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The Spoon

Daily news and analysis about the food tech revolution

off-premises

Al Fresco Vs. To Go

Outdoor dining: an opportunity to innovate or a yet-another huge expense for restaurants? The whole restaurant industry is pondering this question as we head into fall and start prepping for winter.

I wonder if restaurants might not be better off forgoing the whole debate and instead keeping their focus fixed on their off-premises strategies.

In many cities, restaurants have relied heavily on outdoor seating at a time when dining rooms remain shuttered or can legally only accommodate a fraction of their normal capacity. Some businesses have gotten very creative in their efforts. And that creativity will need to carry them through the next several months of cold, snow, and wintery mixes, when normally no customer would even consider dining al fresco. There’s no telling when dining rooms will be able to operate in full capacity again, and with reports of rising COVID-19 cases, there’s also no way to predict if we’ll have to shut them down completely again.

In response to the uncertainty, some cities are getting proactive about winterizing the outdoor dining experience. The idea is to reinvent the outdoor seating format to make it more comfortable for restaurants-goers to eat outside, despite the weather. This week, Washington D.C.’s Office of Nightlife and Culture announced a $4 million grant program to help restaurants cover the cost of tents, domes, heaters, furnishings and other operational expenses that specifically relate to outdoor dining. Applicants must submit a budget of their planned expenses before they can receive funds. All locally owned businesses may apply, with a few caveats. (Read the full requirements here.)

The grant program follows recent news of Chicago’s Winter Design Challenge, which was accepting ideas for outdoor dining formats and will announce the winners in a few days. Submissions so far have included tents, solar-powered pergolas, heat-reflecting walls, heated tables, and igloos, among other gems.

All of those ideas sound compelling (including the igloo). None are likely to be cheap, which gets to the real issue of winterizing outdoor dining. It’s less a question of whether these solutions would work as it is of how much more money a restaurant would have to pay in order to implement them? That’s to say nothing of the fact that restaurants must first obtain sidewalk cafe permits to even be allowed to serve outside, which is yet-another expense piled on the heaters, furniture, and other creations meant to protect diners from the weather.

I need hardly say that restaurants can ill afford these options at a time when many are struggling to simply keep the lights on. Off-premises formats are not ideal, but they are going to be a better long-term bet for most businesses. For one thing, the numbers around digital ordering, which powers off-premises orders, say as much: 50 percent of consumers are using restaurant mobile apps “more often or much more often” than they were before the pandemic, according to one recent survey. Another found that its restaurant customers “have seen a 782.7% increase in Online Order sales volume growth.”

At the same time, 60 percent of restaurant operators say that their operational costs are higher now than pre-pandemic, according to the National Restaurant Association, and that’s without heated tents or igloos.

As much as I hate to say it, forgoing the question of outdoor dining altogether and using any remaining funds and resources for improving to-go formats seems like the wiser decision. At least for now. Someone may come along with a truly disruptive idea that could reinvent outdoor dining without breaking the bank, but that’s a wish more than a reality right now.

A Fine-Dining Drive-Thru Extravaganza

Speaking of creative concepts. Reservations platform Resy this week unveiled plans for “The Resy Drive-Thru,” a fine-dining drive-thru event that takes place October 15 and 16 at the Hollywood Palladium in Los Angeles. Resy is doing the event in partnership with Amex, which acquired the platform last year.

Ten noted Los Angeles restaurants will host pop-ups outside the Palladium. Guests will be able to drive through this “whimsical labyrinth,” which effectively amounts to a 10-course tasting dinner on wheels. Chefs include Nancy Silverton, Curtis Stone, Nyesha Arrington, Konbi, Night + Market, and Jon & Vinny’s, among others.

From a Resy press release: 

“Each of the chefs will create a never-before-seen dish from their individual kitchens, to be served in sequence to the guests, who will remain in cars for the duration of the experience.”  

I thought the whole thing faintly ridiculous (and pretentious) at first, until I remembered how badly the pandemic has hit the full-service and fine-dining sectors. No, a fine-dining drive-thru won’t solve all the restaurant industry’s current woes. Yes, the event is partially a way for Resy to promote its business. But it’s also another example of the industry being forced to think of new and unusual ways to connect with customers. And right now, we need as many of those as we can get.

Following the event, Resy and American Express will make a donation to chef Jose Andres’ nonprofit World Central Kitchen.

Restaurant Tech ‘Round the Web

Virtual restaurant company Triver Eats and Urge Gastropub & Common House San Marcos opened their first Taco Box virtual franchise this week in San Diego. The concept offers family-style taco bars available takeout or delivery.

Donatos vs. Dominos: Pizza chain Donatos told NRN this week that it operates “a secret innovation hub” near its Ohio HQ, where it tests new foodservice innovations it hopes will eventually benefit the entire food industry. So Domino’s is clearly not the only pizza company-turned tech innovator in town.

Read this: an extensive breakdown of the many ways in which third-party delivery services are decimating the restaurant industry.

 

Google Continues Its Quiet March Into the Restaurant Biz With Panera Integration

Fast-casual chain Panera today announced a new integration with Google that lets customers order pickup and delivery meals directly via Google’s Search, Maps, and Assistant apps.

It’s a pretty simple setup. Search “Panera” and, if nearby locations of the chain are participating, you’ll see “order pickup” and “order delivery” buttons right beneath the map on the page. You then simply scroll through the menu selecting the items you want to purchase and checkout using your mobile wallet. Those using voice can ask Google Assistant to find the nearest Panera and place your order directly via the device.

It’s no surprise that the Google integration is available for off-premises-only orders. Curbside pickup and delivery remain two of the biggest sales channels for restaurants right now as dining rooms remain either shuttered or operating at reduced capacity. In response, those restaurant chains that have the money to do so are pouring more resources into speeding up the off-premises experience with more digital tools.

Google itself is no stranger to the restaurant business. In fact, the search giant has been something of a sleeping giant the last couple years when it comes to restaurants. In 2019, it added menu recognition to Google Lens, which lets you point a camera at a menu to see popular items, and integrated third-party delivery services directly into Search, Maps, and Assistant. It also partnered with third-party delivery integrator Olo to let restaurants offer delivery via Google.

And with the fate of the restaurant dining room still very uncertain, words like “speed” and “efficiency” are top of the list for many restaurant chains when it comes to their off-premises strategies these days. Panera is no exception. The chain has already inked hybrid delivery partnerships with many of the major services, and recently launched its own geofence-enabled curbside pickup program. 

The Google partnership is available for select Panera stores around the U.S. In all likelihood, it will also press forward the trend of major restaurant chains partnering with Google for off-premises orders.

Denny’s Off-Premises Sales Have Almost Doubled Thanks to the Pandemic

Denny’s announced on its Q2 earnings call this week that average weekly sales for off-premises orders have almost doubled since the start of the pandemic, from $4,000/week in February to $7,900/week in July.

Like other restaurants that have historically been known for their in-dining room experiences, Denny’s found itself having to quickly pivot when the pandemic hit. Speaking on the call, John C. Miller, CEO of the Spartanburg, S.C.-based chain, outlined the ways in which his company has adapted to the changes.

Those efforts included continued focus on Denny’s long-established Denny’s on Demand platform, which allows guests to place online orders for pickup and delivery. (The chain’s menu is available through most of the major third-party delivery services.) Like others, it also added curbside pickup and, once stay-at-home restrictions began to loosen, converted areas of its parking lots and sidewalks into outdoor seating.

The reinvention of the restaurant menu is another common theme to emerge from this pandemic. And by reinvention, I mean pared down selections that allow kitchens to work more efficiently. Denny’s was no exception here, having streamlined its own menu to focus on its most popular items, and offering family-style bundles, as well.

If Denny’s story of off-premises orders saving the day sounds familiar, that’s because it’s the state of most major restaurant chains the U.S. right now. McDonald’s said it made 50 operating changes to get “pandemic ready,” many of them around digital ordering and off-premises orders. Starbucks, which saw one of its toughest quarters so far, is completely overhauling some traditional sit-down locations and turning them into to-go-centric stores. 

Denny’s itself has permanently closed some of its sit-down locations due to “unforeseeable business circumstances prompted by COVID-19.”

“This quarter has proven to be one of the most difficult quarters this country and especially the full-service restaurant industry has ever seen,” Miller said on the call. And there’s no telling what Q3 will look like, since the state of the restaurant industry changes practically every day and full recovery is dependent in part on the trajectory of the pandemic.

Coffee Bean & Tea Leaf Is the Latest Chain to Embrace Direct Delivery

The Coffee Bean & Tea Leaf announced today via press release the launch of its newly redesigned mobile app. Among updates to the UX and improvements to the chain’s digital rewards program, the standout feature of the redesign is direct delivery.

As a quick refresher, direct delivery is when a chain can process orders made for delivery directly through its own digital properties (i.e., app and/or website), rather than having to go through a third-party service like DoorDash or Uber Eats. The big upside here is that restaurants pay a lower commission fee to third-party services because DoorDash Et al. are only handling the actual delivery of the food, not the order processing and technical logistics. The Coffee Bean & Tea Leaf currently delivers through Postmates to California and Arizona. 

The new app can process delivery orders directly. Other features, according to today’s press release, include an order-ahead menu for pickup orders at physical stores, the ability to scan, earn, and redeem points from the app’s home screen, and more customization capabilities for food and beverage items.

Coffee Bean & Tea Leaf’s app revamp comes at a time when digital properties are the main channel through which most restaurants are connecting with customers. A rise in COVID cases coupled with extremely uncertain economics has forced restaurants to rethink their approach to the digital realm. Keeping a customer (and their data) entrenched firmly in a chain’s own ecosystem is becoming increasingly important, and is one of the drivers behind this adoption of direct delivery. Coffee Bean & Tea Leaf is the latest brand to adopt this strategy, but plenty others already offer a similar approach to delivery. Panda Express recently announced the launch of its own delivery service. Outback Steakhouse and Wendy’s offered direct delivery long before the pandemic.

The move towards direct delivery doesn’t just mean potentially better margins for restaurants. It’s also fueling the growth of a specific area of restaurant tech, namely delivery integrators that sell out-of-the-box tech solutions to help restaurants bring some functions around delivery back in house.

Coffee Bean & Tea Leaf did not say in the press release if it has redesigned its app completely in-house or if it used technology from a third party like ShiftPixy. But it’s entrance into the direct delivery space is a sign that we’ll see similar moves from other regional chains in the near future as the dining room reopening remain in a constant state of flux.

Black Box Intelligence: Full-Service Restaurant Sales Slumping, Off-Premises Still on the Rise

As the number of COVID-19 cases spikes in multiple states, full-service restaurant recovery has slowed, according to new data from Black Box Intelligence in a story by Nation’s Restaurant News.

Black Box, a Dallas, TX-based restaurant analytics firm, said as COVID-19 cases rise and new restrictions set in place (see California), dine-in sales at restaurants have decreased. 

Part of the reason for that is the number of restaurants actually open for dine-in service. “After a steady climb since the end of April, the percentage of restaurants existing in the pre-COVID era that are now open for dine-in has plateaued around 87% for the last three weeks,”said Black Box.

This shouldn’t surprise too much. In the last few weeks, major chains like McDonald’s have halted their reopening plans for dining rooms and some states have either reduced capacity or ordered in-house service to stop altogether. 

Also not surprising: off-premises sales are increasing for quick-service and fast-casual restaurants. Black Box said that while off-premises sales had been slowing as restaurants reopened, “that trend has now been reversed in the last three weeks.”

This new data comes on the same week Yelp released its latest Economic Average Report, which found that 60 percent of businesses that have closed are now shuttered permanently. 

None of that makes for a very positive outlook for many independent restaurants used to relying on dine-in service that don’t have the dollars of a major chain to invest in off-premises. Starbucks or Chipotle, for example, may have the bucks to pivot their models to new, to-go-friendly formats that ensure sales. The future is much less certain for your favorite mom-and-pop joint, though.

Whether sales at full-service restaurants gain momentum again depends a lot on the trajectory of the pandemic. Judging from the latest numbers around the latter, dining room sales will likely stay down for some time to come.

Report: 66% of Consumers Are Not Ready for Restaurant Dining Rooms

Around 66 percent of consumers said they would not be willing to eat in a restaurant’s dining room immediately, according to new research from Washington State University’s Carson College of Business and covered by RestaurantDive. Another 47 percent said they planned to wait another three months before venturing out to eat. 

Of those surveyed for the report, 21 percent said they would eat in restaurant dining rooms “soon after” they reopen. “Over time, others will join this group of consumers — assuming that there is not a second wave of COVID-19 infections,” Dr. Dogan Gursoy, a professor of Hospitality Business Management at Washington State University, told the Bellingham Herald recently. About 50 percent of respondent said they would wait at least one to three months before eating out. 

The report also found that casual restaurants will be the first type of eating establishment customers will patronize. Think Outback Steakhouse or Applebee’s, or any of the hundreds of thousands of independent sit-down restaurants in the U.S. Well, at least those that have managed to keep the lights on during state-mandated dining room shutdowns. 

Consumers surveyed for the report said that sanitation efforts like masks for servers, hand sanitizer stations, and other visible efforts, like seeing staff clean tables and chairs, will be the most important safety precautions. 

As states reopen, rules, regulations, and practices vary from one to the next in terms of keeping customers safe. All states that have allowed dining rooms to reopen have set rules in place around reduced capacity for customers, with some at 50 percent and some as low as 25. Reservations are being encouraged, even for quick-service chains you’d have never in the past imagined having to book a table for, and many businesses are limiting the size of large parties to between 6 and 10 people. Meanwhile, the National Restaurant Association has thorough guidelines about updated cleaning and sanitizing procedures for restaurants as they start to invite customers back. 

Even so, consumers are wary when it comes to mingling with the outside world again, which means no matter how visible and effective a restaurant’s sanitization strategy is, it needs to also continue its off-premises strategy. Dr. Gursoy recommended having such a strategy in place for the next three to six months, since limited capacity in the dining room will make it next to impossible to turn a profit.

Granted, there’s no guarantee off-premises orders will make a restaurant money either, especially not when it comes to delivery. Add a possible second wave of coronavirus infections to the mix, and it looks like we’re still a long ways off from the restaurant industry having a true recovery. 

Starbucks Speeds Up Its Plans to Make Stores More To-Go Centric

As if it weren’t to-go-friendly enough, coffee behemoth Starbucks announced this week it is speeding up the reformatting of many of its stores to cater to more off-premises orders. Yes, the move is in response to the impact COVID-19 has had on the restaurant industry. It’s also part of Starbucks’ ongoing “Bridge to the Future” reopening plan, which CEO Kevin Johnson outlined in a letter yesterday.

A huge part of that plan is to accelerate the pace of development for what Starbucks calls its “third place” — that is, stores that cater heavily to on-the-go customers and off-premises orders. That includes drive-thru locations, Starbucks Pickup stores, and more recent formats, such as curbside pickup.

Starbucks, which claims 80 percent of its orders before the pandemic were already “on the go,” had already been moving in this direction. But as Johnson suggested in his letter this week, the pandemic has changed consumer behaviors and habits and made many folks more amenable to off-premises formats and less excited about sitting down in brick-and-mortar locations. In keeping with that, Starbucks’ plans to transition its store formats “over a three- to five-year period will now occur over the next 12 to 18 months.”

That will include building out more drive-thrus, creating more pickup locations in dense urban areas, and relocating low-performing stores (e.g., those in malls) to locations where they can have a drive thru. Johnson added in his letter that customers will “soon see more curbside pickup options as well as delivery – all formats optimized for the current crisis and a future of changing consumer expectations for the third place across the U.S.”

This emphasis on the so-called third space isn’t unique to Starbucks, although no other restaurant chain out there is pursuing it quite as aggressively. Probably because few restaurant brands have as much money or reach as Starbucks, who said this week it has now regained roughly 60 to 65 percent of prior year comparable U.S. store sales, according to Johnson.

Other brands may be able to incorporate some of these “third place” initiatives into their own operations. Buffalo Wild Wings just launched its first to-go-only concept store in Atlanta, GA, while Shake Shack unveiled its own off-premises concept earlier this month.

More interesting, though, are what smaller chains are up to. For instance, Austin, TX-based chain Torchy’s Tacos has been retrofitting existing drive-thru windows at its stores and creating on-the-fly curbside pickup at other locations. When we spoke back in April, the brand’s Chief Marketing Officer, Scott Hudler, said the company had “MacGyver’d” a bunch of technologies together to run these off-premises operations smoothly. So far it seems to be working. 

Few will be able to accomplish a total overhaul of their store formats a la Starbucks. But plucking one or two elements for the coffee giant’s playbook, at least when it comes to making to-go orders more efficient, could make all the difference as the entire restaurant industry moves closer to that third place.

Buffalo Wild Wings Launches a To-Go-Only Concept Store

Buffalo Wild Wings is set to unveil a new model for its sports bar/restaurant this week. The chain announced today it will open its first GO model on May 13 in Atlanta, GA, and is designed specifically for takeout and delivery orders. Depending on its success, the new store format could serve as a blueprint for other casual dining restaurants looking to transition to more off-premises-focused formats for the future.

If you’ve been to a Buffalo Wild Wings in the past, you’ll know the restaurant specializes in big dining rooms where customers pack in to watch sports games on the massive television sets that hang on pretty much every available bit of wall space there is. But thanks to the pandemic, packed sports bars are decidedly a thing of the past. Buffalo Wild Wings clearly knows this, as the chain said in the announcement it has been converting its 1,250-plus locations into versions of this to-go-only format for the last six weeks.  

The new 1,800 sq. ft. GO store in Atlanta will still have some TVs as well as limited seating where guests can wait for their orders without missing any of the game. But, as mentioned above, the store is dedicated to off-premises orders. Customers that order ahead will be able to pick up their food from heated lockers. The store will also feature a walk-up counter for placing orders. 

In a statement, Buffalo Wild Wings’ Chief Operating Officer John Bowie said that the company’s takeout and delivery business has grown over 140 percent over the last six weeks — more or less since shelter-in-place orders hit the U.S. What’s worked so far has largely informed the new GO store format.

Other popular casual dining chains will also have to incorporate more to-go-friendly formats in the coming months to meet the requirements for social distancing. Some already are. At the end of March, Outback Steakhouse announced the first U.S. unit of its fast-casual standalone concept Aussie Grill, which is basically a food court version of Outback. Shake Shack announced its own off-premises-only Shack Track stores earlier this month. Some chains, like IHOP and The Cheesecake Factory, were unrolling to-go-focused standalone concepts long before the pandemic.  

Sports bar or no, the days of crowded dining rooms are gone — possibly forever, at least for a couple of years. Pivots to off-premises-focused concepts, as Buffalo Wild Wings and others have done, will soon enough become the norm for those chains with the money to overhaul their operations. While that’s bad news for sports fans who like watching the game out, it’s good news for businesses looking for clues as to how to reimagine their restaurants in a post-pandemic era. 

Welcome to Burger King. Did You Have a Reservation?

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Things I never thought I’d live to see: a global pandemic shutting down the economy, the McDonald’s snuggie, and fast food restaurants requiring reservations to dine in. But with the restaurant biz on the brink of catastrophic meltdown and businesses slowly reopening under strict social distancing practices, we can expect lots of new versions of the on-premises experience over the next few months — and probably a total redefining of what it means to be a restaurant. 

News landed this week that Burger King is testing an app for dine-in reservations at three stores in Milan, Italy that are expected to fully reopen on June 1. Reuters reports that the app lets customers order food and book a table before ever setting foot in the restaurant, which will operate at less than half its pre-pandemic capacity. During peak hours — 12–2 p.m. and 7–9 p.m. — roughly one-third of those tables will be reserved for customers using the app.

The company says it expects the new booking system to keep its revenue stable in the face of reduced in-house seating. Previously, BK in Italy got about 70 percent of its revenues from dine-in customers. Social distancing won’t allow for that now, and BK said it hopes to make up some of those lost sales with drive-thru.

Reservations are one way to keep crowds at bay in QSRs. Another is to build social distancing features into the actual store layout and operations, as McDonald’s has done in The Netherlands. The mega-chain is trialing a few initiatives at one store in the city of Arnhem, including table service, where burgers are delivered on trolleys, designated waiting spots for the line, and hand sanitizing stations at the store’s entrance. There may also be a host behind a plexiglass-shielded station, directing people where to stand in line.

There’s no word yet on whether this McDonald’s prototype will make its way to the U.S., though I wouldn’t be surprised if some social distancing elements wind up in the chain’s ongoing Experience of the Future store remodels. Burger King, meanwhile, has said if the trial of its app is successful in Italy, it could be used in other countries. 

And while QSRs are busy adopting features we’re most used to seeing at casual dine-in joints, the latter continues to adjust its format to be more to-go friendly. This was already happening B.P. (before pandemic). Now, sit-down restaurants are accelerating the addition of things like drive-thru lanes and self-service kiosks to keep business moving and socially distant at the same time.

All this suggests some seriously blurring lines between the normally siloed types of restaurant experiences. Going to a McDonald’s might suddenly feel like a more formal affair, while family dinner night at The Melting Pot might feel strangely casual without the usual person-to-person formalities. Tech tools that automate the order and pay process, and redistribute the tasks of servers, food runners, and cashiers, will only further change the now-fluid definition of the restaurant. 

We’re only at the start of things when it comes to these new dining out formats. Expect many more iterations of the restaurant to surface in the coming weeks. 

Grubhub Responds to Commission Fee Caps.

Meanwhile, I’d be remiss if I didn’t mention the ongoing smackdown between third-party delivery services and governments mandating caps on the commission fees these tech companies charge restaurants. That was a hot topic this week as more cities joined the list of those either considering caps or already implementing them. 

Grubhub responded this week via its Q1 2020 earnings call. CEO Matt Maloney said these fee caps force the company to increase fees for consumers, lessen marketing spend, and are ultimately resulting in fewer orders for independent restaurants. “Our preliminary data shows that on average, our independent restaurants are seeing over 10% fewer orders since the fee cap and many of these orders have shifted to a large brand or QSR restaurants that were not impacted by the emergency ordinance,” he said.

Note that he said “orders” not “revenues.” There’s no question that being on a platform like Grubhub makes a restaurant more visible to more potential customers. That in turn would hopefully fuel more orders for, say, your local pizzeria instead of Papa John’s.

But with Grubhub et al. taking an up to 30 percent commission of each restaurant transaction, more orders does not translate into significantly more revenues for restaurants. See this gem of a receipt, courtesy of one independent business, as proof of how little restaurants make on third-party platforms. 

On the call, Maloney said one-size-fits-all model “will not work.” And yet one independent restaurant owner who testified at a public hearing last week about NYC fee caps suggested there was virtually no negotiability when it comes to commission fees, suggesting Grubhub runs its own one-size-fits-all model when it comes to food delivery.

The debate around commission fees has been building momentum for some time. The pandemic has effectively stripped any remaining gloss off the facade of third-party food delivery and put its unsavory insides on full display. That the sector will need to make a pivot of its own if it wants to stay relevant seems more and more a question of “when,” not “if.” 

Amazon Returns to Restaurant Delivery. Sort of

But let’s end the week on a less-infuriating note, like Amazon running a makeshift third-party delivery service for restaurants in its corporate buildings. Drivers that used to transport the Seattle tech giant’s corporate employees are now running food from restaurant to customer, according to Eater Seattle.

Deliveries are contactless, meaning the restaurant packages up the order and sets it in the delivery driver’s trunk. Said driver then leaves the food on the customer’s doorstep. 

Once upon a time, Amazon ran a restaurant delivery service, which it shuttered in June of 2019. At the time, Amazon cited competition from the likes of Grubhub, Uber Eats, and other third-party delivery services. The new endeavor doesn’t appear to be a play by the company to get back into that space. Rather, it seems to be a temporary lifeline for local restaurants, not to mention a way to keep drivers who once ran corporate employees around working now that those employees are under stay-at-home orders.

On that note, have a good weekend, and don’t forget to tip your drivers.

Jenn

Zuul Kitchens and Figure 8 Team Up for Ghost Kitchen Consulting Firm

Ghost kitchen provider Zuul Kitchens and delivery consulting firm Figure 8 Logistics announced via email today the launch of Zuul Studios. The initiative combines Zuul’s operational chops when it comes to ghost kitchens with Figure 8’s expertise around delivery strategy and logistics for restaurants. 

Zuul launched its first ghost kitchen facility in NYC last year for restaurants needing more space to fulfill off-premises orders. Like other major ghost kitchen networks, Zuul provides members with kitchen infrastructure, labor support, delivery fulfillment, and consultations about menu and POS integrations. 

Meanwhile, Figure 8 is a consulting firm for food delivery businesses that works with restaurant operators to analyze their existing strategies and improve upon them. Helping restaurants launch native delivery — that is, delivery orders that originate on the restaurant’s digital properties, not those of third parties — is a key offering Figure 8 pushes.

With Zuul Studios, it seems the two companies have put the best of their respective capabilities together to offer restaurants both the physical space to fulfill more delivery orders and the strategic know-how to build a stronger business around off-premises offerings. Zuul Studios says will help restaurants design, build, and launch ghost kitchen operations, configure an affordable tech stack for off-premises models, and launch virtual restaurant brands.

According to the press release, “Zuul Studios acts as a catalyst for helping restaurants and real estate owners remain competitive and develop sustainable food delivery business models. Combining Zuul’s expertise operating ghost kitchens and Figure 8’s experience in food delivery consulting, Zuul Studios is able to create innovative delivery strategies for their clients.”

Of course right now, the pandemic has turned most restaurants into ghost kitchens that can only serve delivery and takeout orders. And though restaurants are slowly reopening, by and large they won’t return to the pre-coronavirus days of packed dining rooms. For QSRs and fast-casual spots that survive, off-premises will be an important element of the overall restaurant business model of the future. 

Ages ago, Chowly’s Sterling Douglass mentioned that when it comes to ghost kitchens, it’s “a tough business, in some ways tougher than running a traditional restaurant.” That’s still true. A lot of the methodology, whether around operations or financials, that would apply to a dine-in restaurant isn’t relevant in a ghost kitchen setting. Plus, many restaurants aren’t even sure of how to determine whether they have the demand to even warrant a ghost kitchen operation. As businesses shift into this new and very off-premises-focused normal, many of these questions will need to be addressed. 

That makes a consulting firm for ghost kitchens a potentially attractive sell right now. Zuul Studios hasn’t publicly released numbers on how much they charge for consulting fees or kitchen space. To be honest, it’s probably out of reach for many small restaurants, though they probably won’t have the customer demand anyway. For bigger chains now looking to make delivery a bigger part of their business, teaming up with Zuul Studios might be a way to ensure smoother operations and a better off-premises strategy overall going forward. 

Despite a Pandemic, Chipotle’s Digital Business Keeps Growing

Chipotle just recorded its highest quarterly level ever for digital sales, according to the company’s Q1 2020 investor call yesterday. Company CEO Brian Niccol said digital sales grew 81 percent, to $372 million, representing 26.3 percent of sales during the first quarter.

Numbers include the month of March, when restaurants across the country started shutting down dining rooms in efforts to stem the spread of the novel coronavirus. The upheaval this has caused for the restaurant industry can’t be understated: everyone from small, independent restaurants to massive chains like The Cheesecake Factory have seen sales drop in some cases, and nosedive in others.

Why not Chipotle?

For one, the company has long been doubling down on its digital business, which powers off-premises orders for delivery, takeout, and drive-thru. Prior to the pandemic, Chipotle already operated a $1 billion-plus digital business. Over the last couple years, the company has forged partnerships with multiple delivery companies, revamped its rewards programs, introduced new store formats for to-go-friendly business models, and added more drive-thru lanes — “Chipotlanes” — to its locations. It helps that the chain has always offered the kinds of quick-service meals made with food that travels well.

On the call this week, Niccol suggested that in order to combat the sudden loss of dining room traffic, the company was able to accelerate its existing digital initiatives: “the majority of our restaurants are open for to-go orders, which is allowing us to successfully leverage the digital platform we put in place over the past two years.”  

He added that, “As people started to implement social distancing, we moved swiftly by driving further investments toward digital and delivery designed to reduce friction, while increasing convenient access.” 

Delivery remains the fastest-growing segment of Chipotle’s digital offerings. A partnership struck with Uber Eats in March no doubt helps, as it gives the chain access to even more potential diners. Niccol said digital order-ahead transactions were also up, “doubling from the levels seen prior to COVID.” Daily signups for the Chipotle rewards program have spiked “nearly fourfold.”

A recent consumer survey that Niccol referenced on the call said Chipotle customers would return “at a similar or higher rate than before” once the pandemic eases enough to let dining rooms reopen. Given that, Niccol said he expects the company to continue expanding unit volume, margins, and store base in the long term. 

If nothing else, Chipotle’s glowing reports of the last quarter illustrate why it’s so important now for restaurants to be running with a digital and off-premises strategy in place. For smaller businesses with shallower pockets, this of course throws a host of other issues on the table, paying third-party delivery commission fees being one of the ugliest. Smaller restaurants would also typically need to look to third-party platforms that can assist them with building and running the kind of mobile app that functions well, and also address the issue of customer data. 

Right now, most restaurants are just struggling to keep the lights on. For those that manage, pulling from Chipotle’s digital playbook is a move worth considering in the longer term. 

COVID-19 Summit: How a Global Pandemic Will Reinvent the Restaurant Menu

For the last few weeks — really since states began mandating dining room closures — one of the most commonly uttered pieces of advice for restaurants has been to rethink their menus. Between a global pandemic, a looming recession, and unprecedented disruption to daily life, it seems the one piece of restaurant operations that’s pretty much never changed suddenly needs a major overhaul.

That point was reiterated yesterday at The Spoon’s COVID-19 virtual summit. In particular, two big points stuck out: the menu needs to teach consumers how to eat healthier and it needs to be redesigned for the off-premises format.

Robert Egger, the founder of LA Kitchen, talked about the need to rethink the menu in times like these and focus on trimming portions down.

“The tyranny of the plate is something we need to reject,” he said on a panel with Spoon Publisher Mike Wolf and chef Mark Brand. He was talking specifically about the four-compartment meal that represents the standard American diet, where “the big piece of meat” is accompanied by vegetables and starches.

Egger’s suggestion is that restaurants and institutional foodservice businesses distance themselves from that format and look to menu models that create more integrated meals that are plant-forward and rely on alternative proteins for sustenance. Think of the grain bowls or falafel bowls served up by chains like Sweetgreen or Tender Greens, two companies Egger referenced in his talk. These, he says, can give customers a “robust, flavorful replacement” for the standard American diet that relies so heavily on animal proteins and gigantic portions.

Brand agreed. “If you continue to feed the beast, which is literal obesity and diabetes, you’re already part of the problem,” he said. “Why are you opening a restaurant to kill people?”

Instead of reacting to what they think customers want to see on the menu, restaurants should instead try to lead customers to choices that will be better for them. That could mean offering an alternative protein to chicken or not serving avocado toast in a region that doesn’t grow avocados. It definitely includes serving smaller portions and getting away from what Eggar called “the groaning plate.”

In many cases, it will also mean preparing food that can travel easily. With restaurant dining rooms closed for now, businesses are having to quickly pivot to off-premises models that serve delivery and takeout meals. One mantra I’ve heard often in my conversations over the last few weeks is “pare down your menu” to make it friendlier to the off-premises format.

Moving your menu to an off-premises setting is more than just a matter of uploading your existing one to Postmates et al. Restaurants have to factor in what food travels well and how they can offer variety without inducing decision paralysis, where a customer sees so many options they freeze up.  

At the event yesterday, Chowly’s Sterling Douglass said there was no magic number of menu items when it comes to offering choice without that decision paralysis. Rather, it’s a matter of simplifying the choices themselves. For example, an item called “Chicago-style Hot Dog” will be selected more than a hot dog that requires customers to take an extra step by selecting “Chicago-style” from a list of styles. 

And, of course, the food has to travel well from the restaurant to a customer’s house. That’s where Eggar’s grain bowls could prove themselves really valuable. A plate of chicken parmesan sliding around a box and getting more lukewarm with every minute doesn’t exactly make for an appetizing to-go order. A bowl of greens, quinoa, and other items that were meant to be mixed together makes a whole lot more sense when it comes to food that travels. My bet is that it’s cheaper to produce, too.

As restaurants continue building and modifying their models to fit in this strange new world or social distancing, paring the menu down to a few simpler, healthier options could prove the most beneficial thing for everyone’s health, not to mention their wallets.