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Daily news and analysis about the food tech revolution

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Week in Restaurants: Ghost Kitchens Might Be Hurting Small Businesses

Food delivery has a dark side. That we knew, but it does seem to be getting more airtime lately, with legislators and restaurants alike pushing back against some (okay, most) of the practices companies like DoorDash, Grubhub, and Uber Eats employ. We saw more of that this week when a San Francisco restaurant owner took Grubhub to task and urged others to join her. Judging from Grubhub’s latest earnings call, though, the service isn’t budging on certain practices.

Read on for more on those as well as other noteworthy restaurant news from around the web this week.

Ghost Kitchens Get an Oversight Hearing in NYC

Ghost kitchens are all the rage, but not everyone is thrilled with them. On Thursday, New York City council members held an oversight hearing to discuss whether ghost kitchens are a friend or hindrance to local business, and if they need to be regulated. “Are you a threat to our mom-and-pop restaurants, or should you be embraced as a partner that’s going to help them continue to flourish and grow?” councilmember Mark Gjonaj asked ghost kitchen operators at the hearing. (Gjonaj has also been vocal when it comes to third-party delivery in NYC.)

Kitchen United CEO Jim Collins was present, as was Zuul Kitchens cofounder Corey Mancione. While regulatory measures were not discussed, the event definitely puts a spotlight on the more controversial aspects of ghost kitchens. The main debate at last night’s hearing was whether ghost kitchens hurt small, independent restaurants by lessening overhead costs for bigger chains, who have the deep pockets to more easily embrace off-premises ordering.

Image via Unsplash.

TripAdvisor Unveils a Review Aggregator for Restaurant Operators

TripAdvisor launched a new tool on Wednesday that aggregates restaurant reviews from multiple websites so that owners and operators can view all of them from a single dashboard. Dubbed Review Hub, the subscription-based feature gathers reviews from Facebook, Google, Yelp, and “other major review sites” into one place. The aggregated view promises restaurant owners an easier, faster way to spot trends in feedback, see what’s working and what isn’t, and respond to customers more consistently. Subscriptions are available on both a monthly and annual basis.

Planet Hollywood Founder Launches a Virtual Restaurant Network

Robert Earl, known as the founder of Planet Hollywood, has launched a virtual restaurant concept called Wing Squad, which is available exclusively through third-party delivery platforms Grubhub, Uber Eats, DoorDash, and Postmates. The online menu is fairly streamlined, offering up just wings, sides, and a few desert options, all of which is cooked in ghost kitchens. The restaurant is currently available in 16 cities, including Los Angeles, San Diego, Detroit, and Las Vegas. Earl, whose Earl Enterprises owns chains like Buca di Beppo and Earl of Sandwich, said in a statement that Wing Squad is part of his Virtual Dining Concepts network. Other online-only restaurants are coming soon.

Grubhub Added 150,000 Non-Partnered Restaurants

Grubhub beat Wall Street estimates for Q4 2019 in what was a drastic change from the company’s dismal third-quarter results. Part of the third-party delivery service’s efforts in Q4 included doubling its restaurant inventory by adding 150,000 non-partnered restaurants — that is, restaurants that do not have contracts with the service and have not given permission to Grubhub to use their menus online. The controversial tactic is also used by Postmates and DoorDash. While Grubhub defends the strategy, saying it is meant to reverse the slowdown in daily orders, more and more restaurant owners are speaking out against the practice, turning the issue into the latest battle between restaurants and delivery services. Mark Gjonaj, over to you.  


Will the Restaurants Themselves Be Third-Party Delivery’s Biggest Opponent?

A while back, I wrote that third-party delivery services like DoorDash and Grubhub are engulfed in a massive fight now against all manner of opponents, from government regulators to investors worried about profitability to the force that is social media. But in the wake of fresh controversy, these delivery companies’ strongest opponents might actually be the restaurants themselves. 

Restaurants’ need to push back against delivery services was (once again) brought to light recently when San Francisco restaurant owner Pim Techamuanvivit, who owns Michelin-star restaurant Kin Khao, left the following tweet:

Techamuanvivit went on to explain how she discovered that Kin Khao was listed on Grubhub and its subsidiary brand, Seamless, despite the fact that the restaurant has never offered delivery or even takeout. After all, it is a Michelin-star joint.

An excellent article from Wired goes into the full details on how Kin Khao got mixed up with a virtual brand that operates out of one of Reef Technology’s ghost kitchens. (It was a technical error.) But the bigger point, as Wired underscores, is that Grubhub had listed Techamuanvivit’s restaurant in the first place, without her knowledge or consent, and that doing so is actually a common practice Grubhub started some months ago.

Essentially, Grubhub identifies non-partnered restaurants — that is, restaurants with which it doesn’t have a contract — that are popular in a city, creates a page using the establishment’s menu and basic information (pulled from public sources), and has orders sent directly to Grubhub. Grubhub then figures out how to actually get the order, which usually involves sending a driver to retrieve a pickup order. However, in the case of a high-end restaurant like Kin Khao, which only offers dine-in service, that tactic clearly doesn’t work.

Many restaurants have voiced concerns over this practice. Steven Sorensen, general manager and partner at The Farmhouse at Jessup Farm in Colorado, had a similar experience to Techamuanvivit’s, even though his restaurant had “routinely” declined to partner with Grubhub. “Our food is not designed for that app,” he told the Coloradoan. “It’s designed to be enjoyed immediately in the restaurant.” 

Another restaurant owner, this one from Ohio and going by the handle @ThaibyTY, tweeted that Grubhub had listed incorrect information about their business and incorrect menu items and prices:

Other services like Postmates and DoorDash follow a similar practice. The argument is that listing non-partnered restaurants widens third-party services base of restaurants and and is a way to drive more delivery orders to local restaurants.

But this practice of listing restaurants without their consent is just one of many griefs with delivery businesses are getting louder about.

Grubhub has for some time now also been dealing with a controversy around charging restaurants “bogus” phone order fees. The service announced a new phone-order system in January (which NYC regulators immediately labeled “insufficient”), but according to the NY Post, the service has yet to refund the majority of its restaurant partners on those erroneous fees.

That service, along with Uber Eats, was the center of an oversight hearing in Manhattan last year that called into question the commission fees delivery services extract from restaurants, usually 20 to 30 percent of each transaction. Caps have also been proposed for these commission fees.

DoorDash isn’t off the hook, either, given the controversy last year around how the service tips its workers, a point that’s the center of a lawsuit filed by DC Attorney General Karl Racine.

I wrote back in December that, for at least the first half of 2020, we should expect the already messy food delivery space to get even messier “get messier, raise more questions, and incite more regulatory battles as it progresses towards normalization.”

But maybe it shouldn’t normalize, at least not in its current form. Maybe this latest controversy should instead encourage more restaurants to vocalize their concerns around the unregulated, unsustainable beast third-party delivery is becoming, and in some cases, take further action in order to become a legitimate threat. Techamuanvivit, for her part, is promising legal action against Grubhub and has encouraged other restaurants to do the same.

Litigation is tricky, though. In-N-Out Burger famously tried to sue DoorDash in 2015 but the case was dismissed two months later in a confidential settlement. What the industry needs to see are examples of such lawsuits going to trial and their outcomes forcing changes in how business gets done between restaurants and third-party services. There are no guarantees that will happen.

There are arguments out there that if restaurants don’t like the way these third-party services operate, they shouldn’t use them. That angle might have held water two years ago. Now, off-premises orders are expected to drive most restaurant sales over the next decade, which means delivery is practically mandatory for many restaurant types. Unless you’re a restaurant like Kin Khao, where delivery doesn’t make sense for your brand, most restaurants have to contend with marketing costs, paying drivers, and managing the technical logistics of on-demand ordering. Often the cheapest way to do that is to use third-party services, which may handle the heavy lifting of delivery operations for the restaurants but which are also largely unregulated and as of now face little accountability for their business practices.

Whether Techamuanvivit’s Twitter takedown of Grubhub and possible forthcoming lawsuit can inspire others in more precarious positions (those restaurants who feel they need the partnerships with third-party services), remains a question.

Meanwhile, talk of consolidation among third parties continues, and worry from investors over profitably continues to threaten the model. Coupled with growing concern and louder voices from the restaurants themselves, it seems more likely that something big is going to give very soon. And it should. Otherwise, everyone loses in the long term.

Week in Restaurants: Delivery Gears Up for Super Bowl Sunday

In today’s delivery-crazed culture in which we live, Super Bowl Sunday has become as much about the food we’re ordering as it is about football or hotly anticipated TV ads. Makes sense, then, that QSRs, fast-casual joints, third-party delivery services, and many more are dabbling in delivery initiatives this coming Sunday. Check a couple of them below, as well as more restaurant-centric news from around the web this week.

Chipotle is running a TikTok campaign for Super Bowl Sunday.

In a clear bid to win over Generation Z, Chipotle has launched a campaign on TikTok called “TikTok Timeout.” For every commercial break after a timeout during the big game, some of the app’s most popular content creators will share their own Chipotle delivery ads set to Justin Bieber’s song “Yummy.” The campaign is searchable through the hashtag #TikTokTimeout.

Little Caesars spotlights delivery with DoorDash.

Known historically for its pickup service, Little Caesars finally joined the delivery craze not long ago when it announced a partnership with DoorDash to ship pizzas directly to customers’ doorsteps. The pizza chain is spotlighting that move with its first-ever Super Bowl ad, which could cost over $5 million. Clearly the chain is ready to invest aggressively in delivery. 

Postmates will have customers sign a waiver for wings.

Delivery service Postmates is running a couple Super Bowl-centric initiatives this week, according to an email sent to The Spoon. From January 30 to February 1, Postmates users can enter to win a wings pack themed around the web series “Hot Ones.” The goods, which include wings as well as “Hot Ones”-branded sauces, will be delivered to the winner on February 2 just before the game starts. The wings are apparently so hot users must sign a waiver upon delivery. 

In a separate campaign, Postmates users can also enter to win a year’s worth of pizza or wings. More details on the campaigns are here.

Yelp launches health score pop-up alerts for restaurants.

Yelp released a new feature this week in Chicago and Los Angeles that alerts users via pop-ups when a restaurant has health code violations. According to the Chicago Tribune, when a user scrolls through a restaurant’s review page, they will see a pop-up message alerting them if the establishment has a bad health score. Yelp already lists restaurants’ health scores on their pages; the added pop-up feature is a way to quickly call attention to businesses with the worst violations. The Chicago and Los Angeles release of the feature Yelp did in its hometown of San Francisco in 2015.


Week in Restaurants: More Virtual Eateries, 7-Year-Old Predictions That Came True

Another week another virtual restaurant, not to mention more free food via third-party delivery services running promo campaigns in the hopes of enticing more customers. And while said third-party services were busy debating the ethics of the on-demand delivery  model, here’s what else happened this week in the restaurant industry. 

Grubhub and Lettuce Entertain You Launch a Third Virtual Concept

Grubhub has been capitalizing on the virtual restaurant concept of late, rolling out delivery-only establishments in partnership with restaurant group Lettuce Entertain You. The two have already launched concepts around the Whole30 diet and lifestyle brand Bon Appétit. This week, the third-party delivery service announced a third virtual restaurant concept, this one inspired by Bharathi “Bonnie” Rao, a retired school teacher, curry leaf farmer and owner of Perryville Farms. Dubbed Padma’s Curry Leaf, the new “restaurant” will serve Indian-inspired lunch and dinner dishes exclusively through Grubhub.

2020 Predictions From 2013

Restaurant tech — both the adoption of it and the actual tools — has changed a lot in the last seven years, something highlighted this week in an article from Nation’s Restaurant News that looks back at a handful of 2013 predictions. How do they hold up in 2020? “Damn well, actually,” writes NRN contributor Ron Ruggles, who helped come up with the original outlook. AI in the drive-thru, digital ordering and payments, and ubiquitous outlets and USB ports for customers’ gadgets in restaurants all make appearances on the original 2013 list, and are all things we see in restaurants today. Read the full list here.

Red Lobster Joins an E-Catering Platform 

Red Lobster is the latest restaurant chain to capitalize on the growing market for catering. This week, the chain announced it has joined ezCater’s platform, an online marketplace through which restaurants can launch and manage corporate catering businesses. Chili’s, Panda Express, McAllister’s Deli, and many other major restaurant chains are already clients of the service. 

Postmates Is Giving Away $1M in Chicken

Postmates has run the numbers and, at least according to company data and a press release, determined that chicken is one of the top items ordered from the service during football games. With that in mind, the third-party delivery service is giving away $1 million worth of chicken this Sunday, January 19. Users can add a promo code (FREECHICKEN) to any chicken order to get in on the deal.

Reports of a Grubhub Sale Fuel Talk of Consolidation for Third-party Food Delivery

Grubhub has hired financial advisors and is “considering strategic options including a possible sale” according to a report published by the Wall Street Journal yesterday. 

The news comes on the heels of a rough few months for Grubhub that started when the third party delivery service reported lackluster Q3 results in October of 2019 and posted a fourth-quarter forecast well below Wall Street expectations. The company cited competition from other players like Uber Eats and DoorDash as one of the main reasons for its slowed growth. Shares nosedived more than 40 percent after the earnings call.

Grubhub went public about six years ago and was a pioneer in on-demand restaurant food delivery. But with the seemingly unstoppable demand for off-premises orders and the rise of competing companies trying to see this demand, Grubhub has seen its worth erode over time by billions of dollars.

Yesterday’s news sent the beleaguered company’s value up 12.5 percent, to about $54 per share according to CNBC. CNBC also noted that Uber shares “also spiked on the news, as investors bet consolidation in the crowded food-delivery industry would help the company.” Uber is no stranger to lackluster earnings calls: the company posted billions in losses on its most recent earnings call, and its Uber Eats delivery business is said to be hemorrhaging money. 

Grubhub merging with Uber Eats, Postmates, or DoorDash is an obvious possibility, and today’s news won’t be the last time we hear the word “consolidation” when it comes to discussing the third-party food delivery market. Consumer loyalty with any one service isn’t high, with users preferring to hop from one app to the next in search of the best deals and perks. Investors, however, aren’t as excited about the free delivery, rides to restaurants, and other perks third-party services are doling out like after-dinner mints. Of late, investors have instead been urging these companies to focus less on attracting customers and more on actual profitability — something no third-party delivery service has yet achieved.

A consolidation of the market could help. Across the Atlantic, it’s already happening with the Just Eat-Takeaway.com deal (which is still moving ahead despite recent counter offers). Amazon, too, could be a potential player when it comes to mergers and acquisitions, though much of its future involvement could depend on how its controversial investment in Deliveroo shakes out, at least in Europe.

In the U.S., Some experts in the field say there isn’t room for more than two companies in the third-party delivery space.

DoorDash will probably be one of those companies. The service has built a food delivery empire by adopting the “out-raise and out-subsidize” approach when it comes to the competition. It is one of the fastest-growing brands in the U.S., and despite controversies around its tipping policies, the service is currently valued at over $12 billion. It grabbed the top spot among major food delivery services away from Grubhub in 2019.

Grubhub joining forces with any one of its main competitors could boost margins for these companies — though they still have yet to prove to investors that the third-party delivery model can even become profitable.

DoorDash Partners With Chase to Give DashPass Subscriptions to Cardholders

Today DoorDash announced its first-ever partnership with a credit card company. The food delivery startup has teamed up with Chase to offer DashPass subscriptions to certain Chase cardholders, according to a press release from DoorDash.

The DashPass is DoorDash’s monthly subscription service that waives delivery fees for users on orders of $12 or more. Normally, the service costs $9.99/month.

The deal with Chase gives certain cardholders access to the DashPass for a free or discounted rate. Chase Sapphire Reserve and Preferred members can receive a complimentary DashPass subscription for up to one year (maximum two years). Chase Freedom, Freedom Unlimited, Freedom Student, and Slate cardholders can get a complimentary pass for three months, followed by a 50 percent discount price on the DashPass fee for nine months. 

Catherine Hogan, President of Chase Branded Cards, noted in a statement that Chase has seen spending on food delivery “more than double” in the last year, with cardholders ordering delivery at least once per month on average. The deal with DoorDash gives those cardholders access to more rewards for the money they spend on food.

For DoorDash, the deal is also a way to access a larger number of potential DashPass subscribers. DashPass launched in 2018 and has since grown to 1.5 million active users, with 1 in 3 DoorDash orders in top markets coming from DashPass users, according to the press release. Chase, however, is one of the largest credit card issues in the U.S., with 93 million cardholders overall — many of whom could in theory at least become DashPass holders long term.

So far, no other third-party delivery service has teamed up with a credit card company. However, if the DoorDash-Chase deal proves fruitful for both companies, we could see many more initiatives like this between other banks and delivery services. Both Uber Eats and Postmates offer monthly subscription plans that could potentially be used for similar deals, for example.

Eligible Chase cardholders have until December 31, 2021 to activate their DashPass service.

Uber and Postmates File a Lawsuit Claiming AB 5 Is Unconstitutional

With California’s Assembly Bill 5 (AB 5) law set to go into effect on January 1, Uber and Postmates have filed a complaint alleging that the new law, which will make it harder for gig economy companies to classify workers as independent contractors, violates constitutional rights.

The complaint, filed Monday in a U.S. District Court, argues that AB 5 violates multiple clauses in the U.S. and California constitutions, including equal protection. The suit points to the “laundry list” of occupations exempted from AB 5, which includes travel agents, grant writers, construction workers, and salespeople, and argues that AB 5 is designed to stifle gig-economy companies and their workers.

“[AB 5] irreparably harms network companies and app-based independent service providers by denying their constitutional rights to be treated the same as others to whom they are similarly situated,” the lawsuit says.

The complaint alleges that AB 5 also violates due process clauses of the Fourteenth Amendment, the Ninth Amendment, and the contracts clause of Article I. It asks for a preliminary injunction against AB 5 while the lawsuit is considered.

AB 5, which expands on a California Supreme Court decision from 2018 known as Dynamex, was signed into law in September by California governor Gavin Newsom. Under the new law, workers are considered employees of a business unless the employer can show they meet certain criteria that would classify them as independent contractors.

The new law would require gig-economy companies like Uber, Postmates, and other food delivery services to give drivers and couriers health insurance, paid time off, and other perks not typically only given to full-time employees.

It would also undercut the entire model on which these companies are built — a model many already call unsustainable for the long term. By some accounts, third-party services will make up 70 percent of all restaurant delivery orders by 2022. But these companies have yet to turn a profit. If AB 5 causes a ripple effect across other states who would sign similar laws into place, it could further erode the possibility of profitability ever happening.

DoorDash, Uber, and Lyft have pledged $90 million to get a 2020 ballot measure passed that would counteract AB 5.

Food Delivery Got Really, Really Messy in 2019. That’s a Good Thing

Roughly this time last year, talk around the future of restaurant food delivery screamed promise and progress. Funding and acquisitions abounded. Valuations skyrocketed, and by mid-year, third-party food delivery apps were projected to have 44 million U.S. users by 2020. 

That number hasn’t changed, but a heck of a lot else did, and somewhere along the line, the rose-tinted glasses through which the industry viewed food delivery came off and reality set in. In case you hadn’t heard, reality is a messy business. At the close of 2019, food delivery is even messier, mired in regulatory battles, bad press, and questions around profitability that grow louder each week.

None of this means third-party food delivery is dying. All of it plays a crucial role in moving the discussion forward about food delivery — what it is now and what it should become going into 2020.

Before we go forward, here’s a quick look back:

Third-party Delivery Opponents Got Stronger and Fought Harder

Largely speaking, there weren’t many detractors — at least not vocal ones — of third-party delivery services like DoorDash, Grubhub, etc. at the start of 2019. While some chains, notably Jimmy John’s, opted out of third-party delivery, we saw more deals struck in the first half the year than questions raised. 

DoorDash serves as a good example of the sentiment around third-party delivery in the first half the year. DoorDash became the first delivery company to offer service in all 50 U.S. states. It also struck lucrative deals with high-profile restaurant chains left and right. And there was its valuation, which kept ballooning with each new funding round, eventually eclipsing $12 billion. 

The other major services also had their fair share of lucrative deals and high valuations. Uber Eats nabbed a “preferred” delivery partnership with Starbucks. Postmates raised millions ahead of its IPO (more on that in a minute). Grubhub, too, made a slew of deals with high-profile restaurant chains, including Taco Bell and Dunkin’.

Then things started to get tense. In June, an oversight hearing held in NYC called into question the high fees Grubhub and other companies charge restaurants for use of their services.

From there followed one controversy after another: antitrust investigations, ethically questionable tipping policies, plummeting stock. More recently, California passed Assembly Bill 5, which reclassifies gig workers as employees and undercuts the entire model on which third-party delivery is built. DoorDash and Uber, among others, have vowed to fight back in 2020.

We can certainly expect that battle to take place. But if events in 2019 taught us anything, it’s that no matter the front it chooses to fight, third-party delivery companies will find more than one opponent lying in wait. 

IPO Fever Cooled Down

Of the big four third-party food delivery companies, Uber, Postmates, and DoorDash were all said to be moving towards IPOs in 2019. (Grubhub IPO’d back in 2014.) However, Uber was the only one of them to actually follow through and go public — then subsequently racked up billions in financial losses. The company’s most recent earnings call saw some improvement: roughly $1 billion in losses in Q3 versus $5.2 billion in Q2. But it’s still $1 billion in losses.

Postmates, meanwhile, confidentially filed for an IPO in February but was at last check in talks to find a potential buyer after laying off staff and shuttering its Mexico City operations. DoorDash may be pursuing an IPO for 2020. Or it may be pursuing a direct listing, largely to avoid some of the scrutiny that comes with debuting on the public market. After all, profitability remains very much a question mark for third-party delivery companies, and IPOs in general fizzled this year, leaving even more questions about them for next year.

Hybrid Delivery Heated Up

Earlier this year, I wrote that “there are now more ways for restaurants to do delivery than the two extremes of pay for your own fleet or sign up with a third-party service.”

That middle ground gained, eh, ground in 2019 thanks to the rise of hybrid delivery strategies, where delivery orders originate through the restaurant’s own app and third-party services are used only for last-mile fulfillment. Some chains, notably Panera, are using an inverse version of this strategy, sending orders through third-party apps but handling the last mile themselves. 

There are even variations on those variations, but they all hint at the same thing for the future: the delivery stack — tech, operations, the all-important customer data — won’t rest in the hands of one but many for some time yet.

Progress, as George Orwell once wrote, is “slow and invariably disappointing.” The market for third-party delivery may be mired in confusion and controversy (of its own making in some cases), but, as I said before, that doesn’t spell the end for the model. In fact, third-party delivery is still expected to account for 70 percent of delivery orders in 2022.

In the near future, though, expect this area of the food industry to get messier, raise more questions, and incite more regulatory battles as it progresses towards normalization.

Newsletter: What Comes Next for Ghost Kitchens? Plus, Third-party Delivery and At-home Agtech

This is the web version of our weekly newsletter. Sign up for it and get all the best food tech news delivered directly to your inbox each week!

I’m not gonna lie: putting together our market map on ghost kitchens was hard. The concept as we know it is relatively new, and the lines between the different categories of ghost kitchen might be easy enough to draw in a graphic but are never as solid in real life. For example, CloudKitchens provides kitchen space but it’s also a network of virtual restaurants. Starbucks runs its own kitchens but relies on Alibaba’s Heme supermarkets to provide the space. Grubhub, Uber Eats, and DoorDash deliver food but also operate in other areas of the stack.

That overlap, though, is a big part of what makes this area of the restaurant industry such an interesting one to watch. Not only is the 2019 ghost kitchen redefining the restaurant experience as we know it, it’s also redefining the way restaurants operate, the technology they use to do that, and even what their menus offer in any given area. Fat Brands, for example, uses Fatburger locations on the West Coast to also fulfill delivery-only orders for sister brands that would normally only be available to customers in the East. 

As we head into the next year, we can expect the overlap of companies and categories to increase as more multi-unit chains try their hand at ghost kitchens, more kitchen infrastructure providers try out their own virtual restaurants, and literal mobility (kitchens on wheels) becomes more commonplace. 

Head over to The Spoon for more predictions on what comes next for ghost kitchens (RIP POS?) and to download the map. And since this is such a nascent market that changes weekly, expect more iterations of this map to hit your inbox in the future.

Third-party delivery is staying put. Sort of.
It’s no secret that consumer appetite for delivery is driving the growth of off-premises orders. And while they may be controversial, third-party services like DoorDash and Postmates are a big part of this growth.

The biggest part, by some accounts. This week, CBRE Group noted in a new report that 70 percent of delivery orders will come from third parties by 2022. That’s a no-brainer. These services provide the tech infrastructure, logistics, and actual drivers that are often too expensive for restaurants to operate on their own. Third-party delivery may be expensive for restaurants and paddling through a sea of bad press lately, but it is in many ways necessary for businesses who want (need, actually) to offer off-premises ordering for customers. 

Like ghost kitchens, this is a messy, fast-changing market whose model will continue to evolve as restaurants adopt hybrid strategies and new laws are passed regulating how these companies do business.  

At-home vertical farms: Big convenience or big expense?
If you still prefer the old-fashioned method of actually cooking food for yourself, Miele’s latest news will be of some interest. As my colleague Chris Albrecht reported this week, the German appliance-maker known for everything from washing machines to coffee systems has acquired Agrilution, a Munich, Germany-based agtech startup known for its Plantcube indoor vertical farm. 

As Chris notes, the Plantcube looks like one of those at-home wine fridges, and like any vertical farm uses software to regulate temperature, climate, water levels, and nutrient delivery to crops. The system grows a variety of leafy greens and fits right inside your existing kitchen infrastructure. 

Question is, Do people want vertical farms built into their kitchens?

Potentially.

No, setting up a grow system in your home is not as convenient as buying a bag of kale from the store. For those so inclined, though, an at-home vertical farm like Agrilution’s means being able to pick fresh, better tasting ones right out of their own cabinetry. Those living in dense urban areas, where the fire escape is the closest thing to outdoor space, could have an actual at-home garden.

First, though, we have to get over the cost hurdle. Right now, price points of various at-home vertical farming systems go for anywhere between roughly $500 (Ponix Systems) and $3,000-plus (Miele). What we don’t have is abundant data on how much these farms cost consumers in terms of electricity, water, or repairs if the system breaks down. There is also the issue of space. Agrilution’s Plantcube may fit nicely into the under-counter space of a single-family home in Nashville. Your average New York apartment, on the other hand, would be hard-pressed to accommodate one.

Still, it’s a great sign that a major appliance-maker like Miele is showing interest in getting cabinet-to-table greens to more homes in the future.

Until next time,

Jenn

Postmates’ Serve Robot Spotted (and Filmed) Making Deliveries in LA

From the looks of it, Postmates’ Serve robot is ready to roll into action, almost exactly a year after the delivery service unveiled it.

First, Serve made an appearance on The Ellen Show last week in a staged bit about delivering chips and guacamole. And almost immediately after that, Chris Reilly posted an Instagram video of Serve out in the wild making a delivery in “#Hollywood” by the “#CNNBuilding.”

It’s not exactly thrilling footage, but it does show that Serve is real and making rounds around La La Land.

https://www.instagram.com/p/B5tJXUxlN6b

In addition to being cute and cool, Serve’s apparent public debut party, as it were, is a bright spot for what has otherwise been a bummer of back half of 2019 for Postmates. The company delayed its IPO following the WeWork debacle and a general souring on third-party delivery services that have yet to prove their profitability. Then last week, Postmates shut down its Mexico City office and laid off dozens of employees across multiple offices in the U.S.

But Postmates continues to ride the robot delivery wave. Serve is just one of the delivery rover robots that have rolled into the market this year. Starship is being used by a number of colleges now, Refraction AI is proving its hardiness by making deliveries in snow covered streets, and Kiwi just announced a reinvention of its own robot that will make the device more rugged and give it the ability to retrieve items from vending machines.

Los Angeles is an interesting test case for Postmates’ delivery robots. It’s very spread out, which typically works against rover bots with their slow speed and smaller delivery range. However, Los Angeles has nice weather year round and is pretty flat (making it easier for the robot to get around), plus it has a ton of celebrities who order via Postmates.

Postmates seems to be focusing Serve’s, errr, service in California right now. The company announced it August that it was given a permit for sidewalk robotics operations from the City of San Francisco.

Report: 70 Percent of Delivery Orders in 2022 Will Come From Third-party Services Like DoorDash

Restaurant food delivery from third-party services like DoorDash and Grubhub will account for 70 percent of all delivery orders by 2022, according to a new report from CBRE Group.

It’s a surprising prediction — said no one ever. CBRE’s new report, the third in the firm’s U.S. Food in Demand series, is one of many, many pieces of research confirming the central role third-party food delivery services now play in the restaurant industry. Off-premises ordering is expected to be the major driver of restaurant sales over the next decade. An undeniable part of that growth is delivery, which according to the CBRE report reached $34 billion in sales last year, up 13 percent from 2017.

DoorDash, Grubhub, and other third-party services remain an important — and obvious — element of this growth, and for good reasons. As CBRE points out, there are many elements of the delivery stack restaurants need to meet today’s demand, whether it’s technical logistics to process orders, marketing services to widen a brand’s audience, or couriers and drivers that place the actual food in customers’ hands. “Restaurants often lack the infrastructure for direct delivery and the customer reach that third-party delivery operators like Grubhub, Seamless, Eat24 and DoorDash provide,” the report notes.

However, these services are also expensive for restaurants to use. Controversial commission fees eat into restaurants’ overall profit margins, which are already thin. The third-party delivery model itself is also currently under fire from multiple angles — how it treats workers, what it does to the environment, and the increasingly important question of profitability. 

None of those issues mean third-party delivery services are going away any time soon. Instead, the model will evolve, so that by 2022 it will look substantially different from the one we use today.

Already, we are seeing clues as to what direction that shift will take. A growing number of restaurants are now adopting hybrid strategies, where customers place orders and pay for them through the restaurant’s own mobile app or website, which handles the technical logistics around processing and fulfilling that order. Third-party delivery companies, meanwhile, supply the last-mile logistics, including drivers and couriers. Some restaurants, notably Panera, work off an inverse version of this, with customers placing orders via the third party’s app and the restaurant handling that last mile itself. 

Both approaches have pluses and minuses. The general consensus is that the hybrid concept will continue to gain popularity over the next year, even as it too changes and evolves alongside the way third parties process, fulfill, and deliver our restaurant orders.

DoorDash, Impossible Foods Among the Fastest Growing Brands in the U.S. in 2019

Food tech companies have a major presence among the fastest growing brands in the U.S. in 2019, according to a new report from Morning Consult Brand Intelligence that ranks brands according to purchasing consideration among consumers. 

DoorDash took the number one spot for fastest growing brand in the U.S. this year, while Postmates clocked in at number three and Impossible at four. And those are just the top five. Among the top 20 fastest growing companies in the report, food and beverage companies nabbed 11 of the spots.  

According to the report, Morning Consult determines its rankings by which brands “have seen the biggest rise in purchasing consideration this year, how that is playing out across generations and which brands have seen a lift in brand identification, even if it didn’t translate to an increase in purchasing.”

Part of the reason for DoorDash’s top spot is no doubt its expansion strategy. Unlike Postmates or Grubhub and Uber Eats (the latter two also landed in the top 20), DoorDash has focused heavily on not just major metropolitan areas but also suburban areas across the country. It was the first third-party delivery service to become available in all 50 U.S. states and has over the last few years struck deals with major restaurant chains that cater to those areas. Think Chili’s, Outback Steakhouse, and Chick-fil-A. This is the second year in a row DoorDash — which to date has raised over $2 billion — has been ranked fastest growing brand in the U.S. for Morning Consult’s report.

The company was also, among food delivery companies in the report, the only brand to consistently rank at the top across generations, from Generation Z all the way up to Baby Boomers.

Even with high appeal among consumers, DoorDash faces multiple uphill battles going into 2020. The company is still getting backlash over its much-maligned former tipping policy, including recent charges brought by D.C. Attorney General Karl Racine. DoorDash is also one of a few companies that have pledged to fight California Assembly Bill 5, which reclassifies gig workers and in doing so turns the entire model by which third-party delivery services operate on its head — and further erodes the idea of these companies every becoming profitable. Appealing to consumers is a boost for DoorDash in 2019, but it’s appealing to investors that will make or break delivery companies in 2020.