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Daily news and analysis about the food tech revolution

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Fight Club: Mischief. Mayhem. Third-Party Delivery Fee Caps.

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If you like a good fight, the one around restaurant commission fee caps is worth watching. I spent the better part of three-plus hours the other day tuned into the New York City Council’s Committee on Consumer Affairs and Business Licensing public hearing. One hotly debated topic was around capping commission fees third-party delivery services like Grubhub and Uber Eats charge restaurants.

I’d love to say everything got resolved and NYC will be placing caps on third-party service commission fees for all time. The reality is that this fight was here long before the pandemic and will be around long after it leaves.

I’m sure you’ve heard of the brouhaha brewing around the issue. Restaurant industry advocates and businesses alike had flagged those third-party delivery commission fees — which can go as high as 30 percent per transaction — as prohibitively expensive for restaurants. With dining rooms closed now, most restaurants are left with the options of either shutting down completely or relying on a third-party service like Grubhub to help them execute on delivery orders.

One restauranteur who testified at this week’s hearing explained that for independent restaurants, the fees are more or less non-negotiable. (Side note: he also expressed fear of retaliation from delivery companies for his speaking at the hearing.) Jessica Lappin, a former NYC council member and the President of the Alliance for Downtown New York, said that even if restaurants are doing takeout and delivery right now, they are doing it at a loss. Council member Mark Gjonaj suggested that due to the commission fees, each transaction a restaurant makes is “yielding a net loss.”

Perhaps the most telling moment came when a Grubhub representative took to the mic to “express Grubhub’s strong opposition” to fee caps. You can watch the entire (and rather circular) debate that broke out here, but it more or less boiled down to the idea that if NYC and other cities successfully impose fee caps, Grubhub et al. will have to change their business model.

Therein lies the marrow of the matter in terms of why third-party delivery companies oppose commission fee caps and other changes (e.g., reclassifying workers as employees). Government oversight of those fees cost these companies more money, and further erode their chances of ever becoming profitable. An unprofitable model won’t satisfy investors, and third-party delivery as we know it would then be on the rocks.

Sky-high delivery fees and a faltering economy won’t help the model in terms of its attraction to the average end consumer. And they certainly won’t improve the net-negative returns restaurants are making at the moment.

In some cities, Big Government has already stepped in. San Francisco, Seattle, and Chicago have all introduced fee caps that will last at least as long as dining rooms remain closed. Los Angeles is considering a similar measure. NYC’s proposed 10 percent cap was actually introduced months before the novel coronavirus hit the U.S. in full force. 

As emergency measures, these fee caps feel necessary right now if independent restaurants are to have any kind of shot at keeping the lights on. Longer term, everyone (restaurants, advocates, government, tech companies, and consumers) will have a responsibility to address how much damage the delivery model is actually doing. It seems a global pandemic that’s taking lives and shuttering businesses isn’t enough to make some of these services stop siphoning the livelihood from restaurants. Are those really the businesses we want calling the shots in the restaurant industry in the future?

McDonald’s limited menu is good news for the drive-thru lane.

Among other things, like drive-thru lanes generating more sales, McDonald’s spent quite a bit of its earnings call this week talking about its menu. Since shelter-in-place orders forced the chain to close down dining rooms and rely on off-premises orders, McDonald’s has been offering a limited menu. For example, it doesn’t offer breakfast for the time being.

Cuts like that were made to help the mega-chain manage the operational difficulties restaurants face right now. On this week’s call, CEO Chris Kempczinski suggested customers should not expect every McDonald’s in the nation to immediately revert back to its pre-pandemic menu.

Smaller menus for the long term could work in McDonald’s favor, though. When we looked at the QSR Drive-Thru Study last year, one of the standout points was the steady increase in drive-thru wait times over the last couple decades. Growing right alongside those wait times has been the number of items QSRs offer on their menus.

These complex menus take longer to read, present customers with the tyranny of too many choices, and up the risk of an order being inaccurate when it is ready. None of those things make for speedy service, and with more customers likely going to opt for the drive-thru lane over the dining room now, finding ways to fulfill orders faster is crucial for QSRs.

No one is suggesting we revert back to my favorite picture of all time, this McDonald’s menu from the ’80s. But as restaurants pare down menus and plan to work with reduced capacity and limited staff once they reopen, the bloated mess of choices QSR’s previously offered may become a thing of the past.

Sweetgreen just added dinner options.

One company not paring down its menu is Sweetgreen. On LinkedIn this week, cofounder and Chief Brand Officer Nathaniel Ru unveiled the chain’s new dinner menu, called Plates.

For the last four weeks, the tech-forward fast-casual chain — most widely known for its highly Instagrammable salads — has been testing a Sweetgreen dinner menu. Via a post on Medium, the company said the process has been about “operationalizing an entirely novel concept (normally a year-long process) in just 30 socially distant days.”

That 30-day process looks, from the photos, to have turned up a menu full of plant-centric dishes and lots of legumes, grains, and sauces. If you want more details around how the team put this new concept together, the full Medium post is definitely worth a read.

Sweetgreen had been planning the dinner concept for some time in the hopes of launching it next year. But, as the Medium post notes, “given the current state of uncertainty, the need for warm, familial, and home-cooked food has never felt more important.” 

They’re right on the money. Family-style meals and comfort food are two major trends right now for restaurants as people shelter in place. I’ve never considered couscous and warm leafy greens comfort food, but I’m from rural(ish) Tennessee so what do I know? Plenty of folks are health conscious these days, and with many consumers likely to be wary for some time about going out to eat, a dinner concept is a smart play for Sweetgreen. 

Now if we could just get it delivered without those pesky commission fees. 

Report: Sweetgreen Lays Off 10% of HQ Staff

It’s confirmed: The COVID-19 pandemic has forced tech-forward fresh food restaurant chain Sweetgreen to reduce headcount.

According to a report on LA-centric new site dot.LA, the company is laying off approximately 10% of its 350 person HQ staff.

The Spoon was the first to report of potential layoffs a couple of weeks ago when I got wind of some reductions-in-force whispers and had confirmed the departure of the company’s head of automation Derek Pietz and director of engineering Ken Cottle. With this news, Dot.LA was able to confirm that the layoffs were much broader than just the tech team and started in late March. From the report:

“Dozens of terminated workers were read a pre-written script at the end of last month and were then logged-out of their Slack and email accounts. “They blindsided us and they weren’t transparent,” said a former employee, who declined to be identified because Sweetgreen made him sign a nondisclosure agreement. “It was disappointing to have five years of the company end like that.”

It’s too soon to tell what things will look like on the other side of the pandemic. Sweetgreen, like many restaurants, has pivoted to help where they can, but also has had to halt parts of their normal operations. The company, which raised $150 million in fresh funding last fall, is likely paring back to lower its cash burn rate.

We’ll continue to keep an eye on this story as it unfolds.

Sweetgreen Looks to Be Shedding Tech Execs

It appears Sweetgreen, the fresh food darling that has at times called itself a tech company, has recently shed some of its tech execs.

The Spoon has learned that two of Sweetgreen’s senior technology team are no longer with company as of this week. The employees are Derek Pietz, the company’s former head of automation, and Ken Cottle, who had the title Director of Engineering.

It was almost a year ago that The Spoon wrote about Pietz getting hired at Sweetgreen as the company’s first head of automation. Pietz had come over from Lab2Fab, the division responsible for building out robotic restaurant proof of concepts for food service equipment giant Middleby.

Pietz confirmed to me via Linkedin message he is no longer with the company, but would not comment further. Cottle updated his Linkedin in recent days and indicated he is looking for a new position.

While we don’t yet have a ton of information on why Pietz and Cottle are no longer with Sweetgreen, their departures come at a time when both restaurants and restaurant tech companies are scaling back both initiatives and headcount. This week alone, POS company Toast cut 50 percent, Yelp laid off 1,000 employees and furloughed even more, and mega-chain McDonald’s announced it is slowing development of its tech-centric Experience of the Future stores. All of these moves are in response to COVID-19’s impact on the economy and the current fallout the restaurant industry is experiencing because of mandatory dining room closures.

At this point it’s too soon to tell if these departures are a sign of a McDonalds-like pullback on future forward initiatives or part of a bigger reduction in headcount due to COVID-19. Still, two senior technology execs leaving only a year or so after their arrival makes one wonder if the company has had a change of heart (COVID-forced or not).

We’ve reached out to Sweetgreen for comment and will update the story when we hear back.

Sweetgreen, Taco Bell Using Their Off-Premises Muscle to Feed Hospital Workers Fighting COVID-19

Sweetgreen today announced the launch of its Sweetgreen Impact Outpost Fund, a partnership with José Andrés’ World Kitchen Center (WCK) that aims to get more food to front-line medical workers in hospitals, according to a company press release. 

The new fund comes just on the heels of Sweetgreen’s Impact Outpost program, which launched two weeks ago to get free Sweetgreen meals to hospital workers and medical personnel. Outpost is Sweetgreen’s delivery-catering hybrid service that operates portable drop-off sites for deliveries. Up to now, Outpost has been seen more commonly in corporate offices.

The Impact Outpost program places these drop-off stations in hospitals. After launching the program, Sweetgreen received a ton of feedback from both large corporations and individual customers wanting to support it through donations. The new partnership with Andrés’ non-profit is a way to provide this as well as increase the number of hospitals receiving meals from Sweetgreen.

From the press release:

“Through the fund, corporations, sponsors and customers are able to join sweetgreen and WCK’s efforts to feed more front-line medical personnel working in hospitals, while also helping fund new Outposts in relief sites, including schools, senior centers and in vulnerable and high-risk communities.”

You can donate directly to on the fund’s website, and even make a donation in memory or honor of someone. The site notes that this fund will remain open “for as long as needed,” and that right now, the goal is to deliver at least 100,000 meals to workers. 

Sweetgreen is one of several notable restaurant brands now using their established off-premises platforms to deliver food to frontline workers. Also this week, Just Salad announced a partnership with Mount Sinai to deliver 10,000 meals per week across seven hospitals in NYC boroughs Manhattan, Brooklyn, and Queens.

Taco Bell has turned its Taco Trucks, which are food truck versions of the QSR, into mobile commissary kitchens that bring food to frontline workers. “While most of our restaurants are operating only through the drive-thru, this leaves some truck and ambulance drivers unable to quickly order from us,” company CEO Mark King said in a letter. He added that the chain is working with its franchisees to make this service available “where possible.”

Finally, Chipotle, another QSR with a booming digital business, is giving away free burrito boxes to healthcare facilities. The boxes come with 25–50 burritos, depending on how many are needed, and will be delivered between April 6 and April 10. DoorDash, with whom Chipotle has an ongoing delivery partnership, will handle the last-mile fulfillment of the orders.

There are bound to be plenty more restaurant brands using their existing digital and delivery strategies to more easily and efficiently get meals to workers while the pandemic lasts. And judging from the latest news, that could be a while. Stay tuned.

The Food Tech Show: How Coronavirus is Accelerating Certain Food Tech Sectors

It’s a scary and confusing time, so I hope getting together with some familiar food tech friends will give you a 30 or so minute respite from the madness.

One warning in advance though: we do talk a little coronavirus, but we do look at the possible bright side for some of those sectors in the food tech space where the outbreak could accelerate adoption.

Other stories we discuss in today’s pod include:

As always, you can find The Food Tech Show on Apple Podcasts, Spotify or wherever you get your pods. You can also download it direct to your device or just click play below.

Sweetgreen Rolls Out Truly Compostable Bowls — Will Other Chains Follow Suit?

If you’ve grabbed lunch at a Sweetgreen before, you likely felt pretty virtuous as you tossed your takeout container, knowing that it’s “100 percent compostable.”

But the truth about those takeaway bowls is a lot less pleasant. According to The Counter (formerly The New Food Economy), all molded fiber bowls contain PFAS; a nasty class of chemicals that do not naturally biodegrade. That means that the compostable food containers you’ve been throwing out are not, in fact, compostable. In fact, they contain hazardous, unhealthy components that never break down.

However, Sweetgreen just took a big step to get rid of PFAS and make their to-go containers truly compostable. The fast-casual chain partnered with Footprint, a company fighting single-use plastic packaging, to develop a new line of biodegradable bowls that are completely devoid of PFAS (h/t FastCompany). Sweetgreen launched the bowls first in San Francisco earlier this year, since new legislation requires that as of January 1, 2020, all single-use food service ware (containers, cups, etc) in SF must be PFAS-free.

The containers are made of fibers from bagasse, an agricultural waste product, which is blended, heated, and covered with a natural coating so it won’t leak. The lids for Sweetgreen’s to-go containers are currently plastic, but the company plans to start selling lids made of the same compostable material soon. Sweetgreen has plans to roll out the compostable bowls at all of its stores nationwide in 2020.

Sweetgreen is one of several restaurant chains with high numbers of to-go orders that is increasing its sustainability efforts. Its competitor, Just Salad, recently announced plans to send zero waste to landfills by 2022. Coffee chain Blue Bottle aims to divert at least 90 percent of its waste from landfills by the end of this year.

On the fast food side, Taco Bell aims to implement PFAS-free sustainable consumer-facing packaging by 2025. Starbucks will switch to reusable packaging by 2030 in a bid to cut its landfill waste by half. And McDonald’s, Chick-fil-A, Subway, and Burger King have all made their own pledges to reduce single-use and plastic.

In a time when worry over COVID-19 could be making restaurants more hesitant to accept consumer’s reusable containers — Starbucks, for example, has stopped letting customers use their own drinking vessels — better to-go packaging is more needed than ever before. But implementing truly recyclable or compostable packaging is much easier said than done, even as more cities mandate PFAS-free to-go containers.

With its new biodegradable bowls, Sweetgreen shows that it’s taking sustainability seriously. The move should put some pressure on fast-casual competitors like Chipotle, Panera, Chopt, and more, to follow suit and step up their to-go container game.

Shake Shack’s Newest NYC Location Will Focus on Takeout, Delivery Orders

Shake Shack is set to open a new location in Midtown Manhattan, one that will focus specifically on delivery and takeout orders, according to Restaurant Dive.

The new location will have two separate entrances, one for delivery and takeout orders, including those made via the Shake Shack mobile app, and one that traditional dine-in customers can use. The latter will have very limited seating options, though there will be an outdoor patio. The store will also feature self-service kiosks, which Shake Shack has been testing for some time, with varying degrees of success.

The news makes the NYC-based burger chain the latest QSR to jump onboard the trend of opening stores either dedicated to or heavily focused on to go orders. Trend might be an understatement, though. The National Restaurant Association predicts that off-premises orders will drive the bulk of restaurant sales over the next 10 years. QSRs in particular — are responding to the demand by increasing delivery services (either their own or with a third party), building out digital order strategies, and in some cases, Shake Shack included, literally redesigning store layouts.

Locations dedicated to off-premises orders is another tactic becoming commonplace. In 2019, Starbucks opened its first express location in Beijing, China, and followed up that move with plans to launch a similar shop in NYC next year. Last week, IHOP announced a new standalone restaurant chain called Flip’d that will cater to delivery and takeout orders. The list goes on: Krispy Kreme, Sweetgreen, KFC, Chopt . . .

Spoiler alert: the rise in popularity of ghost kitchens is only going to increase the number of to-go-focused locations restaurant chains open. Some of these locations will become ghost kitchens themselves, fulfilling delivery and takeout orders for not just that location but all of a brand’s surrounding stores. This is how Starbucks’s express store in Beijing currently functions, with to-go orders from surrounding Starbucks cafes funneled to the express store, speeding up fulfillment times and allowing traditional locations to focus on in-store customers.  

Shake Shack plans to open a few of these to-go focused locations in the future.

Chopt Is the Latest Restaurant Chain to Launch a Store Dedicated to Delivery and Pickup Orders

Chopt Creative Salad joins the growing number of restaurant chains building out brick-and-mortar stores completely dedicated to delivery and pickup orders. The fast-casual chain opened its first location for off-premises-only orders last week in Manhattan’s SoHo neighborhood. 

Customers of the Chopt SoHo store can order online or via the chain’s mobile app, bypassing the need to wait in line and interact with a cashier. Delivery orders are handled by the major third-party services (Grubhub, DoorDash, etc.), while the SoHo location will also feature self-order kiosks for those walking in off the street. Those kiosks will be able to accept cash in addition to cards — an important feature in an age where the debate over cashless payments is heated and chains like McDonald’s have come under fire recently for kiosks that won’t take good old-fashioned greenbacks. 

Chopt hasn’t said whether its delivery- and pickup-only store will provide a new model for future locations. CEO Nick Marsh told Forbes that, “It will be a significant part of our growth going forward, though we can’t give a percentage on how many of them will open.”

Chopt isn’t the only salad chain in NYC to be experimenting with off-premises order formats. In October, Just Salad teamed up with Grubhub to deliver a virtual restaurant brand called Health Tribes to NYC customers. Sweetgreen, who raised another $150 million in funding in September, has expanded its Outpost service, which entails placing pickup stations in office buildings. The chain also just opened its Sweetgreen 3.0 store, a so-called high-tech location that emphasizes self service and orders destined for outside the restaurant.

It all makes sense. Salad travels well — better than, say, french fries. But — and this is the understatement of the week — salad chains aren’t alone in embracing this off-premises store model designed to fulfill more delivery and pickup orders. Chick-fil-A has operated off-premises stores since 2018 and just announced it’s also working out of DoorDash’s new ghost kitchen in Northern California. Starbucks has a to-go-only store in China and one planned for NYC. Masses of other chains following this trend is pretty much a foregone conclusion.

In a place like NYC (or San Francisco, for that matter), the model allows restaurants to utilize smaller spaces and cut down on the amount of rent they pay to be in business. And as demand for delivery increases along with the expectation for online ordering and self-service technologies, this to-go concept will become a de facto part of most major chains’ strategies.

The Food Tech Shöw: Umlauts, Delivery Drones & Sweetgeen 3.0

After a mini-break following the Smart Kitchen Summit, The Spoon editors were back this week to record a brand new editor roundtable edition of the Food Tech Show.

Jenn Marston, Chris Albrecht, Catherine Lamb and myself jumped back on the mic to discuss the following stories:

As always, enjoy the podcast and please leave a review if you enjoy what you hear.

You can listen to the Food Tech Show by on Spotify, Apple Podcasts, by downloading direct to your device or just by clicking play below.

Sweetgreen Unveils High-Tech Store Design in Manhattan

We heard rumblings earlier this year that fast-casual chain Sweetgreen was planning a next-gen store with a “high-tech, high-touch experience,” and said location finally opened for business this week in Manhattan.

“After 2 years of hard work, today we debut sweetgreen 3.0 on 32nd and Park. It’s our first concept store that combines digital and physical shopping with tasting experiences,” Sweetgreen CEO and cofounder Jonathan Neman wrote in a LinkedIn post.

Dubbed “Sweetgreen 3.0,” the new store is “intended to be a cross between an Apple store and a farmers’ market,” as the Wall Street Journal put it. Customers can order from so-called concierges wielding iPads or use self-order kiosks and mobile app ordering to select food and customize orders. When an order is ready, it shows up on a digital board that, from the sound of it, is reminiscent of Brightloom’s front-of-house pickup system.

The 3.0 store is also a testing ground for future changes that could spread to other Sweetgreen locations. Notably, that includes getting rid of the Chipotle-like assembly line ordering format out front and prepping all meals in the back of house. Instead of shuffling down the line watching their salads get assembled, customers can try samples from a tasting bar while they wait for their food. The two-level store also includes a “retail market” that sells cookbooks, sauces, and other items.

The next-gen store is just the latest in a series of tech-focused initiatives Sweetgreen has launched recently. In June, the company made its first-ever acquisition by purchasing tech-centric delivery service Galley Foods. More recently, in September, the company raised $150 million and launched its own in-house delivery program to complement deals already in place with third-party services.

Proceeds from the opening day of Sweetgreen 3.0 will go towards nonprofit organization FoodCorps, with whom Sweetgreen works to get healthier foods into school Cafeterias.

Sweetgreen Makes First-Ever Acquisition With Purchase of Meal-Delivery Company Galley Foods

Fast-casual salad chain Sweetgreen announced today is has acquired meal-delivery service Galley Foods (via Food Dive). This is Sweetgreen’s first-ever acquisition. The deal was for an undisclosed amount of stock and cash.

Galley Foods is a Washington, D.C.-based service that emphasizes fresh food and clean ingredients for the heat-and-serve meals it delivers to customers. That message is in line with Sweetgreen’s business, also based out of D.C., which places huge emphasis on local sourcing, whole foods, and other elements of health and sustainability.

Galley also brings to the table what Sweetgreen CEO Jonathan Neman called “unparalleled insight into delivery” in a recent press release. The acquisition gives Sweetgreen access to Galley’s logistics technology as well as its abilities around live courier operations. According to the press release, Galley’s CEO, Alan Clifford, will become Sweetgreen’s VP of Logistics. Galley Foods will continue to operate in the D.C. area, while Clifford and his team will join the Sweetgreen team.

Sweetgreen has been one of those companies at the forefront of the off-premises movement in the food industry (which is one of the reasons the company landed on our Food Tech 25 list this year). Besides offering delivery through its own website and app as well as through third parties such as Grubhub and Postmates, the chain also maintains its delivery-catering hybrid service called Outpost, where customers can retrieve food they’ve ordered online at pickup stations during lunchtime. WeWork, Nike, and Headspace are just some of the companies offering these stations to workers.

With the Galley Foods acquisition, Sweetgreen might well be looking for ways to have more control over its off-premises options. Outpost already requires customers to order via Sweetgreen’s system, rather than through a third-party app. Purchasing a company like Galley Foods suggests the same might eventually be true for Sweetgreen’s delivery orders. It’s no secret that restaurants have their share of troubles with third-party services: there’s little control over branding or customer service, and the fees restaurants pay per order can impact often thin margins. A company that notably tried third-party delivery then backed out of it is Olive Garden, who said its customers weren’t satisfied wit the service. Might Sweetgreen be next on the list to reign delivery back beneath its own roof?

Sweetgreen Connects Schools With Fresher Foods By Emphasizing Choice

Imagine being able to vote on your school cafeteria’s lunch options each week. Even in the ’80s, I doubt many of us would have chosen soggy fries and cardboard-like pizza. But we probably wouldn’t have chosen vegetables, either.

Fast-casual salad chain Sweetgreen wants to change kids’ attitudes about healthy meals by introducing them in a way that educates students about the importance of fresh food while still giving them choice over what they’re eating. To do so, the Washington, D.C.-based company has partnered with non-profit organization FoodCorps, an AmeriCorps entity that works to find different ways of getting healthier food into schools, to pilot the Reimagining School Cafeterias program in schools around the U.S. (h/t Fast Company).

Reimagining School Cafeterias takes existing school food programs and, with input from Sweetgreen’s culinary team, works to “guide students to make healthier choices and create more inclusive and joyful cafeteria experiences.” Sweetgreen has pledged $1 million over the next two years towards further developing the Reimagining School Cafeterias program. The initiative was announced earlier this month and is currently in three schools in the U.S. Since it builds off existing programs within each school, Reimagining School Cafeterias looks different in each location.

In New Mexico’s Navajo Nation territory, students at Wingate Elementary School can learn about and try out various sauces and spices at the school’s Taste Buds Flavor Bar. The Tasty Challenge, at Aberdeen Elementary School in Aberdeen, NC, lets kids try different fresh produce, prepared in different styles, and vote on what they like best. And in Oakland, CA, Laurel Elementary students brainstorm ideas about how to make their cafeteria better, from the way the room is set up to what’s offered in terms of food.

Getting better, fresher food into schools in the U.S. is a mission more and more organizations are taking on, from Ford Motors introducing vertical farming to schools in Detroit to Teens for Food Justice working in The Bronx to teach youths farming techniques. Those efforts are needed: An estimated 1 in 8 Americans are considered food insecure, including about 12 million children.

What’s interesting about Sweetgreen’s approach to schools is how the fast-casual chain takes its business approach of building your own meals and translates it to the school setting. In other words, it introduces students to healthier eating by giving them choices, and without shoving a plate of green beans at them and forcing them to eat it.

Sweetgreen does a number of community service initiatives, many of which are around sustainability and assisting food desert parts of the U.S. Schools, though, are a particularly important territory. Especially in light of how the USDA recently changed some rules around school food, essentially weakening health standards.

As usual, it’s up to the non-profits of the world to offset a lack of change at the government level by launching programs that teach kids (and everyone else) the value of healthier eating. If more of these programs got support from growing restaurant companies like Sweetgreen, we might even be able to make the concept of fresh veggies appealing to more kids. As one 5th grader is quoted as saying on Sweetgreen’s site, “I thought broccoli was nasty. Not this broccoli. You do it right.”