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The Spoon

Daily news and analysis about the food tech revolution

Uber Eats

Uber Sells Its Eats India Business to Rival Zomato

Consolidation in the food delivery sector continues. Today, Uber said it was selling its Eats business in India to local rival service Zomato, according to an article from TechCrunch. The deal, which is valued between $160 million and $200 million, is effective immediately. 

The two companies have been in talks since November of 2019. With the deal, Uber will own a 9.99 percent stake in Zomato. It will shutter all operations in the Indian market, with Eats customers and restaurants becoming part of Zomato. According to TC, some Eats employees will have the option to join Uber’s ride-hailing service. The rest will be let go.

For Uber, a big part of the motivation behind the sale is to cut back on loss-making operations as it struggles to reach profitability by 2021. The company’s Eats business launched in India in 2017 but faces strong competition not just from Zomato but also another local service, Prosus-backed Swiggy. Both those competitors fulfill well over 1 million orders each day, while Uber Eats only does about half a million. 

The move to shutter operations in India is similar to Uber Eats’ decision in September 2019 to shutter operations in South Korea, where Woowa Bros.’ food delivery service Baedal Minjok owns 75 percent of the market share. 

Meanwhile, both competition and consolidation worldwide in the food delivery sector continues to intensify. In Europe, Uber Eats will have to contend with Just Eat and Takeaway.com, two companies merging to become one of the largest food delivery services in the world. Deliveroo is also a major competitor in that market. In the U.S., Uber Eats still lags behind DoorDash and Grubhub in terms of marketshare. 

All of these companies face an increasing amount of pressure to become profitable. And given the trend towards consolidation happening of late, India might not be the last market Uber Eats bows out of in the near future. 

New Proposed NYC Legislation Takes Aim at Third-party Delivery Tipping Practices

A new NYC bill proposed this week is once again putting third-party delivery services’ tipping policies under scrutiny, according to an article from the New York Daily News. Specifically, the proposed law is aimed at transparency around how much of the tip on any given delivery order actually goes to the delivery worker as, well, a tip.

New York City Council member Richie Torres introduced the legislation on Wednesday that would, according to the NY Daily News, require third-party delivery services to “notify customers if gratuity is paid to delivery workers in addition to their regular wage – or if tips are put toward their base pay.”

Speaking strictly of third-party restaurant-food delivery companies, the proposed legislation seems aimed specifically at one. In July of last year, DoorDash received a storm of bad press over its then-tipping policy, which used money from workers’ tips to meet the minimum guaranteed base pay.

Though the company eventually changed that much-maligned tipping policy, D.C. Attorney General Karl Racine later brought charges against DoorDash, claiming the old tipping model mislead consumers about where their money was going.

Torres’ proposed legislation seems as much aimed at protecting workers as it is about transparency towards customers about where their money goes. In a tweet Wednesday, he wrote:

#NYC can no longer afford to turn a blind eye to app-based delivery companies stripping workers of their hard-earned tips. It’s wage theft, plain & simple, and the public has a right to hold businesses accountable for exploiting their workers and stealing their wages.

He also told NY Daily news that there’s “a special place in hell for companies that confiscate the tips of low-wage workers,” adding that tips are “profits for the companies – dollars the companies should be paying workers out of their own profits.”

If the legislation is approved, all third-party delivery companies, including DoorDash competitors Grubhub and Uber Eats, would have to comply by disclosing their tipping policies in their terms of service or via some other method before a transaction is processed. Failure to do so would result in services being charged penalties.

DoorDash competitors Uber Eats and Grubhub would be on the hook to comply, as presumably would a service like Instacart, which has also come under fire recently for questionable tipping policies for workers.

A spokesperson for DoorDash said in a statement that “100% of [a] tip goes directly to the Dasher who earned it — in addition to the base pay our company offers for each delivery.” He also added that DoorDash shares “in Council member Torres’ commitment to transparency and we look forward to working with him to ensure the highest quality experience for our customers and workers.” 

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.

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.

Uber Is in Talks to Sell Its Uber Eats Business in India to Zomato

Food delivery service Zomato is in talks to buy Uber Eats’ India business, sources familiar with the matter told TechCrunch. The deal values Uber Eats’ India business at $400 million currently, and the rideshare giant would potentially be able to invest $150 to $200 million in Zomato.

The deal comes as Uber Eats struggles to stay competitive in India, where it is currently the number three player behind Zomato and Prosus-backed food delivery service Swiggy. Uber Eats currently makes roughly half a million deliveries each day, while its competitors each do well over 1 million orders daily.

Uber has been in talks with Zomato since November of this year. 

India isn’t the first country Uber Eats has backed out of. In September of this year, the company shuttered its business in South Korea, citing “competitive pressures” most notably from Woowa Bros.’ Baedal Minjok food delivery service. (The South Korean market got a further shot of consolidation last week when Woowa announced plans to acquire Delivery Hero for $4 billion.)

Uber posted over $1 billion in losses on its most recent earnings call, where it also noted that its Eats business was still losing enormous amounts of money. In India, the company projected a negative revenue of $107.5 million for Uber Eats between August and December of this year, according to TechCrunch. The company also announced layoffs, which included Uber Eats team members, in October. 

Uber and Zomato are still finalizing terms of the deal, which could go through before the end of this year. The $150 to $200 million investment would give Uber a sizable stake in the Zomato and therefore entry back into India’s food delivery market. The combined forces of Zomato and Uber Eats would make for the largest food delivery service in India, ahead of Swiggy.

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

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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

Domino’s Expands GPS Tracking Tech Across U.S. Stores

Domino’s announced this week it will expand its GPS tracking technology to roughly a quarter of its U.S. stores by the end of 2019. The chain has been piloting this technology, dubbed Domino’s Tracker, in select locations throughout this year. According to a press release, Domino’s expects “a significant portion of stores” to use it in 2020.

For customers, the Domino’s Tracker offers a more precise time estimate of when their pie will arrive. After placing an order via the Domino’s app, they will be able to access an interactive map of their order and receive an estimated delivery time. Users can opt in to receive text message updates letting them know when their order is on the way, when it is two minutes away, and when it has arrived. 

Store managers, meanwhile, can view where drivers (Domino’s refers to them as “delivery experts”) are on the road. The idea is that by having more exact visibility into drivers’ locations, managers can better manage operational elements of the delivery process, such as route optimization and driver safety. 

GPS tracking technology isn’t new to the delivery world, and in fact, part of Domino’s motivation behind enhancing its own is to compete with third-party food delivery services like DoorDash and Uber Eats, who already have such capabilities in place. The move is one of many strategies Domino’s has in place to fight back against third-party delivery dominance.

That’s no small order in a restaurant industry where 70 percent of all delivery orders are expected to come from third-party delivery services by 2022.  Hence initiatives like the Domino’s Innovation Garage, a testing ground for new tech that opened in August, an e-bike program to speed up delivery in dense urban areas where cars are inefficient, and partnerships with location-tech companies to pinpoint hard-to-find street addresses. 

Earlier this year, Domino’s CEO Richard E. Allison noted that his company faces “headwinds related to aggressive activity from third-party delivery aggregators” and that he did not expect to see this change any time soon. He added the company will continue to invest in technology for the foreseeable future.

Domino’s GPS tracking technology is currently operating at stores in Phoenix, Houston, Salt Lake City, Miami, Las Vegas, Baltimore and Norfolk, Virginia.

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.

Spoon Market Map: Ghost Kitchens in 2019

Just half a decade ago, the phrase “ghost kitchen” referred to restaurants that looked legit on Grubhub and Seamless but were actually digital fronts for unregulated kitchens. In other words, chicken tenders from what appeared to be a local restaurant might actually have been cooked in someone’s apartment.

Then the delivery boom went off, thanks largely to the growth of third-party services like Grubhub and DoorDash, and by the many digital channels through which customers could suddenly get food. Order tickets proliferated for restaurants, but so too did the stress around how to fulfill those orders without over-burdening the in-house kitchen staff.

The answer to the problem? Take the restaurant out of the kitchen.

In the last few years, restaurants have been moving many of their operations around delivery and to-go orders to dedicated kitchen spaces outside the main restaurant location. The name “ghost kitchen” has stuck around, but now it’s a health-department-friendly term for these spaces that act as hubs for off-premises orders.

But actually, there are many names nowadays for the concept: ghost kitchen, virtual kitchen, cloud kitchen, the (slightly nauseating) description “kitchen as a service.” All those phrases amount the same thing: a kitchen facility that exists solely for the purpose of helping restaurants cook and fulfill to-go orders and get them into the hands of delivery couriers. There is no dining room or front-of-house staff in a ghost kitchen, the tech-stack is more streamlined than that of a full-service restaurant, and, increasingly, the location is completely separate from a restaurant’s dine-in location(s). Now, too, there are also kitchens on (literal) wheels, which add yet-another piece of mobility to the business model. 

To help you navigate the evolving world of ghost kitchens, we’ve created a market map for your reference. This market map is intended to be a snapshot of the current ghost kitchen landscape in 2019. It’s not comprehensive, and we expect both it and the overall landscape to change drastically over the next 12 months. That means you can expect to see this map updated regularly. As always, we welcome suggestions for additional companies and players in this space.

Have suggestions? Drop us an email.

1. Kitchen Infrastructure Providers

The largest category in ghost kitchens right now, Kitchen Infrastructure Providers can be likened to cloud computing providers: they rent companies the space and tools needed to run a business, either as a flat-fee model for on a pay-as-you-go basis. 

Kitchen United, for example, charges a monthly membership fee that includes rent, equipment, storage, and services like dishwashing. Reef, which originally made a name for itself reinventing the concept of the parking garage, offers these things as well as direct partnerships with major third-party delivery companies like DoorDash and Postmates.   

Normally these facilities are large, warehouse-like buildings that hold multiple “restaurants” under a single roof. For large restaurant operators with multiple chains looking to fulfill extra demand brought on by delivery or test out new concepts without incurring too much risk, these are ideal.

Multi-unit chains can also use these spaces to reach customers in areas where they might not have a brick-and-mortar store. Chick-fil-A is widening its reach in the SF Bay Area by working out of DoorDash’s newly opened facility.

2. Restaurant-operated Kitchens

For some restaurants, running a ghost kitchen operation themselves makes more sense than teaming up with a third-party kitchen provider. This is often the case with smaller, independent restaurants, whose ghost kitchen might consist of nothing more than an area of the restaurant’s existing location(s) dedicated to fulfilling off-premises orders. Or it might apply to multi-unit chains who simply want to expand to new areas and don’t have the capital or inclination to deal with the burden of a full-service restaurant. Colombian chain Muy is one such company, having started as a dine-in restaurant before expanding its ghost kitchens to serve more areas of Latin America.

The most notable of all the companies in this category right now is Starbucks. In addition to building out “to-go” stores that exist solely for the purpose of fulfilling off-premises orders, the company has also partnered with Alibaba to turn parts of the latter’s Hema supermarkets into ghost kitchens in China.

The boundaries around this category are especially fluid. In other words, just because you operate your own ghost kitchen in one part of the country doesn’t mean you can’t team up with a third-party provider in another, as The Halal Guys and Chick-fil-A have done.

3. Virtual Restaurant Providers

This is where the lines really start to blur between restaurant, kitchen provider, and delivery company. Anyone can make a virtual restaurant, and as the category in our map shows, more than just restaurants are trying their hand at food concepts that can only be ordered through digital channels and are prepared in a ghost kitchen. Whole30, for example, is a diet concept better known for its cookbooks than its dealings with the restaurant industry. The folks behind that brand teamed up with Grubhub and restaurant company Lettuce Entertain You to create a virtual restaurant offering meals with Whole30-approved foods. 

On the other hand, a company like Keatz runs a network of virtual restaurants it houses beneath the roof of its own ghost kitchens. Taster, based out of France, creates native restaurant brands for food delivery companies like Uber Eats and Deliveroo. Food is cooked in Taster-run kitchens.

4. Mobile Kitchens

In slightly more its own category, companies like Ono Food Co. and Zume are creating robotic, self-contained kitchens on wheels that offer restaurant experiences that can be tailored to specific neighborhoods in a city and also plug into third-party delivery services.

Restaurants can also partner with these kitchens on wheels to expand their reach into new markets, as &Pizza has done by teaming up with Zume.

What’s Next for Ghost Kitchens

Ghost kitchens will become the norm for multi-unit chains. With off-premises orders expected to drive the majority of restaurant sales growth over the next decade, multi-unit brands (think Panera, Chipotle, etc.) will find ghost kitchens a cost-effective way to meet this demand without overburdening existing restaurants. The majority of them will rent space from kitchen infrastructure providers, as Chick-fil-A is currently doing with DoorDash. 

There will be an explosion of delivery-only brands. Since ghost kitchens provide a cheaper, faster way for food entrepreneurs and small restaurants alike to test-drive new concepts, we will see an influx of delivery- and pickup-only brands come out of these kitchens over the next year. Many will be born inside the walls of facilities like Kitchen United or CloudKitchens. Meanwhile, the number of virtual restaurant networks like that of Keatz will increase. 

Artificial Intelligence will be designed into the kitchen. AI is a really broad term that’s often misused. That fact aside, its presence in the restaurant industry is here to stay, and in ghost kitchens, it will prove itself valuable for everything from tracking ingredients to helping staff curb food waste. On the consumer end, we expect to see the technology more deeply integrated into the apps and websites from which customers order, improving recommendations and upselling opportunities.  

More non-restaurant food brands will launch virtual restaurants. In keeping with a trend recently made popular by Whole30 and Bon Apétit, food brands, diets, celebrity chefs, and other non-restaurant businesses will team up with third parties to launch delivery and pickup concepts. Grubhub and Uber Eats are two such third parties already doing this. Expect many more such partnerships — soon.

Bonus: The tech stack will get pared down. No front of house means no POS, right? Quite possibly. With less (or no) customer-facing technology like digital menu boards, self-order kiosks, and tabletop ordering, much of the restaurant tech on the market today becomes irrelevant in a ghost kitchen setting. As the folks at Reforming Retail noted recently, “under this scenario the POS is just an ordering node in the cloud that outputs your menu to a consumer and sends orders to your kitchen.”

That doesn’t mean restaurant tech is going by the wayside. Some ghost kitchens, like those of Muy, have a walkup option where customers order at kiosks onsite, and there will doubtless be new solutions created that are specifically for the ghost kitchen. But the tools of tomorrow’s ghost kitchen won’t look a thing like today’s bloated restaurant-management tech stack. For everyone involved, that’s a bonus.

Week in Restaurants: Uber Eats Launches Group Ordering, Waitr Could Get Delisted

Recent news from suburban destination Dave & Buster’s brings up memories of the weekend I had one too many Washington Apples and lost my credit card during a Dance Dance Revolution challenge. If you’re planning similar shenanigans for the weekend, you might want leave the plastic at home and consider the chain’s new contactless payment app. More on that below, along with a few more noteworthy stories that happened in the restaurant industry this week.

Uber Launches Group Ordering
Aiming to further streamline the process for customers choosing and ordering food, Uber Eats this week launched a Group Order feature that lets multiple people participate in a single order. Customers just click the “Start Group Order” button within the app and can then share a link with friends, family, and coworkers, according to a blog post from Uber Eats. Restaurants can opt into the service for no additional charge. The feature is similar to Postmates group order feature, which launched this past August. DoorDash, meanwhile, has offered group ordering since 2017.

Waitr in Danger of Getting Delisted 
Third-party delivery service Waitr is in danger of getting delisted by Nasdaq, according to a recent regulatory filing. Nasdaq warned that the Louisiana-based company could be delisted because its stock has been below $1 per share for the last 30 consecutive business days. Waitr has until June 1, 2020 to regain compliance, which means its common stock needs to close at $1 or more per share for 10 consecutive business days before that time. This time last year, Waitr looked to be a promising alternative to bigger services (DoorDash, Uber Eats) for smaller U.S. cities. That has not been the case for Waitr, which has struggled over the last 12 months with bad press and profitability issues alike. The company acquired Bite Squad earlier in the year but has since written off much of that deal. 

Flynn Restaurant Group Offers Instant Pay to Restaurant Workers
A sad reality for the restaurant biz is that its workers earning an hourly wage often live paycheck to paycheck. Of late, more restaurants are addressing the issue by teaming up with tech companies that offer employees faster access to their wages. The latest is DailyPay, an app users can link their bank account, payroll card, or debit card to and instantly access their earned but unpaid wages. This week, the company announced a partnership with Flynn Restaurant Group, parent company of well-known restaurant chains like Applebee’s, Arby’s, and Panera. According to a press release, the partnership makes DailyPay’s capabilities available to more than 48,000 restaurant employees across the U.S. 

Dave & Buster’s Unveils In-store Contactless Payments App
If you’re up for a night of drinks and arcade games but worry about losing your credit card in the process (see above), there’s now an app for that. Dave & Buster’s this week announced a mobile app customers can use to pay for games at the famed arcade/bar/restaurant. Previously, one swiped a credit card to start a game. With the new app, customers can simply tap their phone. The app also manages rewards points users earn from in-store purchases like games.