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Daily news and analysis about the food tech revolution

virtual restaurants

Restaurants Hate Third-Party Delivery Services, Actually

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When it comes to talking about the year 2020, one of the things third-party delivery services like to say is that they were “a lifeline” for restaurants that might have otherwise had to shutter permanently due to dining room closures and restrictions. 

Plenty have disputed this over the last several months. But perhaps no one has lately been more to-the-point about the matter than Recode’s Kara Swisher, who hosted Uber CEO Dara Khosrowshahi on her Sway podcast this week.

“You’re not allowed to get away with saying you’ve been a lifeline to restaurants,” she told Khosrowshahi early on.

Swisher noted the oft-cited figure, that delivery services charge restaurants commission fees of up to 30 percent of a single transaction for use of their services. Khosrowshahi countered by saying Swisher’s math was “incomplete” and that the 30 percent is “untruthful” when it comes to representing what restaurants are actually on the hook to pay delivery services. According to his math, restaurants pay Uber Eats 13 percent per transaction “net of the courier.” If restaurants want to use their own couriers, the commission cost is “about 15 percent.”

But as Swisher suggested, even those lower numbers are harmful to restaurants, which typically operate off margins that are about 3 to 5 percent. That irreconcilable math is one of the reasons cities across the U.S. have introduced mandatory caps on commission fees, some as low as 10 percent.

Pre-pandemic, the argument was that if a restaurant took issue with high commission fees, they could simply opt out of doing delivery. That argument holds no water now, though, since the pandemic essentially forced restaurants into doing delivery and most do not have the money or expertise to build an in-house delivery business. Actually, most can’t even afford their own courier fleet.

It’s also worth pointing out that while Khosrowshahi called the 30 percent commission fee “untruthful,” he never actually offered a hard number around how high an Uber Eats commission fee reaches when a restaurant is using a courier, as most are. If anything, his cagey response of “13 percent net of the courier” seems to confirm the 30 percent commission fee’s existence.

Uber Eats had a big year in 2020. It more than doubled its revenues and even acquired a competitor, Postmates, towards the end of the year. Khosrowshahi himself said the service had a $40 billion-plus run rate and would be larger than the company’s mobility business in 2021.

Conversely, the restaurant industry has lost $240 billion in sales and is still 2.5 million jobs below pre-pandemic levels, according to the National Restaurant Association. A total of 110,000 restaurants in the U.S. have closed, which is about 17 percent of the nation’s restaurants total.

Khosrowshahi defended his company’s approach to restaurant commissions, using words like “reasonable” and “fair” to describe them. To which Swisher simply pointed out that most restaurants she speaks with disagree, and only use the Uber Eats and Caviars of the world because the pandemic has forced them to.

“They hate you,” she concluded, flatly, before using the phrase “menace economy” to describe the environment in which restaurants must now operate to stay in business.

Here’s How the Restaurant Biz Survived 2020

I know most of you would rather forget 2020 ever happened, but it never hurts to look back before going forward, which is just what the National Restaurant Association did this week. The trade group published a list of top trends it says kept many restaurants in business last year while the pandemic wreaked havoc on the industry.

The 10 trends that made the list were based on those found in a survey The Association did of more than 6,000 restaurants and 1,000 adults. The majority of the trends on the list are directly related to helping restaurants “keep their businesses open and employees on the payroll,” as The Association puts it.

The full research post is worth a read. This being The Spoon, I’ll highlight a few items that made the list that illustrate how tech-forward the pandemic has made the restaurant biz in recent months:

  • “Streamlined menus.” Part of this is related to the actual food: restaurants needed a way to reduce inventories and fulfill items faster, and “pare down your menu” became a mantra for many early on in the pandemic. However, streamlined menus also have to do with offering food that travels well, for pickup and delivery orders, and not overwhelming digital customers with choice paralysis as they view menus via their own mobile devices.
  • “Off-premises foodservice takes precedence.” The Association noted that before the pandemic, 80 percent of full-service restaurant traffic was on-premises. The change restaurants were forced to make to delivery and takeout formats in March, when shutdowns first started, rippled across the entire industry and is now more or less ingrained in operations. Which is to say, even when restaurants are operating at full dining room capacity once again, off-premises will be an important part of any restaurant’s strategy. 
  • “Selling groceries.” This started early in the pandemic when restaurants began selling inventory unused because of shutdowns, and doing so via off-premises channels like delivery and drive-thru. The Association’s survey found that “more than half of consumers” would consider buying grocery staples (produce, dairy, meat) from restaurants themselves if those items were offered. Little wonder, then, that third-party delivery services like DoorDash and Uber Eats added grocery delivery to their businesses in 2020.

Other trends in the restaurant industry — ghost kitchens, virtual restaurants, better back-of-house tech — are woven into the more general trends on The Association’s list. For example, a shift to off-premises foodservice will inevitably mean more ghost kitchens. Pull up a virtual restaurant menu from just about anyone these days and you’ll find it’s decidedly streamlined. 

“We now know that three things are certain: the pandemic tested the limits of operator creativity and knowhow, accelerated tech adoption and emerging trends, and confirmed that customers sorely miss their restaurant experiences,” says the report.

With a widespread vaccine still months away (at least) and restrictions still in place for the majority of dining rooms, these trends that helped us survive 2020 will also start to shape 2021 and beyond. 

Restaurant Tech ‘Round the Web

Panera is the latest major chain to announce plans to go all-in on ghost kitchens. The brand said this week it also has mobile kitchens, redesigned drive-thru lanes, and a virtual catering business in the works.

Fat Brands, meanwhile, is doubling-down on its existing ghost kitchen strategy. The company said at an ICR presentation this week that it plans to open a dozen ghost kitchens in 2021.

Restaurant tech provider Perfect Company raised $6 million for its solution that brings automation to the front of house, back of house, ghost kitchens, convenience stores, and other foodservice areas. 

C3 Acquires Shuttered Specialty’s Locations to Launch Virtual Restaurants

One thing the restaurant industry has in abundance right now is underutilized kitchen space. A lot of that extra space unfortunately exists because of widespread restaurant closures that are permanent. The small silver lining here is that some of that space is actually getting repurposed for the restaurant biz as ghost kitchens and virtual brands continue to grow in popularity.

Case in point: the Specialty’s Café & Bakery chain shuttered permanently in May of 2020 because of “current market conditions attributed to COVID-19 and shelter-in-place policies.” Today, digital kitchen platform C3 (Creating Culinary Communities) announced it has acquired 22 former Specialty’s locations and will use the spaces to launch a new digital brand, EllaMia.

The locations will also house other C3 brands, which include Unami Burger, Krispy Rice, and Sam’s Crispy Chicken. The idea is to house multiple virtual restaurant concepts under one roof, essentially turning each of those shuttered Specialty’s locations into a mini food hall. Users can bundle items from all of the different concepts at a particular location into a single order, which is placed and paid for via the C3 app. Orders will also be available for pickup.

The draw of repurposing underutilized kitchen space, rather than renting infrastructure from a more traditional commissary, is that it is potentially much cheaper for digital restaurant companies like C3. Existing kitchen spaces usually come with a good amount of the physical kitchen infrastructure built in. Many other companies are also taking advantage of the concept, including Ordermark/NextBite, which pairs restaurants with unused kitchen spaces, and Fat Brands.

C3 founder and CEO Sam Nazarian said in today’s press release that underutilized kitchen space is “key to the C3 model” and that this new endeavor means “operating 100 distinct dining concepts in a third of the space required by a traditional restaurant.”

The EllaMia concept, meanwhile, has two existing locations, in Dubai and London. The first of these new U.S. locations will open in February at former Specialty’s in Chicago, Seattle, San Diego, the San Francisco Bay Area, and Orange County.

3 More Restaurant Biz Predictions for 2021

Even in the best of times (not a pandemic) making industry-wide predictions is kind of a guessing game. After all, anything can happen, a point underscored by the restaurant industry’s COVID-19-induced meltdown followed by a seismic shift to off-premises formats. 

One thing we do know with certainty as we head into the new year is that those off-premises formats — delivery, takeout, drive-thru — are here to stay. So with that in mind, here are a few mini-predictions for 2021 that suggest how restaurants might further adapt to these new formats.

An overwhelming number of virtual restaurants will surface.

Some good news is that practically anyone can start a virtual restaurant brand. Some bad news is that everyone from established restaurants to celebrities to random internet stars is doing just that, quickly saturating the market in the process.

This is likely to increase, especially in the first half of 2021. However, there is a huge difference between launching a chicken wings brand and maintaining a successful, even profitable, concept for the long term. Over the next 12 months, we will learn more about what it takes to achieve the latter. In the process, many, many virtual brands will come and go.

There will be more off-premises options for high-end restaurants.

Full-service, high-end restaurants were hit hardest by the pandemic in 2020, since those experiences have historically relied on the full dining room experience to reach customers. 

But towards the end of 2020, we got a glimpse of how these restaurants might both survive and prosper in a restaurant industry that’s irrevocably shifted to meal formats like delivery and takeout. Lunchbox and C3 launched a virtual food hall for fine dining, and Crave Collective showed us what an entire ghost kitchen operation for such restaurants would look like. 

Rather than try to replicate existing fine-dining experiences in a to-go box, concepts like those of Lunchbox and Crave work with the chefs to imagine new ones that maintain a higher-end feel while being simpler and more travel friendly.

Expect more virtual food halls and ghost kitchens dedicated to higher-end dining to emerge in 2021, and more restaurants to take a chance with these formats. 

Cell-based meat will come to more restaurants. 

At the end of 2020, Singapore-based 1880 became the world’s first restaurant to sell cultured meat via a partnership with Eat Just. The combination restaurant/club/social enterprise threw a launch party for Eat Just’s GOOD Meat cultured chicken and will carry it on the menu in some capacity moving forward.

Restaurants are a logical stop for cell-based meat companies on the road from lab prototype to mainstream staple because they have historically always played a role in consumers’ eating behaviors and patterns. 

Just Eat isn’t the only cell-based meat company currently in restaurants. In Tel Aviv, Israel, Supermeat has its own test kitchen-turned restaurant called The Chicken that invites consumers to dine on cell-based meat in exchange for feedback.

More restaurants around the world will play host similar developments in 2021. 

MrBeast Burgers’ Overnight Success Actually Holds Some Lessons for Aspiring Virtual Restaurants

You know the virtual restaurant movement is catching on when a famous YouTuber gets involved and their efforts are a massive overnight success. This week, Jimmy “MrBeast” Donaldson, teamed up with a company called Virtual Dining Concepts and launched a virtual restaurant brand called MrBeast Burgers. The restaurant is already serving 300 locations across the U.S., according to a press release sent to The Spoon and a very excited tweet from Donaldson from the weekend:

Donaldson is a YouTuber who is as famous at this point for his large charitable donations and other philanthropy as he is for his online stunts. He unveiled MrBeast Burgers over the weekend via his own YouTube channel and a one-day pop-up event in Wilson, North Carolina, where he gave free food to, well, thousands, it seems, along with some iPads, cash, and a new car.

Those interested can get the delivery-only menu via the MrBeast app and on the major third-party delivery platforms. Virtual Dining Concepts said in this week’s press release that it worked with Donaldson’s team to create the menu, which includes burgers, chicken sandwiches, fries, and other quick-service staples. 

Restaurants can add the MrBeast menu to their existing operations and essentially run the restaurant out of their own kitchen. The concept isn’t brand new. Wow Bao and others have been running similar “dark kitchen” businesses for some time. However, the MrBeast brand’s popularity may push the concept into the mainstream, given the practically overnight popularity of the initiative.

As to the quality of the actual food, the initial response is a patchwork at best. My very unscientific glance at some recent tweets turned up everything from complaints about the high prices and uncooked meat to high praise and overseas followers begging for international locations.

Even so, the whole thing is another piece of evidence that branding is critical for virtual restaurants to be a success. We talked about that at length a couple weeks ago at our ghost kitchen event (you can view the sessions here), with the majority of restaurant industry panelists agreeing that it’s much easier to start a virtual restaurant operation when you have an existing platform and recognition. Otherwise you’re just the random dude who wants to sell chicken wings but can’t stand out from the masses of folks trying to do the same thing.

Jimmy Donaldson is not a chef, but nor is he a random dude, as his nearly 49 million YouTube following can attest. But overnight success and longevity are two distinctly different things. The big takeaway here for anyone wanting to launch a virtual restaurant is that the food, customer service, speed, and efficiency matter more than ever in today’s to-go focused restaurant industry. Fifty million fans is one thing. Fifty million fans that love you because of your food is an entirely different, and more difficult, feat to pull off.

‘Just Do What Domino’s Did’ – Takeaways From The Spoon’s Ghost Kitchen Deep Dive

It’s our weekend restaurant tech news wrapup. You can subscribe to our newsletter here to get this delivered to your inbox.

And now for some final thoughts on The Spoon’s ghost kitchen event, which we held this past Wednesday.

For the (virtual) event, we gathered restaurant operators, tech companies, ghost kitchen infrastructure providers, and thought leaders together to discuss not just the promise ghost kitchens hold for restaurants, but also the realities those businesses must face when using this model.

Last week, I covered a couple of the major points made at the event around building a virtual restaurant brand and the risks of relying on a 100-percent delivery-only operation. 

To top that off, here are a few more noteworthy points raised by event panelists and attendees throughout the day:

Ghost kitchens and virtual restaurants are here to stay. Many of the developments in recent months have been in reaction to the pandemic, but the ensuing focus on ghost kitchens, delivery, and virtual restaurants will stay long after vaccines have been administered. Huge numbers of consumers have found new ways to interact with food via online channels. Even when it’s safe to dine inside a restaurant again , those new behaviors will continue driving the industry towards the off-premises model.

There is a lot of under-utilized kitchen space out there. From extra space in existing restaurant kitchens to hotel facilities to coffeeshops not open during dinner time, plenty of kitchen infrastructure already exists for restaurants to turn into a ghost or dark kitchen operation. The benefit of this route, versus renting space for a commissary, is that restaurants can leverage fixed costs that are already there. For example, if you are running a virtual brand out of an unused part of your own kitchen, you’re not paying for additional electricity, staff, or equipment. As restaurants plan for off-premises orders and virtual brands, they should consider the infrastructure assets they already have as an important factor in determining how to approach the ghost kitchen question. 

Third-party delivery: Love it or hate it, we still need it. More than one panelist felt that, despite high commission fees, restaurants need third-party delivery services right now. Some went as far as to say the industry would have been decimated over the last nine months without them. Others said restaurants need third-party delivery services in the initial stages of an off-premises/ghost kitchen strategy because of the visibility these services are able to provide via their online marketplaces. 

However, restaurants absolutely must invest in their own native delivery platforms. After a restaurant has attracted an initial following on a third-party marketplace, the big challenge is converting repeat customers to one’s own website and getting them to place orders there. A good deal of marketing and communication has to go into this process, not to mention investing in actually building out that direct channel. Technologically speaking, this is very expensive, but numerous companies exist that help power the back end of native storefronts without demanding 30 percent of each transaction.

Just do what Domino’s did. Quote of the day goes to Lunchbox’s Nabeel Alamgir, who said, “The best thing you can ever do is just do what Domino’s did—invest in it 20 or 30 years before everyone else did.” Of course, he quickly followed up with some actionable advice about delivery and ghost kitchens. But his half-joking, half-serious comment also serves as a reminder and a call to action to the entire industry to keep on innovating, even — nay, especially — amid the uncertainty that has defined the restaurant biz in 2020.

Data :Full-Service Restaurants Are Still Flailing When It Comes to Sales

Apparently it was the week for new data on just how badly the restaurant industry is struggling right now, especially when it comes to full-service restaurants. Payments company TableSafe just released data that found transaction volumes at full-service restaurants declined to 50 percent of pre-pandemic levels in November after recovering 60 percent of pre-pandemic levels in October. 

These numbers follow those from Black Box Intelligence, which found same-store sales growth at restaurants at -10.3 percent, a 3.8 percentage drop from October’s year-over-year sales growth rate. Black Box Intelligence called November “the worst month for the industry since August based on year-over-year losses in sales and traffic.” Sales may continue their decline in the coming months, too.

Both those reports coincide with the National Restaurant Association’s recent letter to Congressional leadership that detailed the rapid economic decline of the restaurant industry and more or less pled for restaurant relief from Congress. 

All this data is also coming at a time when cities around the country are operating under indoor dining restrictions and cold weather has made outdoor seating a non-option for many. 

We’ve said many times before that continued focus on off-premises channels — takeout, delivery, drive-thru (where applicable) — should be a priority for restaurants, both as a short-term response to the pandemic and as a longer-term play. Off-premises channels won’t provide the same level of assistance as, say, stimulus relief or a bailout, but they can provide an avenue to extra revenue that, judging from the above data, is badly needed right now.

Restaurant Tech ‘Round the Web

Hand-hygiene system PathSpot this week announced an ongoing partnership with Opus, which makes a text-based training tool for employees. Together, the two companies will provide a more comprehensive onboarding and training program for restaurants using PathSpot’s device in their stores. 

Can’t go out for a holiday steak? Restaurant chain Ted’s Montana Grill will deliver it to you via its new Butcher Shoppe service. Customers can buy bison and premium beef as individual steaks, fresh grind, and specialty boxes via the new e-commerce site. All orders arrive fresh the next day.

Guardian writer Oliver Holmes got a chance to head over to The Chicken, a restaurant in Israel that happens to be the world’s first location for testing cell-based meat in a restaurant setting. Check Holmes’ review of his experience and the food here for a meaty (sorry, not sorry) weekend read.

Event Wrap: Restaurants Still Need Brand Equity, Brick and Mortar in a Ghost Kitchen Strategy

This week, The Spoon gathered a wide variety of restaurant industry players together to discuss the most pressing questions the restaurant biz faces right now around ghost kitchen adoption. Throughout the day-long virtual event, restaurant operators, tech companies, virtual restaurant owners, and ghost kitchen providers themselves weighed in on a range of topics, from the economics of going the ghost kitchen route to building a delivery-friendly menu to the tech powering the concept.

One of the most recurring questions to surface during the event was this: Do you still need a physical restaurant in order to make the economics of a ghost kitchen operation work?

Panelists almost unanimously agreed that, at least right now, you do.

“If you go on a delivery app only and you don’t have a brick-and-mortar presence, you better have brand equity,” Andy Wiederhorn, CEO of Fat Brands, emphatically stated during the event. And that brand equity is not easy to build. (More on that in a minute.)

Others pointed to the industry’s reliance on third-party delivery apps (DoorDash, Uber Eats, etc.) as a huge hurdle to running a 100 percent delivery-only restaurant that actually makes money. “When you move 100 percent delivery only, the economics you have with third-party platforms is going to matter more,” said Kristin Barnett, Head of Strategy for NYC-based Zuul Kitchens. On the same panel, Kitopi cofounder and chief revenue officer Bader Atul agreed there is a “strain on profitability” when you attempt to limit a restaurant’s entire existence to third-party delivery apps. This is because it’s difficult to offset the sky-high and highly controversial commission fees delivery services charge restaurants (up to 30 percent per transaction, in some cases).

For now, at least, restaurants should consider what multiple panelists called the “omnichannel” approach. Some ghost kitchens, like those of Kitchen United and Boise’s recently opened Crave Collective facility, offer pickup options in addition to delivery. Big brands, meanwhile, have the obvious advantage here, since they have deep pockets and a long history of brick-and-mortar business to go alongside delivery. If they’re not already in a certain market, as Chick-fil-a wasn’t when it started serving the California Peninsula area via its DoorDash Kitchens operation, existing brick-and-mortar presence elsewhere can offset the cost.  However, Zuul’s Barnett pointed out that smaller restaurant chains, such as those that operate out of Zuul, can also take advantage of the omnichannel approach. 

Other ghost kitchen providers, including Kitopi and Reef, operate off an entirely different model from the normal commissary kitchen by handling all of the operations of fulfilling an order and the restaurant gets a royalty fee. This method provides restaurants the opportunity of trying a ghost kitchen operation out without having to commit their own labor to the process.

Still others, including Alex Canter of Ordermark and Nextbite, suggested we are fast-headed towards a day when running a 100-percent delivery-only restaurant will be not just feasible but the norm. Nextbite, one of his companies, operates a portfolio of delivery-only brands and helps restaurants add these brands to their own operations. During this week’s event, Canter referenced one Nextbite client that had incorporated five of those virtual concepts into their restaurant and were doing “10 to 15 times more revenue through those brands” than via their own. He said more and more, his company hears clients ask whether they even need their brick-and-mortar stores anymore.

But part of the success of a virtual brand will depend on how well it can build the aforementioned brand equity—another major takeaway from this week’s event.

Multiple panelists agreed that running a restaurant out of a ghost kitchen is more than simply sticking a menu online and waiting for the customers to come. They won’t, if an online menu is the long and short of your branding efforts. Just as with brick-and-mortar restaurants, virtual eateries in ghost kitchens and/or dark kitchens need their own “brand identity,” to use a marketing cliche, something that sets it apart from the dozens of other similar options out there.

We returned to a chicken wings example again and again throughout the day. Your virtual chicken wings joint needs a compelling story around its origins, ingredients, and even basic marketing components like name and visual representation. Without those brand identity elements, your virtual chicken wings restaurant has little chance of standing out amid the dozens of other chicken wing offerings on delivery marketplaces. See ClusterTruck, who was at our event, as an example of a company that has mastered the art and science of branding a virtual restaurant.

Our event covered dozens of other topics outside of these two big takeaways. To watch videos of the panels and access more content, head over to our Spoon Plus channel and become a subscriber.

New Restaurant Restrictions Put the Value of Restaurant Tech to the Test

States and cities across the U.S. have imposed new restrictions and in some cases lockdowns that will once again shutter indoor dining. As they’ve done in the past, these restrictions once again call into question how restaurant tech can help restaurants pandemic-proof themselves and stay in business.

A stay-at-home order for Chicago residents goes into effect today. Restaurants must close by 11 p.m. each night and may only offer delivery, takeout, and outdoor seating. The city didn’t completely shutter indoor dining; it’s allowed so long as tables are within eight feet of an open window. But given Chicago’s typical wintertime temperatures, neither that nor patio seating will likely be popular options for diners right now.

New Mexico, and Oregon have imposed far tighter restrictions. Effective last week, Oregon restaurants and bars must return to takeout- and delivery-only service. New Mexico has similar restrictions as residents shelter under a two-week-long stay-at-home order.

Likewise, restaurants in Washington State and Michigan must halt indoor dining and stick to takeout and delivery models. Other states, including Minnesota and New York, have imposed curfews on restaurants, and for everyone, the threat of another lockdown looms large.

One difference this time around is that unlike in March, restaurants have more tools at their disposal when it comes to fulfilling off-premises orders. Since the early days of the pandemic, most restaurant tech companies have offered so-called “contactless” solutions that minimize human-to-human contact. Some parts of those packages, like QR-code-based ordering for the dining room, will be of little help right now, since there is no dining room in many places. But other features, such as software to power online order processing, could help restaurants fulfill takeout tickets faster and in a more organized fashion. Elsewhere, delivery integrators a la Chowly and ChowNow are now more widely used than in March and help restaurants manage delivery orders coming through multiple sales channels (DoorDash vs. Uber Eats vs. Caviar, for example). 

The option to go virtual is also more widely available. That point was underscored recently in the massive $120 million sum Ordermark raised for its NextBite platform, which pairs restaurants with kitchen space to help them develop and operate virtual restaurant brands. Along those lines, countless options for ghost kitchens have sprung up from the likes of Zuul, Virtual Kitchen, ShiftPixy, and many others. Still others, like restaurant chain Wow Bao, offer creative takes on the ghost kitchen/virtual restaurant concept that could benefit not only themselves but other local restaurants.

These and other tech solutions will undoubtedly help restaurants as they navigate new lockdowns and restrictions. The unknown factor is whether they will be enough. Big-name QSR brands have the deep pockets to turn their drive-thrus into digital innovation centers and reinvent their physical footprints, and restaurants with a certain level of demand will find ghost kitchens useful for pandemic-proofing operations. 

The indie restaurants will, however, struggle more than any other restaurant type. These are businesses that have neither the money to invest in sophisticated tech solutions nor the demand to justify a big ghost kitchen operation. Fee caps may help as far as delivery orders go: cities across the country have implemented mandatory caps on the commission fess third-party delivery services can charge these businesses, and if stricter lockdowns ensue, other municipalities may do the same. 

None of this guarantees a future for independent restaurants. One thing that hasn’t changed, not yet anyway, between previous spikes in the pandemic and this one is that off-premises remains a lifeline for restaurants, not the lifeline. Many restaurants still grapple with the fact that they were built — from the food they serve to the atmosphere they provide — for an on-premises experience. Developments to turn on-premises experiences into those suited for takeout and delivery are moving fast. Unfortunately, the pandemic is moving faster. Seen in that light, restaurant tech’s big priority right now should be helping smaller restaurants complete the transition from the dining room to the living room.

Mobile Servers and Menu Innovation: Crave’s Virtual Food Hall Brings Fine Dining to the Delivery Realm

A new concept is taking shape in the world of virtual restaurants: the fine-dining virtual food hall. That idea might have been outrageous one year ago, but it’s practically necessity now, thanks to the pandemic-induced meltdown of the restaurant industry. In response, third-party hospitality and restaurant tech companies are emerging to assist these high-end concepts with the makeover they need to exist — and, more importantly, thrive — in an off-premises-centric world.

One such concept comes from Crave Hospitality Group, which will officially launch its first ghost kitchen-meets-virtual restaurant initiative in Boise, Idaho next month.

On a call last week, Crave cofounder Devin Wade talked me through the details of the operation, which he says is “hard to categorize” but probably closest to a “virtual food hall” in name. The Boise facility will house 16 restaurant concepts, including ones from James Beard nominee Lincoln Carson, Food Network Pizza Champions Challenge gold medalist Tony Gemignani, and award-winning restauranteur Michael Mina.

Chefs and their culinary teams cook and prepare the food, assisted by a tech stack that manages order fulfillment and deliveries. On the consumer-facing side, guests ordering through the Crave app can mix and match their menu choices, bundling different meals from different concepts into the same order. Food is delivered via Crave’s own fleet of drivers, and there is also a pickup option. 

The official launch of the Boise location comes as full-service restaurants, including fine and higher-end ones, faces more permanent closures and, in some cities, new restrictions. The most recent numbers from the Independent Restaurant Coalition note that revenues for these businesses still “remain 60 percent lower on average than last year’s levels, with many remaining closed at a 100 percent reduction in revenue.”

The high-end restaurant experience faces an additional challenge: it is designed for a dining room, not a to-go box.

That’s a problem Wade said he had been thinking about long before COVID-19. As delivery and ghost kitchens grew in popularity over the last few years, he kept returning to the issue that delivery as-is would not work for high-end dining, and that there had to be a model where the relationships between chefs, their restaurants, kitchen providers, and delivery services was based on collaboration rather than the obsession with speed and efficiency. 

Menu design was one major consideration. Award-winning chefs are “known for certain dishes,” according to Wade, which had to be accounted for on the menu. At the same time, Wade pointed out the inherently creative nature of chefs, and that this asset led the company to work with its chosen restaurant concepts on new menu items “designed to travel.”

Crave also built its own proprietary tech stack to power the Boise facility that includes everything from order processing for back-of-house management, like designating fire times for each individual food item in process. Wade says the goal of Crave’s technology is “Using tech not to dominate and push [chefs] away but to extend their food outside their restaurants.”

Part of that extension, of course, is getting the food through the actual last mile of delivery. Here, too, Crave is aiming to replicate the fine-dining experience in a to-go setting. Instead of using DoorDash or Uber Eats drivers, Crave employs its own couriers, which it calls “mobile servers.” They are W-2 employees, and many are former servers out of work because of the pandemic. They work regular hours, earn server-level wages, and follow many of the same processes they would inside a brick-and-mortar restaurant. For instance, servers meet before each dinner service so chefs can go through the night’s features. “They should know customers names, suggest a follow-up item [to customers],” says Wade, adding that the whole point is to mimic the customer-server relationship that takes place in a restaurant. 

The concept is practically unheard of in the world of delivery, where nowadays many customers hit the “contactless” option in their delivery app and expect food to be dropped on the doorstep. The idea of getting to know your delivery driver seems counterintuitive to social distancing, but the decision to go this route also seems like something of a long-term play for Crave and its restaurant partners. Fear of human-to-human interaction won’t permeate the restaurant experience forever. Delivery, on the other hand, is here to stay. Over time, Crave’s efforts to mimic the server-customer relationship for delivery orders could be a bridge between those two factors.

We will have a better idea of the concept’s short-term success over the next few months. The Boise operation, which Crave has been piloting since June, just moved into its permanent space and will have its grand opening on November 17. From there, Crave plans to scale quickly: Wade says the company already has the next 15 locations mapped out, with four deals already well underway, two in the Dallas, Texas area and two in Salt Lake City, Utah.

Right now, Crave doesn’t have any real competitors in terms of operating a virtual food hall like a fine-dining restaurant. Lunchbox recently teamed up with C3 for a high-end food hall, but the higher-end part of that concept exists mostly in the food itself.

That makes Crave a rather unique player in an increasingly crowded world of ghost kitchens and virtual food halls. If its approach to delivery proves profitable for those involved, full-service restaurants may discover they have one more option when it comes to keeping the lights on during the ongoing fallout.

Ordermark Raises $120M to Build More Virtual Restaurants

Restaurant tech company Ordermark announced today it has raised a $120 million Series C round led by the Softbank Vision Fund with participation from existing investor Act One Ventures. According to a press release sent to The Spoon, Ordermark will use the new funds to “help more restaurants transition to online ordering during the COVID-19 pandemic and beyond.”

Ordermark has been helping restaurants incorporate off-premises orders into their operations since long before the pandemic. The company’s hardware-software combo consolidates all order tickets (delivery, takeout, in-house, etc.) into a single channel to make the management of these tickets easier for restaurant staff.

The company has also been something of a trailblazer in the world of virtual restaurants through its Nextbite platform, which is Ordermark’s portfolio of delivery-only brands. Most recently, Nextbite launched rapper Wiz Khalifa’s Hotbox restaurant concept, much to the delight of munchies fans everywhere.

Ordermark/Nextbite relies on underutilized kitchen space in restaurants to fulfill orders for these virtual brands, which gives the restaurants themselves a chance to build up some incremental revenue. While today’s press release did not specifically name new brands or restaurant partners, the company is clearly looking to build out this virtual restaurant portfolio. Jeff Housenbold, Managing Partner at SoftBank Investment Advisers, said in the release that Softbank will “support [Ordermark’s] mission to help independent restaurants optimize online ordering and generate incremental revenue from under-utilized kitchens.”

Alex Canter, Ordermark’s cofounder and CEO, added that restaurants “must get creative by embracing technology and new sources of revenue generation to reach customers outside of their four walls.”

Ordermark said that since the start of the COVID-19 pandemic, Nextbite has launched 15 brands and has added over 1,000 delivery-only restaurants nationwide.

Lunchbox Partners With C3 to Launch a Virtual Food Hall for High-End Meals

Online ordering platform Lunchbox announced today it has teamed up with virtual kitchen company C3 (Creating Culinary Communities) to create a virtual food hall, much of it devoted to higher-end eats from top chefs. C3 will use Lunchbox’s restaurant tech platform to power the food hall, which will unite C3’s brands under a single ordering interface.

C3, which is a partnership between SBE Entertainment Group, shopping mall company Simon, and Accor Hospitality Group, operates a network of ghost kitchens and delivery-only restaurant brands. Virtual brands currently include the delivery-only version of the popular Unami Burger, a plant-based concept in collaboration with Impossible Foods called Plant Nation, and a caviar bar called 12 Chairs, among others. The bulk of C3’s restaurant brands are, in the company’s own words, “higher-end meals that can withstand 30-minute delivery routes.” Hence the caviar bar. C3 said it also plans to launch seven additional brands in the coming months and have 200 digital kitchens in operation by the end of the year.

The partnership with Lunchbox will give C3 the technology chops to bring its many restaurant brands under a single virtual roof. Customers will be able to browse and purchase meals from all C3 brands via the Lunchbox interface. That includes group orders from multiple restaurants. 

Lunchbox’s software bundles together digital order processing, loyalty programs, delivery dispatch, marketing, analytics, and more into a single interface which restaurants pay a flat monthly fee to use. The company raised $2 million in February of this year and has multiple partnerships with other restaurant tech companies, including Ordermark and Toast.

Virtual food halls seem an obvious next step, what with the pandemic shuttering restaurants left and right and businesses basically being forced to work in off-premises formats. Last month, NYC-based Zuul launched its own virtual food hall to accompany its ghost kitchen network, and Texas-based grocery chain H-E-B recently unveiled a hybrid grocery store and food hall available for takeout and delivery.

If it proves popular, C3’s virtual network for higher-end foods could provide some blueprint materials for other full-service restaurants, which have been hit the hardest by industry-wide shutdowns. Much of that will depend on the type of food these high-end restaurants are serving, and if they can alter their menus to accommodate some transit. It’s not ideal for these types of restaurants, which were crated around the dine-in experience, but it’s at least some lifeline in these perpetually uncertain times.

NYC Ghost Kitchen Company Zuul Launches a Virtual Food Hall

NYC-based ghost kitchen operator Zuul announced this week that its virtual food hall, Zuul Market, is now live.

The new initiative is a cross between an online marketplace and a white-label delivery platform. The marketplace sells a limited number of items from restaurants that are currently members of Zuul’s ghost kitchen facility in SoHo, including Junzi Kitchen, Stone Bridge Pizza & Salad, and Sarge’s Deli. Zuul has also worked with its member restaurants to co-create virtual brands, which are also available through the marketplace. For example, Stone Bridge also operates the virtual-only Rival Sandwich Co.

All food is prepped and cooked in the SoHo kitchen facility. Zuul then delivers the food at scheduled times to drop-off points located in office buildings as well as residential properties around NYC. Zuul controls the entire process, from order processing to fulfillment to the last-mile delivery.

The idea is to provide a more efficient system for delivery, where meals from multiple restaurants going to multiple different people can be bulked together and taken to a single location. To do this effectively, Zuul has partnered with Silverstein Properties and Broad Street Development, both major property developers in NYC that own both office buildings and residential properties. Zuul Market menus will be available to residents and employees throughout those companies’ properties. For example, Silverstein integrated Zuul Market into its Inspire app for tenants as a building-wide amenity across its buildings. 

How successful this delivery strategy is in office buildings depends a lot on how many people actually wind up going back to the office. Right now, it’s not many. But residential properties could be a lucrative area for delivery and commerce during the pandemic, and probably after. Folks are spending more time at home these days, and with colder weather coming, that’s likely to increase. So whether it’s automated convenience stores, contact-free delivery pods a la Minnow, or a virtual marketplace like Zuul’s, more and more companies are finding new ways to bring the restaurant experience into the home. 

Zuul said it plans to build additional food hall partnerships with both restaurants and properties in addition to more ghost kitchen facilities across NYC in the future.

Kbox Global Raises £12M to Expand Its Virtual Restaurant Network

Virtual restaurant platform Kbox Global announced this week it has raised £12 million (~$15.5 million USD) to expand its food delivery concept. The round was led by London-based venture firm Balderton Capital, according to a press release sent to The Spoon.

Founded in 2019 in London, Kbox operates more than 30 delivery-only restaurant brands. It licenses these brands, along with a technology stack, to restaurants and other foodservice operations looking for incremental revenue to add to their businesses.  

To do this, Kbox assesses each restaurant, including its location and main demographic, then uses those factors to choose the most relevant virtual restaurant brands for the business to offer. Restaurants cook and fulfill the orders themselves, with their existing staff, while Kbox’s tech stack integrates with third-party delivery services that handle the last mile of the delivery.

The company says there are no upfront fees for restaurants looking to utilize this concept, which is a way for restaurants to diversify their food offerings without investing in a full brick-and-mortar operation. In essence, restaurants are turning themselves into ghost kitchens for Kbox brands by partnering with the company.

The idea of one restaurant licensing and running a completely different brand from a third-party is a more recent development in the world of ghost kitchens, though Kbox isn’t alone in expanding the concept. Chicago-based Wow Bao said in April it was licensing its own menu to other restaurant brands in much the same manner as Kbox. Some Fatburger locations double as ghost kitchens for the chain’s sister brand Hurricane Grill & Wings. And let’s not forget about the celebrities launching their own virtual restaurant brands that existing businesses cook and fulfill. 

Needless to say, restaurants need any extra revenue they can get right now, thanks to the pandemic shuttering dining rooms left and right and all but forcing many brands to go the ghost kitchen route. However, we’ve yet to see many numbers about how financially fruitful it is to run a third-party brand out of one’s own restaurant kitchen.

For its part, Kbox says it is on track to have 2,000 of these kitchens in the UK before the end of 2021, and is also in the midst of an international expansion. The company has franchise agreements in Australia and India and says operations will launch in another eight countries at some point next year. The new capital from Balderton will support this expansion, as well as help Kbox establish a presence in the U.S. in earl 2021.