At the height of the pandemic when dining rooms were closed, the phrase “ghost kitchen” entered the public lexicon and new “hot” delivery-only concepts opened their hidden doors almost every day.
But as the post-pandemic dust settles, the off-premises restaurant industry is evolving beyond the rush of flash-in-the-pan celebrity-backed chicken nuggets concepts. Virtual restaurant companies are in it for the long-haul: they’re stepping out of the dark kitchen’s shadows to combine off-and-on-premises experiences, and many are avoiding the phrase “ghost kitchen” altogether.
“It feels like in 2020, there was a big gold rush and now everyone is trying to recapture the viral success of MrBeast Burger,” Markus Pinyero, cofounder of upcoming virtual food hall Oomi Kitchen, said, referring to the Virtual Dining Concepts brand. “[…] We want people to order our food instead of ordering a burger that comes from some influencer that you post to your Instagram and never order from again. The return rate on some of these virtual brands is practically non-existent.”
Oomi is a newcomer to the booming delivery-only restaurant space, which includes multi-brand ghost kitchen commissaries, delivery-only concepts that operate out of brick-and-mortar restaurants, and virtual food halls that house several original and licensed concepts in one spot. But Pinyero does not feel he is late to the game. In fact, he’s taking notes and learning from others’ mistakes.
Whereas the first generation of ghost kitchens may have been hidden behind closed doors and delivery app menus, Pinyero encourages customers to come by the neon-lit Oomi virtual food hall opening in a few weeks in Dallas, where they can order from multiple brands at once and pick up their food from a food locker.
“We're in the middle of a high-density area with extreme visibility, so we are much more customer-forward than many other ghost kitchens,” he said. “It’s much more joyful and hospitable that way instead of walking into the back of a spooky warehouse. We’re very open and brand-centric.”
Oomi further differentiates itself by focusing on the food quality and hospitality first and the technology second. The company its own trained culinary staff for both the original and licensed brands, which include Which Which, FlyRite Chicken, and Pinyero’s own brand, Urban Taco. They don’t franchise or license out these concepts for back-of-house operations because they want to oversee quality control.
“A lot of ghost kitchens might have frozen burger patties and pre-made sauces that you can just heat up and put into a delivery bag, but our brands are meant to operate like true restaurants,” Pinyero said.
Transparency seems to be a running theme among the next generation of virtual restaurant companies. Meal Outpost is a more traditional type of virtual brand company that soft launched in June with operators in Austin, Miami, Charlotte, Durham, Washington, D.C. and Philadelphia. The company is making waves in the ghost kitchen space with an entirely new operations model that doesn’t cost anything for restaurants to sign up. Restaurants just need to purchase the food on their own from their choice of pre-existing emerging brands like Junzi Kitchen and Mono Mono, using the labor in their own restaurant kitchen. The licensor then gets a percentage of the monthly revenue.
Meal Outpost has completely committed to bringing dark kitchens out into the light of day. As a host restaurant, you can sign up on the Meal Outpost website, see and read about which brands are available in your area and filter your search by cuisine and what type of equipment is needed to operate the brand. Then you fill out a form, upload photos of your kitchen space, and once you’re approved, you can begin operating as a ghost kitchen.
“We wanted to create a very user-friendly, seamless platform where anyone can go do it themselves,” Dustin Mares, cofounder of Meal Outpost said. “We tried to mimic an Airbnb website. […] it’s a straightforward, searchable marketplace […] Once operators sign up, we call them and walk them through the remaining steps, send training videos, and schedule their launch date.”
Mares also believes in the importance of working with established or proven brands to avoid the “one-star Google reviews” from the slew of “made-up concepts” that launched during the peak of the ghost kitchen boom.
As the virtual restaurant industry continues to evolve, even veteran companies in the industry have to keep up with evolving customer needs. Larger companies like Kitchen United, C3, Reef, and NextBite are now focusing on logistics perfection. When Reef Technology started as a ghost kitchen offshoot of a parking solutions company, they owned all of the infrastructure, labor and kitchens, and now they’ve evolved to become more flexible. Now, Reef works with third-party companies and focuses on multi-brand locations, like the launch of the company’s first-ever virtual food hall inside at an airport that opened in Raleigh, N.C. this summer.
As Reef has garnered some negative attention and critical headlines for leaving specific cities and cutting ties with larger brands like Burger King and Jack in the Box, Reef representative Mason Harrison points to the company’s shift toward multi-brand locations as a reasonable explanation.
“We tried to show [the brands we partner with] that flexibility is an important part of this industry,” he said. “Most of the brands came down on our side of the fence, and error rates went down while ratings went up when we were able to focus on multi-branded vessels.”
Many of the larger restaurant brands, however, wanted more control over their ghost kitchen presence and wanted to be the only brand in a specific location. But for Reef, it makes sense to become more efficient and flexible as time goes on and resources become more expensive. For the future, Harrison sees Reef expanding its definition of operations to become more of a mix of franchised locations, local restaurants and insurgent virtual brands, as well as having a presence in more unconventional locations.
“The future of Reef is going to be one where a new location might be inside a hotel where they’re operating a few of our brands and using our technology,” Harrison said. “Over the past year, Reef went from growing fivefold and getting into as many markets as possible to focusing on our most profitable markets and models and figuring out whether to invest in new vessels or partner with a hotel or airport.”
Veteran virtual restaurant company Nextbite similarly is taking time at this stage in its business lifespan to focus on being more asset-light and use data and analytics to figure out where and when to build its next delivery-only brand.
“A lot of the first wave of ghost kitchens realized it’s very hard to sustain a successful business with a 100% off-premises model,” Nextbite CEO Alex Canter said. “Many of them have switched to a more hybrid approach where your brands are available for delivery but also have a walkup component. They have taken this omnichannel approach, and that makes a lot of sense.”
Nextbite keeps its operations simple: The company does not build new real estate or open new commissary kitchens: they’re operating with restaurants to enable them to sell more food with a new revenue stream out of their own kitchens.
“We’re kind of the opposite of a ghost kitchen,” Canter said. “There are a lot of terms going around, but we don’t set up dark kitchens in new locations. We turn regular restaurants into ghost kitchens.”
The biggest changes Nextbite has made have to do with data analysis. Nextbite’s team can now match their portfolio of brands with new locations. For example, Packed Bowl by Wiz Khalifa does best on or around college campuses, Canter said. His team can also monitor reviews to figure out customer experience and how tastes are evolving.
Although there is clearly a wide spectrum of operational strategies for ghost kitchens and virtual brands, each company we spoke with agreed that the bar has been raised and that not every company or delivery-only brand will be successful, simply because the market was oversaturated in 2020. The best virtual restaurant companies focus on quality and knowing what their customer wants instead of trying flash-in-the-pan gimmicks.
“Gone are the days when you can just create a menu in five minutes and stick it on DoorDash and expect it to do well,” Canter said. “In the early days, people were creating so many of these virtual brands and expecting them to perform because there weren’t as many options. The space got very crowded very quickly and now a lot of things have to go right for a virtual brand to have success.”
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