According to a report this week in the Wall Street Journal, food delivery startup Wonder is laying off employees and will begin to phase out its signature food delivery trucks in the hopes of creating a lower-cost operating model.
This is a massive shift for a company that became the talk of the food delivery business for a high-touch approach built around its delivery vehicles. Wonder not only brought the food to a customer’s home, but it cooked it curbside in vans that had become ubiquitous over the past year and a half in the North Jersey market in which it operates.
According to the Journal, the company will pivot to a more conventional ghost kitchen model, operating ten kitchens around New Jersey and New York. In addition to delivery, Wonder will offer in-location dining and pickup at locations.
Tightening venture capital markets have cast a pall over the startup world over the past 12 months, and today’s news suggests that even superstar fundraisers like Wonder founder Marc Lore aren’t immune to investors’ darkening moods. It had always been an open question whether Lore could continue to raise enough money for an operating model that looked incredibly expensive from the outside, and now it looks like we have our answer.
Lore told the Journal he believed the current model would require another $1 billion in investment over the next two years to expand its mobile truck fleet. Lore now hopes to raise $350 million over the same time period.
In some ways, Wonder’s pivot is reminiscent of Zume, another high-flying startup that used custom-made delivery trucks and raised hundreds of millions of dollars. Zume, which made pizzas using robotic technology in central locations, used its customized delivery trucks with built-in pizza ovens to cook food on the way to customers. By early 2020, the company had run into financial problems and started pivoting away from its food trucks. It wasn’t long before Zume gave up on pizzas altogether, and today the company is a compostable food packaging company.
Now, the question for Wonder going forward is whether it will be able to maintain its momentum with customers in its current markets without the part of its business that most sets it apart from traditional delivery. Wonder has been extremely popular in the market it operates in, in large part due to the high quality and white-glove service enabled by its trucks.
Without that, will Wonder become just another – albeit very expensive – ghost kitchen startup? Only time will tell.