is Bottom Line Savings, Not Top Line Growth

If you ask Michael Jacobs what he thinks of virtual restaurants, you might expect an enthusiastic declaration of support for the concept. After all, as a co-founder and the original CEO of Ordermark and someone who helped conceive of the idea behind Nextbite, he helped create one of the highest-profile startups powering a wave of virtual restaurant brands launched in recent years.

But in reality, his answer is decidedly more circumspect.

“I don’t think restaurants need virtual brands,” Jacobs told me in a recent phone interview. “It’s a nice to have, and it’s not bad for the restaurant, but it’s not anything that will save a restaurant.”

In other words, Jacobs believes that while restaurants can get ok top-line growth running a virtual brand out of their kitchen, it’s often not a game changer for the overall business.

Where he thinks digital-powered business models can make a difference is by helping restaurants with another part of their P&L: expenses. In particular, the cost of food and materials required to run a restaurant.

This realization dawned on Jacobs over time, first as the founder of Tapin2, a company that made software running multi-brand digital restaurants at stadiums, and later as the CEO of Team Kitchens, a facilities-based ghost kitchen company he started after selling his shares in Ordermark/Nextbite in 2019 (after his separation from Ordermark, he and the company engaged in a round of litigation that, according to Jacobs, has since been settled).

During these stints, Jacobs realized that while there are some benefits to tapping into a collective brand to gain customers and garner incremental sales a la a traditional virtual restaurant, the real power in a collectively powered brand lies in the cost savings of pooled purchasing.

“While working with some of the enterprise brands, I realized that they were saving as much as 50 to 60% on every item they were purchasing,” he said.

In contrast, independently owned restaurants and smaller chains utilizing a virtual brand concept aren’t getting the same scaled purchasing savings as large enterprise restaurant brands. But according to Jacobs, if these smaller organizations leverage pooled purchasing through a virtual collective, it can make a huge difference to margin-constrained businesses.

“The important thing is like during this time where restaurants are hurting from inflation, we have a solution where they can save 15 to 25% give or take on what they’re purchasing right now,” Jacobs said. “And as we scale, I think the numbers will get even better.”

“What I wanted to build was a network of restaurants that work together,” Jacobs said of his new company KitchData. “Where it’s a bunch of small to medium-sized businesses who collaborate through these virtual brands on their purchasing.”

By doing this, Jacobs believes the restaurants can collectively work together to create a virtual brand with a purchasing power similar to that of an enterprise business. Sure, it’s a virtual restaurant, only one where the focus is on the bottom line rather than the top.

KitchData also pairs its technology with concept and brand development consulting, where it helps operators develop a brand they fully own, something Jacobs sees as another significant differentiator.

“It’s theirs to do with as they wish,” Jacobs said. “Ric Flair owns Woo Wings (the virtual chicken wing brand the famed pro wrestler launched recently). Powerbomb Pizza is owned by Pro Wrestling Tees. DaMandyz Donutz is owned by (pro wrestlers) Daria and Amanda.”

KitchData is getting going just as some in the broader restaurant tech space – including Jacob’s former employer – are restructuring as part of a broad pullback of the easy money invested into the space over the past few years. Jacobs, who managed to raise $3 million in seed funding for KitchData despite investor cooling, has high hopes for his company.

“I think it’s the best thing invented for the restaurant industry itself in decades,” Jacobs said. “And we’re going to do a good job at saving the bottom line for restaurants.”

Ghost Kitchen Operator REEF Continues Acquisition Spree, Buying Hospitality-Focused 2ndKitchen

REEF Technology, an operator of ghost kitchens and proximity hubs, announced it has acquired 2ndKitchen, a provider of turnkey food service to hotels, offices, buildings, and other hospitality businesses. REEF and 2ndKitchen will combine their businesses under the REEF brand and will operate under REEF’s Hospitality division. The terms of the deal were not disclosed.

The concept behind 2ndKitchen is to provide food service to local businesses that don’t have their own kitchen facilities, such as pubs, sports venues and hotels. The company handles everything, including setup, ordering, menu development, payment, fulfillment, and customer support. The company, which has set up shop in Chicago, New York City, Miami, Denver, Dallas and New Orleans, powers food service to over 100 thousand rooms and common areas today.

For REEF, the deal instantly adds a large inventory of customers for their kitchen business. The company, which has grown its ghost kitchen network from 50 in February to 450 as of October, needs lots of new open mouths to feed as it expands it food production capacity at a rapid clip, and this deal helps deliver just that.

The deal also gives REEF’s restaurant brand partners a new outlet for their food. The company has been scooping up new partners like Wendy’s, TGIFriday’s, and 800 Degrees with multi-year commitments for new kitchens. The addition of 2ndKitchen gives these brands instant access to hundreds of hospitality businesses.

The deal continues what amounts to a three-month acquisition spree for REEF. In October, the company acquired Bond, an Israel-based logistics company. A month later, the company acquired iKcon, a ghost kitchen operator in the middle east. This week REEF added 2ndKitchen, marking the third acquisition in a three-month span.

The deal is interesting in that 2ndKitchen traditionally leverages local restaurants to provide food service to hospitality businesses. On the REEF side, the company provides physical kitchen infrastructure to help restaurants extend their brand into markets where they don’t operate a kitchen. Under the newly combined company, it’s conceivable that REEF kitchens could become the primary source of food offerings, displacing 2ndKitchen’s legacy restaurant partners.

On the other hand, REEF might also decide to keep 2ndKitchen’s restaurant partners around for the time being given the ghost kitchen operator’s recent troubles with their facilities. REEF utilizes mobile trailers for kitchens in multiple markets which, as reported by Restaurant Dive, have come under increasing scrutiny as of late for health code violations in Florida and other states.

2ndKitchen’s team will remain intact post-deal, including its three co-founders: CEO Nick Anastasiades, CTO Arik Gaisler and CFO Jon Elron.

Jet.com’s Founder Launches Wonder, a Logistics-Driven Bet on The Future of Restaurants

Today Marc Lore, the ex-CEO of Walmart.com and founder of Jet.com, formally announced the launch of Wonder, a ghost kitchen-driven delivery brand powered by high-profile chef recipes and cook-en-route delivery vans. The company currently is delivering food to four cities in Union County in northern New Jersey and has plans to expand to New York and beyond in 2022.

Wonder has reportedly raised an eye-popping amount of money for a company that only formally announced itself today. According to reports, the company has already raised over $500 million in capital, which likely means a valuation in the multi-billion dollar range. The impressive raise is due to Lore’s track record of building highly successful and disruptive e-commerce businesses. Lore’s Jet.com effectively became the core engine of Walmart’s e-commerce efforts once the retail giant bought the company for $3.3 billion in 2016.

The company has partnered with several high-profile chefs to develop recipes and lend their names to virtual restaurants that Wonder will turnkey. Seventeen restaurants and chefs have partnered with Wonder, including Bobby Flay, Nancy Silverton, Daisuke Nakazawa, and Marcus Samuelsson.

The company was founded in 2018 by Lore and was initially run by his brother Chad. However, in 2019, former Diapers.com exec Scott Hilton took over in 2019, and now, Lore – who had mainly been acting in an advisory capacity – is stepping as the company’s CEO.

According to a detailed report in Yahoo News, Wonder will utilize a licensing model that pays a one-time fee to chefs and will then operate out of a 40 thousand square food commissary kitchen where meals are assembled. Each chef’s restaurant brand is assigned its own delivery van, which is operated by a dedicated employee who responds to orders in the app. Once an order comes through, the runner begins preparing the meal in the Mercedes runner van custom-equipped with special oven. Meals are expected to arrive at the customer’s door within 30-40 minutes.

In some ways, the Wonder business is reminiscent of Zume, a one-time restaurant tech darling that also used a centralized production facility and cooked the food (pizzas in the case of Zume) en-route to the customer in a delivery truck. However, unlike Zume, Wonder’s oven-equipped vans take the food all the way to the customer’s door (Zume used a two-stage delivery network where scooters would deliver the pizza to the customer). Another major difference between the two is much of Zume’s focus was on building a robotic pizza-making machine, while Wonder utilizes in-house chefs to prepare their meals.

Lore’s vision of highly-centralized food production combined with a logistics network to reach the end customer is an evolutionary step forward from Zume and others, combining many of the various advancements we’ve seen in e-commerce, food delivery and ghost kitchen/virtual restaurant models over the past few years. While other regions like China have been developing highly-centralized food production and delivery models over the past decade, the US is beginning to play catch up via interesting new models built upon high-tech advances and an accelerated appetite for food delivery over the past couple of years.

While it’s too soon to say whether Lore’s new company will be as successful as his past, it looks like he has the capital, culinary partnerships and logistics know-how to give it a good run.

Kitchen United Acquires Zuul: Has The Wave of Ghost Kitchen Consolidation Begun?

Yesterday, ghost kitchen operator Kitchen United announced they had acquired Zuul, a ghost kitchen technology and consulting services company, for an undisclosed sum.

According to the announcement, Kitchen United will bring over the executive team and transition Zuul’s New York City facility to a Kitchen United MIX kitchen center.

The company also announced that it would integrate Zuul’s ZuulOS technology platform. From the announcement: ZuulOS enables operators to create their own virtual food halls and fulfill multi-brand orders effortlessly. The company also powers native online ordering and batched deliveries with a partner network to provide an efficient delivery model that will marry well with Kitchen United’s proprietary technology platform MIX.

While the addition of a NYC location and the executives is important, much of the announcement focused on the addition of Zuul’s technology platform, ZuulOS, to the Kitchen United offering. What’s interesting is Kitchen United already has its own tech platform called MIX, which is, well, a mix of both consumer-facing elements as well as some back-of-house delivery management pieces.

So what does Kitchen United get with ZuulOS? ZuulOS has white-label consumer-facing elements, but its core is a multi-brand virtual restaurant management platform. ZuulOS, which has its roots in the acquisition of OnTray in 2019, has accounting, menu-building, and kitchens operations components. Throw in Zuul’s consulting services arm, and it rounds out Kitchen United’s ability to spin up new virtual food halls for companies using its technology and shared kitchen products.

For Zuul, while it can’t be said for sure (since terms were not disclosed), chances are the acquisition is probably not the type of exit imagined when they announced they had raised $9 million just over a year ago. Six months after the funding news, it became clear the company was searching for itself as it announced the ZuulOS platform and transitioned away from being a ghost kitchen operator (aside from the one NYC location) to being a Saas/platform company. The news of this deal marks the completion of the company’s journey as it finds a home with one of the industry’s biggest players.

Let the ghost kitchen market consolidation begin

While this is one of the most significant acquisitions so far in the ghost kitchen space, it’s likely only the start of a wave of consolidation.

Even as funding still flows into the ghost kitchen and virtual restaurant space, many operators have realized that running an extensive network of multitenant kitchens is a capital-intensive business. Much of the recent funding in the broader ghost kitchen and virtual restaurant space has gone to companies that are creating platforms that make it easy for restaurant brands to launch new virtual brands through hosted kitchen models. While some companies, like Reef, continue down the heavy capex path powered by huge raises, venture and corporate capital has started to migrate towards hosted kitchen models and virtual restaurant brands that can take advantage of underutilized kitchen capacity in existing QSRs or independents.

This doesn’t mean we won’t continue to see lots of creativity over the next five to ten years in which operators build both new kitchens with limited front of house and completely dark kitchens. The realization in the restaurant, grocery and food service market that the traditional restaurant model of building a kitchen and front of house for every single location is outdated in the age of delivery and digital ordering is still a valid one, and the great recalibration towards new models like hub & spoke and virtual food halls will continue apace.

Part of the big shift towards the digital dining reality of today is finding out what works best for customers and its operations while optimizing the business model from a capex and opex perspective. For their part, Kitchen United, one of the early pioneers in the space, has made the transition from a ‘heavy capex’ model to one that is more flexible, working with everyone from big grocery store chains to set up ghost kitchens to bringing food hall formats to big shopping centers. This deal should only help the company remain a key player as the industry evolves and finds its way.

As the Ghost Kitchen Industry Matures, Here Are 5 Trends to Watch

This following a guest post from Warren Tseng, a long-time operator, investor and advisor in the restaurant and ghost kitchen industries (full bio below).

The food industry has managed to squeeze about 10 years of innovation into just 18 months thanks to the pandemic. This in turn has given rise to a variety of ghost kitchen models that have allowed restaurants and food brands to increase sales and reduce their operating costs. Now that restaurant operators have seen that online delivery may likely be the bulk of their sales going forward, we will continue to see them double down on delivery and find new ways to become more efficient and technology-driven in terms of menu development, supply chain efficiency, direct-to-consumer distribution solutions, and kitchen automation. Here are five trends that will continue to shape the rapidly evolving ghost kitchen industry beyond the pandemic.

  1. Leveraging data and AI to inform menu and product development

Data can provide invaluable insight to any customer-facing industry, and ghost kitchens are no exception. Ultimately, data regarding brand preferences, pricing strategy, ingredients, and the popularity of cuisine types in certain regions can inform everything from menu design to marketing strategy for delivery-only food brands. Examining customer ordering data can also inform restaurants where their particular cuisines may fill a gap on a hyper-local basis, and where they might want to offer their products via a ghost kitchen versus a bricks and mortar location.

For example, JustKitchen has partnered with two Michelin-rated restaurants, Orchid by Peng and 3 Coins, to create delivery-only menus. Their brick and mortar locations previously were situated in very high-density areas of Taipei. By partnering with us, they were able to test the demand for their food in other parts of Taiwan without having to invest in real estate first. By examining the customer ordering data on a trial basis, we were able to see that the demand for this fine-dining style of food was very strong throughout areas of Taiwan they previously weren’t serving.

Additionally, brands that are interested in expanding into new countries can use a ghost kitchen to test out the popularity of the food on a trial basis before taking the leap and investing in the additional real estate and marketing that a global expansion normally requires. They can also test menu items on a trial basis and use ordering data to determine whether certain menu items are a fit for a new market — for example, a North American market versus an Asian market — before developing and rolling out a final concept and menu.

  1. Delivery-only food brands going direct-to-consumer

Whereas today many ghost kitchens and delivery-only brands rely solely on third-party food delivery platforms to connect with customers, in the future we are going to see more ghost kitchens and food brands going direct-to-consumer. Established food delivery platforms will more frequently be used as a test for brands to get initial exposure through the platform’s users. Once operators have found the right product-market fit, they will benefit from continuing to invest in the brand and building out new distribution channels, just as many startups first launch products on a platform like Shopify to test the market before building their own online sales portals and investing in marketing and distribution.

  1. Environmentally conscious initiatives to reduce packaging and food waste

Food waste is a growing global environmental and social issue, and restaurants are one of the world’s biggest contributors to it. In the U.S. alone, it’s estimated that restaurants account for 22-33 billion pounds of food waste each year. But ghost kitchens really do have an opportunity to be leaders in the restaurant industry in terms of reducing food waste. For example, using technology, ghost kitchen operators have the ability to more carefully track historical delivery data to better predict demand and thus more accurately plan supply, which can greatly reduce food waste. In addition, real estate players that host multiple ghost kitchen operators in a single facility, such as CloudKitchens, are able to leverage economies of scale with suppliers to boost efficiency and lower costs for operators. Similarly, ghost kitchen operators that offer grocery delivery in addition to meal delivery can take advantage of the FIFO (First In, First Out) rule: ingredients and supplies can be used in both meal preparation and grocery delivery services, reducing the chance of food going off before it’s used.

It’s no secret that the rising demand for online food delivery also means more packaging that gets tossed in the garbage. I believe that as the industry matures, more ghost kitchen operators will be held accountable for their packaging. At JustKitchen we use 100 percent recyclable or compostable packaging and paper straws instead of plastic straws. I believe, and hope, that we will see more ghost kitchen operators taking the initiative to replace single-use plastics with more environmentally friendly materials in future.

4.) Autonomous food delivery

A big challenge that ghost kitchens and online food delivery platforms alike experienced during the pandemic was a shortage of delivery drivers. As demand for online food delivery exploded during the pandemic, many third-party delivery platforms found themselves short of drivers. Additionally, many people were concerned about drivers handling food hygienically and following contact-free drop off protocols. In some cities, autonomous delivery robots have provided a viable solution to these issues, as they can bypass obstacles such as traffic and human-to-human contact during delivery. However, realistically delivery-by-robot only works in core downtown areas where the delivery destination is relatively near to where the food is prepared. Self-driving cars that can travel longer distances will likely provide a more viable autonomous delivery option in future, but we are not there quite yet.

5.) Modularized / container ghost kitchens

As the industry evolves and cooking technologies become more automated (check out Flippy, the burger-flipping robot), kitchens and everything from cooking to packaging and delivery will become more streamlined and less costly. In general, if care is taken to design menus and preparation methods that are highly efficient, delivery-only food brands will continue to evolve so that they need less space, less equipment, and perhaps even less staff to operate. When you need less space to operate in, you can invest in setting up a greater number of smaller kitchen facilities that occupy less real estate but cover more ground. Modular kitchens can be set up in spaces as small as a shipping container, can be deployed almost anywhere, and can still produce excellent quality products. Many ghost kitchens, such as Reef Technologies, are already implementing modular kitchens and although it can be a trial and error process at first, this is likely a trend we will see more of in the future.

At the end of the day, successful ghost kitchen operations are all about efficiency, and that can be thought of in two parts. On the restaurant side – implementing technology that enables a single ghost kitchen operator to handle multiple brands on multiple delivery platforms out of one kitchen will improve staffing efficiency and reduce food wastage. On the delivery side – having multiple restaurants and multiple brands concentrated in a small footprint, and technology that enables effective queuing and batching of orders – allows couriers and third-party logistics to batch multiple orders from one pick-up location to deliver to multiple destinations. This not only significantly boosts the efficiency of the logistics providers for the last mile, but most importantly, ensures the customer receives the highest quality product possible. Ultimately, ghost kitchens that can consistently deliver high-quality, on-brand products will be the winners in this increasingly competitive marketplace.

Warren Tseng is a strategic advisor to Taiwan-based cloud kitchen operator and delivery-only food brand developer, JustKitchen. Mr. Tseng is an early-stage business operator, advisor, and angel investor with extensive experience establishing and growing companies acrossSoutheast Asia and Greater China. He was an early entrant to the on-demand economy and the cloud kitchen industry from his previous roles as General Manager (Singapore) at Uber Technologies, and Regional General Manager (Asia Pacific) at CloudKitchens, where he established the companies in eight countries across the APAC region.

Wendy’s to Launch 700 Ghost Kitchens Via Reef Partnership

Wendy’s announced this week it will expand its number of delivery-only kitchens via a partnership with ghost/mobile kitchen provider Reef. With the deal, Wendy’s plans to open 700 more of these kitchens over the next five years in the U.S., Canada, and the United Kingdom.

Wendy’s and Reef first announced their partnership in 2020, when the two started testing delivery-only kitchens in Canada. The partnership is part of Wendy’s ongoing strategy to be operating 7,000 units globally by the end of the year, according to the company’s earnings call this past week. The QSR chain plans to have 30 percent of all its new units come from nontraditional locations.  

Reef’s mobile kitchens certainly count as “nontraditional” when it comes to QSR formats. The company, which raised $700 million last year, houses ghost kitchens in mobile trailers that can be parked more or less anywhere there is underutilized real estate and demand for restaurant food. Right now, the company partners with existing restaurant chains that want to boost the number of delivery-only orders they fulfill. Saladworks, Wow Bao, and BurgerFi are just a few names using Reef’s mobile kitchen infrastructure. 

“We are still very early in our nontraditional development journey, but we are encouraged by the results that we’ve seen with Reef, and we’ll continue learning alongside them throughout this partnership as we grow our brand,” Wendy’s CEO Todd Penegor said on the earnings call.

Partnering with Reef on mobile kitchens allows Wendy’s to expand its new build-outs faster, since there’s less development time needed compared to a traditional QSR location with a dining room attached. Wendy’s decision to go the mobile kitchen route differs from other QSRs like Burger King, McDonald’s, and Taco Bell, all of whom have recently announced new store prototypes that emphasize digital ordering and delivery. In those cases, however, the units are stationary and have yet to be built out en masse.

Revenue in the online food delivery segment in the U.S. is expected to reach $32 billion in 2021, which is about 15 percent of the total U.S. fast food market today. That suggests a long-term trend towards non-dine-in formats for QSRs and more focus on the “hub-and-spoke” model where the kitchen is the central piece of the restaurant serving multiple different sales channels. QSRs, in particular, are well suited to the non-dine-in format because customers aren’t typically going to these establishments for the ambiance or experience one expects in a dining room setting.

For their part, Wendy’s and REEF expect to open approximately 50 delivery kitchens in 2021, with the remainder launched by 2025. 

Q&A: Euromonitor’s Michael Schaefer Talks Restaurant Tech

Those with an eye on restaurant tech may remember that this time a year ago, Euromonitor predicted that the ghost kitchen market would be worth $1 trillion by 2030. 

That’s an enormous number to pin on what was then still quite a nascent sector. But Michael Schaefer, the Euromonitor analyst who made that prediction, wasn’t just talking about ghost kitchens for restaurants. He was talking about ghost kitchens that house ready-made meals and pantry/fridge staples, deliver groceries, and service other parts of the food sector in addition to restaurants. Turns out, he was right. Those lines between grocery, restaurant, ghost kitchen, and convenient store are fading as we speak, as much recent Spoon coverage can attest.

Michael is the Head of Beverages and Foodservice Research at Euromonitor International, tracking consumer trends, product innovations, and market evolution across the F&B industries. Needless to say, he’s hyper tuned into the state of the restaurant industry in 2021. Along with food tech investor Brita Rosenheim, he’ll help open The Spoon’s upcoming Restaurant Tech Summit, a day-log virtual event that will discuss the state, present and future, of restaurant tech. 

As a teaser, we recently got some high-level thoughts from Michael about where the industry is headed. Full Q&A is below. And if you haven’t already, grab a ticket to the show here.

This interview has been lightly edited for clarity.

The Spoon: What is the biggest change in terms of the restaurant industry’s approach towards technology as a result of the pandemic? 

Michael Schaefer: There’s certainly a greater willingness to experiment in the restaurant industry. Some technologies, which were adopted out of necessity — such as QR codes for ordering — offer long-term benefits without compromising the guest experience. This will drive further experiments, particularly with technologies that can offer labor savings. 

What do you think the restaurant industry’s biggest challenge is right now? 

Labor is without question the restaurant industry’s biggest challenge in the short term. Restaurant work is difficult, demanding, sometimes dangerous and often pays minimum wage. The pandemic exacerbated these issues while extended unemployment insurance has given workers time to consider their options. This shifting cost-benefit analysis will create ongoing staffing issues. More restaurants will need to consider investing in technology that creates labor savings and makes the average worker’s job less strenuous. 

What is the biggest challenge for restaurants right now when it comes to digitization? 

Integration is the biggest challenge for restaurants when it comes to digitization, particularly among independent outlets. There are more options than ever in terms of systems and approaches to technology. This creates challenges in terms of finding the right solution and ensuring that disparate software and equipment setups can work together in a high-stress restaurant environment. 

What are you most excited about when it comes to the impact of restaurant technology? 

I am most excited to start seeing a range of new models that will reshape what traditional restaurants look like. A restaurant starting from scratch in 2022 will likely take a very different approach to staffing, tech, integration with third-party delivery and loyalty, among other strategies, than a ten-year-old business might. 

What do you think the restaurant industry will look like in five years? In the next five years, restaurants will become less synonymous with prepared food. Prepared meals will remain the primary business for restaurants, of course, and dining in restaurants will not be going away. However, the range of operators, concepts and venues for obtaining prepared meals and solving for daily meal occasions will continue to expand. Rather than a strict separation of restaurants and prepared meals on one end and grocers and packaged food and drinks on the other, we’ll see more of a spectrum, with a range of different approaches to prepared food and drinks, generally ordered via an app and often fulfilled by third-party delivery.

DoorDash Expands Its Ghost Kitchen Operation in California

DoorDash has launched a new location of its ghost kitchen operation, the company announced today via a press release sent to The  Spoon. DoorDash Kitchens San Jose will house six different restaurant concepts from both nationally known restaurants and those from the San Francisco Bay Area. 

This is the second DoorDash Kitchens location. DoorDash launched the first almost two years ago in Redwood City, California, and has served the Peninsula area of the state ever since. The new location will offer delivery and pickup orders for customers in San Jose proper as well as Saratoga and Campbell.

Restaurants in the new location include Aria Korean Street Food, Canter’s Deli, Curry Up Now, Milk Bar, The Melt Express, and YiFang Taiwan Fruit Tea. Canter’s, in particular, is notable on this list because it illustrates how ghost kitchens can potentially improve a restaurant’s geographical reach. Canter’s is so famous in Los Angeles it’s practically an institution. It also only has one brick-and-mortar location, in Los Angeles, though in the last couple years it has expanded its reach in Southern California via a partnership with Kitchen United. Teaming up with DoorDash gives Canter’s a presence in Northern California without requiring the buildout of a full restaurant.

As part of the new facility, DoorDash has launched DoorDash Kitchens Full Service, where the delivery service assumes day-to-day operations like cooking and boxing up orders instead of requiring the restaurant to do so. That requires less work from the restaurants themselves, but it does place even more control over the brand in the hands of DoorDash. DoorDash has partnered with culinary operator A La Couch to hire cooking staff and prepare meals. The last mile, of course, will be handled exclusively by DoorDash and its own couriers. 

DoorDash said part of the motivation behind Full Service is to offer restaurants even less labor-intensive ways to run a delivery-only kitchen. And nowadays, it doesn’t seem like such a bad idea, as many restaurants continue to struggle with high margins, a dearth of labor, and uncertain times in general. 

Full Service handles the hiring, training, and day-to-day tasks in the kitchen such as procurement and inventory management. Restaurants receive a portion of the revenue in return. A specific percentage was not given.

 

Video: See Kitchen Robotics’ Beastro Ghost Kitchen Robot in Action

It’s one thing to write about food making robots — but it’s so much better when you can see food-making robots in action. Which is why it’s cool to see the video Kitchen Robotics released this week of its awesomely named Beastro robot making meals.

Kitchen Robotics is in the business of automating ghost kitchens with hardware and software tools. Beastro is its all-in-one standalone kiosk. Similar to RoboEatz, Gastronomous and Karakuri, the Beastro stores all the ingredients, then dispenses them into a bowl where they are mixed and heated into a meal. Beastro is approximately 12 ft. long by 6 ft. wide and 7 ft. tall, and weighs 1,790 lbs. It can make 45 dishes an hour including Italian and Asian cuisines, as well as soups, salads and more.

We got a glimpse at the Beastro just about a year ago with a teaser video, but that didn’t show the robot working with actual food. This time around you get to see Beastro’s robotic grippers holding the bowl, sliding it around as it adds ingredients, and using the spinning induction cooker to prepare the dish.

Beastro™ a Robotic Kitchen by Kitchen Robotics

Adding robots to a ghost kitchen can make a lot of sense. Robots can work odd (or all) hours, and churn out meals in minutes. They can also be tied in to ordering systems so meals can automatically (and algorithmically) be coordinated, cooked and queued based on when a delivery driver will arrive to pick up the food.

As such, we are starting to see robots creep into ghost kitchen operations. In February of this year, DoorDash acquired food robot company, Chowbotics. At the time of the acquisition, we wrote that DoorDash could use Chowbotics’ robots to assemble its own brand of fresh food for delivery from the DashMart convenience stores. This prediction seems to have borne out as earlier this month, HNGRY reported that DoorDash was indeed creating its own line of private label salad bowls and microwaveable meals with Chowbotics tech.

If DoorDash can make a go of its new robotics program, it’s probably safe to assume that other delivery services will follow suit. Gopuff, for instance, is adding ghost kitchens to its delivery network and has reportedly raised an additional billion dollars. That could buy a few Beastros, for sure.

C3 Raises $80M to Expand Its Virtual Food Hall Concept

Virtual restaurant company C3 (Creating Culinary Communities) has raised an $80 million Series B funding round co-led by Brookfield Asset Management and REEF Technology. Egon Durban and Greg Mondre Managing Partners and Co-CEOs of Silver Lake Partners, along with Dean Adler, Co-Founder of real estate investment firm Lubert-Adler.

C3’s business these days is as much about real estate as it is about restaurants. The company operates more than 40 virtual restaurant brands, leveraging underutilized kitchen spaces around the country to cook and fulfill those orders. For example, the company has a partnership with Graduate Hotels and uses kitchen spaces at Graduate locations to serve delivery-only orders to guests and the surrounding community.

In March of this year, C3 said it would also bring its virtual restaurant concept to residential spaces, starting in Nashville, Tennessee and Phoenix, Arizona. The company recently partnered with Kitopi to take C3 brands overseas to the UAE, has a deal to use Reef locations for kitchens, and last month said it would make its virtual brands available to Chowly’s 10,000-plus restaurant customers.

For all C3 concepts and partnerships, meals are available through the company’s CITIZENS GO mobile app, which is powered on the back end by online order company Lunchbox’s software.  

The $80 million fundraise will go towards further expansion in the form of signing leases with real estate developers at various mixed-use, retail, and hospitality spaces. According to today’s press release, these leases will serve to open CITIZENS food halls, which are brick-and-mortar versions of the C3’s virtual food halls. These spaces will also provide additional kitchen space with which to fulfill delivery-only orders for C3 brands. 

The virtual food hall concept itself isn’t new, with companies like Deliveroo, Zuul, and others employing their own versions of it. Few have pursued expansion as aggressively as C3, however. The latter says it has opened 250+ digital brand locations in the U.S., will have 1,000 by year’s end and is on track for 12,000 kitchens globally by 2023.