TREND
A growing number of operators are creating new virtual restaurant brands, available for delivery only. Basically, instead of offering the same menu in the restaurant and on delivery platforms, restaurant companies are creating a completely new menu with food items optimized for delivery.
The idea behind virtual restaurants is for operators to diversify their offering, streamline operations and ensure high quality and great taste upon delivery.
The already established coverage of the market by food delivery platforms makes the launch of a virtual restaurant brand easier and less capital intensive than the launch of a traditional dine-in restaurant. The only part of the puzzle left to figure out, is how to make the food taste as good when it arrives at your door 30 minutes after leaving the kitchen, as it would if you sat in the dining room right next to the kitchen.
Fueled by COVID restrictions, online food delivery has skyrocketed. According to data analytics company, Second Measure, food delivery sales in the Los Angeles Metro area have more than doubled since last year. This has led restaurant companies to invest in a more tailored delivery offer.
EXISTING KITCHENS
Thousands of restaurants are experimenting with virtual spinoff-brands from inside their own kitchens to capitalize on the rising popularity of ordering out instead of dining in.
Brinker International Inc. and its “It’s Just Wings” brand, partnered exclusively with Doordash to distribute the wings they produce in over 1000 of their existing Chili’s and Maggiano’s kitchens country wide. It’s Just Wings narrowed its offer down to exactly what people want when ordering chicken wings to their home: Using their existing kitchens ensures that delivery is fast and the distance to your home short, the price is kept low by foregoing napkins, utensils or expensive packaging and on top of it, Doordash helps with regular free delivery specials.
On a smaller scale, The Madera Group from LA has launched Burritos Locos – a burrito brand for city-wide delivery on Postmates, produced in their existing Tocaya Organica and Toca Madera kitchens.
GHOST KITCHENS
Ghost kitchens are kitchens that are not co-located with a dining room and where all food is exclusively prepared for delivery. Some ghost-kitchens manage the production of food for several different brands at the same time. The use of ghost kitchens has the advantage of lower rent because it does not need to be located in a prime location.
An interesting way to ensure national coverage of new virtual restaurant brands comes out of the partnership between New York-based hotel and restaurant operator SBE Entertainment Group, shopping mall-owner Simon and hotel partner Accor. “C3”, a ghost kitchen company will take advantage of “underutilized” spaces, such as existing kitchen facilities across both SBE and Accor hotels as well as unused retail space to host production for several virtual restaurant brands. Sam Nazarian, CEO of SBE, calls it “the Netflix equivalent of food and beverage”.
THE MARKET
The pandemic forced consumers to change a lot of their habits and while the internet got flooded with videos of home-made sourdough bread, the majority of people did not want to miss the food from their favorite restaurants. As a result, delivery skyrocketed.
In August 2020, sales for meal delivery services grew 158 percent year-over-year in the US, collectively.
Quarantine drove many Americans to try the phone-to-table lifestyle for the first time. In August, 33 percent of American consumers had ever ordered from one of the services in our analysis, up from 26 percent a year ago.
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