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Daily news and analysis about the food tech revolution

virtual restaurants

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

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

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

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

Above: Picture from Reddit post complaining about BeastBurger

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

But in reality, his answer is decidedly more circumspect.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Nextbite’s Alex Canter Shares Insight on Virtual Kitchen Trends in 2022

This week I spoke with Alex Canter, the CEO and a co-founder of virtual restaurant company Nextbite, to hear his perspective on what 2022 holds for virtual kitchens and restaurants.

Nextbite, based in Denver, Colorado, uses a host kitchen model where it licenses a portfolio of delivery-only restaurant brands to restaurants with excess kitchen capacity. Restaurant partners can fulfill orders under these virtual brands to augment their restaurant’s dine-in and off-premise revenue. By taking on an additional restaurant brand, a restaurant can take advantage of their slowest hours, or even when they might not be open (such as the early morning or late night).

According to Canter, while many restaurants are slowly making their way back from the challenges of COVID-19, most are still not operating at full capacity. “Out of all the restaurants in the U.S., the only restaurant I can say confidently is operating at its full potential is In-and-Out,” said Canter. “They have a line out the door from the moment they open to the moment that they close.”

But this could all change in 2022, in part to new opportunities created by virtual brands. In 2022, “restaurants are really starting to understand their potential,” said Canter. “If you think about the kitchen as a manufacturing facility for food, I would say the average kitchen is probably operating at 30% output of what it could what it can do at peak.” After seeing the spike in virtual kitchens and delivery-only brands, restaurant establishments realize that they can cash in on this too. By streamlining online ordering and offering multiple menus and concepts, restaurants can reach new customers and different demographics.

In total, Nextbite has 17 brands that Canter said have been carefully created to consider emerging dining trends both inside and outside the U.S. People’s tastes and cravings change quickly, and can be easily influenced by social platforms like Tik Tok.

So what food categories and concepts will be successful in the virtual kitchen space in 2022? According to Canter, Pizza and Chinese food – the original delivery food categories – remain very popular. He also said breakfast foods for delivery are on the rise as illustrated by Nextbite’s survey which showed that forty-five percent of consumers ranked breakfast sandwiches as one of their favorite breakfast items to order. Nextbite’s celebrity taco concept, George Lopez Taco, does really well in suburban areas where it can be difficult to find an authentic street taco.

Wiz Khalifa and Nextbite’s restaurant concept, “Hot Box”

According to Canter, Nextbite works with celebrities like Wiz Khalifa and George Lopez because a small independent restaurant would never be able to connect with a high-profile celebrity. By using one of Nextbite’s celebrity-driven brands, they can tap into a celebrity brand’s following and demand.

Finally, Canter says food preferences vary depending on where you sell and who the consumer is.

Food preference and demand “change a lot when you go from major cities to the suburbs to college campuses. Depending on the demographic, some of our brands absolutely crush it on college campus markets and some do just okay in the suburbs. There’s a lot of variety happening, but I think people’s tastes are changing so faster than ever and we’re keeping up with that by constantly innovating and launching new concepts that are meeting that demand.”

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Let the ghost kitchen market consolidation begin

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

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

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

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

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

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

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

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

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

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

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

Voice bots and Back Office Tasks: A Mid-year Look at Restaurant Tech

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As we’re fond of saying lately, last year’s pandemic-induced chaos accelerated the restaurant industry’s adoption of technology so much that about a decade’s worth of changes happened in the span of a couple months. Investor, restaurant tech guru, and friend of The Spoon Brita Rosenheim highlighted that point recently when she released her 2021 Restaurant Tech Ecosystem Map. 

The map, while not exhaustive, includes a staggering number of companies across many areas of the restaurant business, from ordering and delivery tech to back-office tools, business intelligence, corporate catering and ghost kitchens. Even a casual glance shows just how enormous (or bloated, depending on your point of view) the restaurant tech sector has gotten over the last 18 months. 

Brita has her own takeaways and predictions bundled with her map, and you should definitely read through them if you are interested in learning more about restaurant tech’s near-term trajectory. Here, I’ll add a few of my own thoughts to the mix, including:

Rise of the voice bot. This is one category that’s slowly but steadily grown a presence in the restaurant industry over the last few years. But excepting maybe Domino’s chatbot, widespread voice-tech implementations at restaurants are still rare, though that will likely change in the next couple of years. McDonald’s threw heat on this topic last month by announcing it is currently testing automated ordering via voice tech at 10 locations, and that it expects this technology to be in all of its locations within the next five years. Meanwhile, the current labor shortage has left restaurants scrambling to make their operations more efficient. If correctly executed, going fully autonomous with the order process could shave seconds off every individual customers’ order. And those seconds (and costs) add up fast. 

The analytics opportunity. Marketing analytics for restaurants are another “it” category at the moment, if its slice of the restaurant tech pie above is any indication. In the words of Adam Brotman, CEO of Brightloom, online ordering tech has become “a commodity,” and that the next big frontier for restaurant tech is around analytics. When Brotman and I spoke a few months back, he explained that data — about customer preferences, transactions, order histories, etc. — is a huge opportunity for restaurants if they can figure out how to harness it. Seeing as that’s no small feat technically, a huge number of analytics and CRM companies have cropped up offering solutions to smaller businesses that can’t build these programs in-house. Expect more companies and much consolidation in this category.

Back-office bonanza. The sizable slice back-office tech gets in Brita’s market map reflects a trend we’ve written about before: that investment and interest in back-office tasks will continue to attract attention in the coming months. The back office was probably once the most “un-sexy” area of restaurant tech, since most of it has to do with digitizing invoices and schedules and helping businesses run payroll. One pandemic later, restaurants are trying to save on costs in as many areas as possible, and a surprisingly effective way to do that is through digitizing, centralizing, and streamlining some of these previously boring tasks. Like analytics, this category will see a wave of consolidation in the future, and in fact that is already happening.

As always, I welcome your thoughts on my thoughts, now and in the coming months as restaurant tech continues to evolve.

More Headlines

Local Kitchens Raises $25M for Its Virtual Food Hall Network – The ghost kitchen/virtual food hall, started by three ex-Doordash employees, has raised Series A funding roughly one year after launching.

Mobility Service Helbiz Opens Its First Ghost Kitchen – Italian-American mobility company Helbiz announced today it is launching its own ghost kitchen/food delivery/virtual restaurant business called Helbiz Kitchens.

Miso and Lancer Worldwide Aim to Automate Beverage Dispensing for QSRs – Miso announced a partnership with Lancer Worldwide, a global manufacturer of beverage dispensers, to develop an automated, intelligent system designed to speed up and organize drink orders.

Mobility Service Helbiz Opens Its First Ghost Kitchen

Italian-American mobility company Helbiz announced today it is launching its own ghost kitchen/food delivery/virtual restaurant business called Helbiz Kitchens. The concept will initially be available to customers in Milan, Italy, with plans to open additional locations in the U.S. and Italy in the future.

Helbiz’ main service is operating fleets of e-scooters, e-bikes, and e-mopeds customers can rent on demand via the Helbiz app. Service is available in Italy, Washington, D.C., Atlanta, Miami, and a few other U.S. cities. 

The Milan operation of Helbiz Kitchens is housed in a 21,500-square-meter (roughly 23,000 square feet) facility and offers customers a choice of six different menus: pizza, sushi, salad, burger, and ice cream. Customers order and pay via the Helbiz app and can bundle different items from each menu into a single order and payment transaction. 

Couriers, known in the company as “Helbiz Butlers,” will deliver the food using the company’s own electric scooters, which makes sense, given how many of these it currently has in Milan and other cities. The setup is similar in some ways to DoorDash Kitchens, a ghost kitchen operation in Northern California that uses DoorDash couriers to deliver meals to customers from Chick-fil-A and other restaurant chains. Crave Collective, a ghost kitchen/virtual food hall based in Boise, Idaho, also employs its own fleet, despite never having pre-existing mobility infrastructure like DoorDash and Helbiz.

Unlike the other two concepts, however, Helbiz’ food concepts are entirely in-house creations and its team of chefs is entirely employed by the company, not a third-party restaurant. The company’s tech stack, which will power everything from online ordering for consumers to fire times in the kitchen and driver tracking, is also the product of an in-house IT team. 

Part of this focus on keeping things in-house is related to economic recovery. Like most other places, Italy’s economy suffered greatly during the pandemic and is now slowly trying to rebuild. Helbiz says its new ghost kitchen operation will provide 80 new jobs for this first location in Italy, with more to come as the concept expands to other parts of the country.

Service will initially be available, as of today, from 11:30 a.m. to 11:30 p.m. Additional locations are planned for Washington D.C. and other cities in Italy in the future. 

C3’s 10,000 New Kitchen Partners

Unless you make a point of regularly ordering from virtual restaurants, you may not yet have heard of names like Sam’s Krispy Chicken or Plant Nation. They, along with many others, are delivery-only brands created by C3 (Creating Culinary Communities), a restaurant company that’s lately been on a mission to get these brands into seemingly ever pocket of America. The company’s virtual restaurants are in hotels, residential buildings, and even brick-and-mortar food halls. And thanks to a recent deal, they’ll soon be available via a lot more restaurants, too. 

C3 announced last week it had struck a partnership with point-of-sale integration company Chowly, whose technology platform makes it easier for restaurants to manage online orders coming from multiple sales channels. Through the deal, Chowly’s restaurant customers will get the option to be a “host kitchen” for C3’s virtual restaurants and share in the revenue from those sales. 

Host kitchens, as the name suggests, are spaces within existing restaurant kitchens that are dedicated to fulfilling orders from virtual, delivery-only brands. Companies like Fat Brands and Wow Bao have popularized the concept among restaurants, giving underutilized kitchen space a purpose and hopefully making the business incremental revenue in the process.

In the last year, we’ve also seen the rise of companies whose main business is to come up with new restaurant concepts and license them out to existing restaurants. Besides C3, Ordermark launched its NextBite business based on this idea, and Virtual Restaurant Concepts (best known for Mr. Beast Burgers) offers a similar concept.

C3’s deal with Chowly will give restaurant customers that use the Chowly platform an easier way to sell delivery-only restaurant brands than they could do on their own. Rather than having to conceptualize and figure out how to market and deliver wholly new virtual brands, Chowly’s restaurant partners can simply license a turnkey solution from C3, who handles the marketing, branding, and technical logistics of the operation via its exclusive ordering/delivery app, Citizens Go. The restaurant just has to cook the food and get it out the door.

These restaurants could also potentially reach a wider demographic by offering more food types on top of their own menus. I never thought I’d write “Captain D’s” and “high-end plant-based burger” in the same sentence, but that scenario’s entirely possible since Captain D’s is an enterprise customer of Chowly and C3 has a plant-based brand called Plant Nation. A Captain D’s location also offering Plant Nation for delivery could reach new and different customers and add more revenues through such a deal.

For C3, the deal is arguably even more lucrative. Chowly has more than 10,000 kitchen partners across the U.S., all of whom will eventually be able to licenses C3’s brands. That’s a major jump from the 250 kitchens in which C3 is currently in. The company says it will reach 1,000 locations by the end of the year and be in 12,000 kitchens by 2023.

The Chowly deal will be a huge help to that process — and enable C3 to expand more rapidly than it would if it had to forge each new individual kitchen partnership. Chowly’s enterprise brands include the aforementioned Captain D’s, Clean Juice, and Dickey’s Barbecue Pit, all of which give C3 and automatic sizable reach. 

The partnership will launch with these enterprise brands before branching out to include smaller restaurants within the Chowly network. The goal is to make all of C3’s brands available to all of Chowly’s 10,000 restaurants at some point in the nearish future.

As C3, Virtual Restaurant Concepts, NextBite and other virtual restaurant companies scale up, one question to keep in mind is how these companies are ensuring quality control across tens of thousands of restaurant partners. In other words, Sam’s Krispy Chicken will need to taste the same in Seattle, Washington as it does in Atlanta, Georgia in order to become popular on a large scale over time. An overnight sensation like Mr. Beast is one thing. Sustained, long-term loyalty from customers is another challenge altogether, and one for which consistency and high quality are crucial.

More Headlines

OpenTable Launches New Tools to Discourage Diners From ‘Ghosting’ on Their Reservations – The initiative will take the form of forthcoming new digital tools as well as “blog and social content educating diners on the impact of ghosting a reservation.”

South Korea: Lounge Lab Opens Brown Bana Robot Ice Cream Shop – South Korean robotics company Lounge Lab announced today that it has opened Brown Bana, a robot-powered ice cream store in Seoul.

Deliveroo Is Running a Reusable Container Program in Paris – Deliveroo France and circular-packaging company barePack have started offering customers of the delivery service the option to get their food delivered in reusable containers.

JustKitchen Raising $20M, Expanding into the U.S., Asia

Vancouver, Canada-headquartered JustKitchen announced this week it is in the process of raising $20 million to expand its network of ghost kitchens and virtual restaurant brands. The company said it is getting $16 million from Canadian investment dealerr Beacon Securities Limited, which will buy 11.9 million shares of JustKitchen at $1.35 per share. JustKitchen is also looking to raise an additional $4 million.

The company has a number of plans for this new funding, including international expansion, more software development, and some brand acquisition, too.  

JustKitchen operates what it calls “hub-and-spoke” commercial kitchens. Ingredients are prepped in a central main kitchen (the “hub”) and sent to smaller “spoke” kitchens located strategically close to customers. Once a user places an order via the JustKitchens app or website, the spoke kitchen closest to that person completes the order and a delivery service shuttles the meal to its final destination. 

This version of the hub-and-spoke model isn’t widely used at the moment, with most ghost kitchen providers operating traditional commissaries a la Kitchen United or restaurants utilizing space on their own properties. However, the definition of “ghost kitchen” no longer just applies to restaurant food. Another Canadian company, just called Ghost Kitchen, is a good example of this: Ghost Kitchen sells some easy-to-assemble restaurant food, but it also sells pints of Ben & Jerry’s ice cream and packages of Beyond burgers. These simpler types of orders that require minimal prep lend themselves to smaller, spoke-like kitchens closer to customers and powered by a main central kitchen.

In addition to working with third-party restaurant partners, JustKitchen also operates a portfolio of in-house delivery-only restaurants. The company also offers a delivery-only grocery service called JustMarket. Users can add grocery items onto their restaurant meal orders or simply get groceries delivered directly. 

Though based in Vancouver, the company currently only operates its services in Taiwan and Hong Kong. Part of the new funding will go towards opening new spoke kitchens in Taiwan. There are also plans to expand into the western half of the U.S. and into other Asian countries later this year, including Singapore and the Philippines. In the U.S., JustKitchen will begin in Seattle, Washington and several cities in California.

A Virtual Restaurant Brand to Support Bitcoin, ‘Take On’ Big Pizza

Bitcoin Pizza Day is coming up, which makes it an apt time to launch a bitcoin-themed virtual pizza restaurant. Anthony Pompliano, an entrepreneur and investor, announced today he is launching Bitcoin Pizza, a pop-up restaurant brand that will partner with independent pizza shops to deliver pies from May 22–29. (May 22 is the official Bitcoin Pizza Day.)

May 22, otherwise known as Bitcoin Pizza Day, will mark the 11-year anniversary of the world’s first commercial transaction done with digital currency — for two pizzas, as it happens. Papa John’s provided the pies at the time, but don’t expect it or any other major chains to be a part of Pompliano’s pop-up shop this weekend. The brand’s website flatly states that “Bitcoin Pizza is the first decentralized pizza brand uniting our favorite neighborhood pizzerias under one roof to take on Big Pizza.”

To do that, the brand has partnered with indie shops around the country, which will make and deliver a special menu of five different pies. Sides and drinks will also be available. Customers can order for delivery or pickup from the Bitcoin Pizza website. So far, participating cities include San Francisco, Seattle, Los Angeles, Austin, Houston, Miami, Washington, D.C., NYC, Boston, and Chicago. More are slated to be announced.

Proceeds go to the participating restaurants, and some to the Human Rights Foundation’s Bitcoin Development Fund. “Every pizza benefits open-source developers working to make the Bitcoin network more private, decentralized, and resilient,” states the Bitcoin Pizza website. 

There’s just one thing Bitcoin Pizza doesn’t do: accept crypto for currency. Right now, customers that order pizzas can pay with a credit card or Google Pay. According to an interview with Restaurant Business, Bitcoin Pizza is looking into adding crypto as a payment option. Which would make sense, given all of the above.

Bitcoin Pizza is a temporary brand for now. According to Popchew, with whom Pompliano worked to launch Bitcoin Pizza, the brand will relaunch as a permanent operation in the near future.

C3 Launches Brick-and-Mortar Food Halls for Its Virtual Restaurants

Over the last year we’ve seen scores of brick-and-mortar eating establishments turn their restaurants into delivery-only concepts. C3, a hospitality company that runs a portfolio of virtual restaurant brands, has chosen to do things the other way around. This week, the company announced Citizens, a network of brick-and-mortar food halls for its virtual brands.

The first location will open this July in New York City, with a second location planned for Atlanta, Georgia and slated to open in 2022. Further Citizens locations are planned for Seattle, Miami, and California.

The 40,000-square-foot Manhattan West location will be part food marketplace, part sit-down restaurant, and will feature all of C3’s existing restaurant brands in addition to new ones. Customers will be able to order meals from kiosks or the C3 app (which the company launched in collaboration with Lunchbox), then choose to either take food to go or eat it onsite. The location will also feature pre-made grab-and-go options.

The forthcoming Atlanta location will offer a similar setup, and also include a delivery option to the surrounding neighborhood. 

All food hall locations will be powered by C3’s in-house tech stack, which includes the Lunchbox-powered ordering software. 

Plenty of virtual food hall concepts exist currently, from Deliveroo Editions to Zuul’s newly launched effort that’s an online marketplace of restaurants working out of the company’s kitchen facility. Few of these have added any physical spaces outside of the kitchens, though that may begin to change as the pandemic recedes and people return to the world of onsite dining.

Citizens is part of C3’s overall plan to expand its restaurant business, which has previously only been available in the form of delivery-only concepts. Earlier this year, the company announced a partnership with Graduate Hotels to run virtual restaurants out of the latter’s kitchen spaces. C3 has also partnered with multiple residential properties.

This week also saw C3 expand for the first time outside of the United States, to the United Arab Emirates. Via a partnership with ghost kitchen network Kitopi, C3’s virtual restaurants will be available through the UAE as of this coming summer.