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The Naked Bird is a virtual chicken brand launched by New York City-based Bareburger last year.

Why consumer trust is a make-or-break differentiator for virtual restaurant brands

Distrust is one of the biggest consumer sentiment challenges for virtual brands, and a transparent marketing strategy is crucial

One of the buzziest foodservice “scandals” during the early days of the pandemic was the unmasking of virtual brand Pasqually’s Pizza & Wings as none other than Chuck E. Cheese. In May 2020, customers were posting on social media about their experience ordering from what they assumed was a new brand listed on Grubhub, only to be surprised when Chuck E. Cheese pizza showed up at their door. The Pasqually’s virtual brand was (and still is) meant to appeal to adults who wouldn’t necessarily be in Chuck E. Cheese’s traditional demographic of “birthday boys and girls and their parents,” but the lack of transparency threw off unaware customers.

During these early days of virtual restaurant brands, when “ghost kitchens” had not yet entered public consumer lexicon, Chuck E. Cheese learned a cheap lesson in marketing: don’t hoodwink your consumer.  

“Customers don’t like when they find out they’ve been lied to,” said Mark Brandau, group manager at Datassential. “Don't try to be too stealthy with any [virtual] brands that you launch. If you’re known for specific brand elements like signature sauces or a certain color scheme, you should lean into that.”

The lesson that Chuck E. Cheese learned the hard way is one that restaurants continue to learn about virtual brands day after day: Trust with your consumer is everything, and the world of virtual brands — while clearly advantageous from a revenue standpoint — plays with that consumer trust in ways that can be dangerous. 

Virtual restaurant brands that have developed over the past few years generally fall under three categories: quiet subversions of established brands like Chuck E. Cheese’s Pasqually’s and Denny’s Burger Den, virtual brands that are a clear extension of an established restaurant, and virtual brands that have been completely built from scratch, many of which are tied to a celebrity and/or virtual dining group like C3 and Virtual Dining Concepts. For the latter category, it can be very challenging to appeal to a delivery app-scroller without pre-established brand equity.

“Virtual brands have one chance to impress the customer,” said Carl Orsbourn, digital foodservice expert and coauthor with former Taco Bell and Kitchen United executive Meredith Sandland on the book Delivering the Digital Restaurant. “They don’t have the opportunity to bring someone into the restaurant to experience the brand in person … so trust is critical. … The trifecta of great off-premises operations is speed, accuracy and quality, and if you can’t fulfill those things consistently, you’re going to struggle no matter what brand name you have.”  

As virtual brands began to boom, their presence on third-party delivery apps became ubiquitous. But the bonds of trust with the customer also started to bend. If an everyday customer happens to be scrolling for dinner on Grubhub or DoorDash and finds a new brand, it’s very likely they won’t know it’s a virtual brand unless they do some Internet sleuthing. The new French Toast-centric breakfast spot in your neighborhood could very well be the local bagel place entering a new breakfast category through a virtual shop.

So what are the rules for virtual brands on these third-party apps?

While Uber Eats did not respond to media inquiries, the process for getting your virtual brand listed on Grubhub versus DoorDash is a little different. DoorDash said that virtual brands have been marked as such on the app since March 2021, though it is not required for virtual brands to indicate who their parent company is; many, like Brinker International’s It’s Just Wings, do this voluntarily.

Grubhub, on the other hand, does not label virtual restaurants on its marketplace, but has to meet certain quality standards to make a listing on the marketplace, like verifying a concept’s business information, ensuring they have more than 15 menu items available, differentiating from their brick-and-mortar restaurant (if applicable), and verifying photos and descriptions of menu items. DoorDash follows similar standards to avoid duplicity and requires that restaurants operate within local health and food-safety guidelines. Virtual restaurants operating out of a residential address are removed from the DoorDash platform. 

The lax nature of this virtual model would seemingly encourage operators everywhere to thread the loopholes and generate revenue with near-infinite virtual brand iterations. But not all restaurant operators are on board with the virtual restaurant hype train.

Euripedes Pelekanos, CEO of New York City-based Bareburger, which launched a virtual chicken sandwich called The Naked Bird last year, thought that virtual restaurants were going to be the next big thing. In fact, he had plans to launch multiple virtual brands on the heels of The Naked Bird, but ultimately decided not to move forward with them because too many virtual brands would stretch his staff and resources too thin.

At first, Pelekanos said the virtual brand was like a “shiny new toy” and was a good way to show off Bareburger’s prowess in the chicken segment. When it first launched, The Naked Bird contributed around 5% of Bareburger sales, and now that has dipped to 3%. Ultimately, Pelekanos said he’d rather focus on the brick-and-mortar brand and thinks customers will eventually feel the same way.

“I think maybe once or twice, people will give these [virtual restaurants] a shot, whether it’s some sort of value proposition or coupon,” Pelekanos said. “But for people who have been in the restaurant industry for a long time and spent decades building a brand and winning the trust of their customers, it seems very foolish for someone to just come along and think they can do the same with a virtual brand. Having a physical location that people can go visit and see how the food is made is still very important.”  

Though Pelekanos thinks many virtual brands will be “flashes in the pan,” the digital concepts that do subsist will need to own their brick-and-mortar brand equity as much as possible rather than hiding behind a misleading listing on Grubhub.

“We had a meeting to discuss [how to market Naked Bird] and whether to make it a standalone brand not associated with Bareburger,” Pelekanos said. “And someone in the room said, ‘That would be foolish if we didn’t because we want to let our fans know the food came from Bareburger.’” Subsequently, the Naked Bird’s website and social media branding make it clear that it is a Bareburger brand.

While Pasadena, Calif.-based chain Dog Haus has a much more optimistic take on the virtual restaurant’s long-term role in the industry, cofounder Andre Vener said it was crucial that the company tie its brands together under one umbrella, called The Absolute Brands. Virtual brands under that umbrella include Bad-Ass Breakfast Burritos, chicken-focused Bad Mutha Clucka, Plant B veggie burger brand, Jailbird wings and tenders, and the new Big Belly Burgers. Each of the brands mostly utilize ingredients Dog Haus already has in its arsenal.

“We don’t want to be that restaurant that says it’s Indian food but then is selling pizza out the back door,” Vener said. “From day one, everything has had Dog Haus on it. If you spend 10 years building a brand, you want to cash in on all of that street cred.”

Even with street cred on his side, Vener said he had no idea how tough it was going to be to market virtual brands. It’s not just a matter of turning the listing on in third-party apps and watching the orders come in; Dog Haus had to do a lot of cross-promotion on each brand’s social media page to get the word out there and train customers to associate Bad-Ass Breakfast Burritos with the same folks that make loaded hot dogs on King’s Hawaiian rolls.

“As much as our name is Dog Haus, you might personally eat a hot dog only once a month,” Vener said, “but a burger or chicken sandwich, you might eat once a week. With [each segment], we try to get that customer coming to us several times a week.”

Even though Vener said that transparency and brand familiarity is crucial, it ultimately comes down to the customer having a good food experience delivered to their door.

“As long as the food gets there on time, is hot and tastes good, I don’t think a customer will care,” he said.

Aaron Noveshen, CEO of Starbird Chicken, has a similar approach to the company’s suite of virtual brands, which almost all have the company brand in their names: Starbird Wings, Starbird Salad, Starbird Bowls and Gardenbird.

“I’m learning how important the strength of a brand is,” Noveshen said. “There are so many of these virtual brands doing just $300 a day in sales out of a random location. I’m just happy we’re not trying to invent this thing from the ground up.”

Noveshen’s advice to operators trying to succeed with virtual brands is to let the customer be part of the conversation. A connection between the brands is critical; Noveshen has a rule that for each virtual brand Starbird develops, the company can only source one new ingredient. The rest of it is crossover and introducing customers to new sections of the menu and new forms of Starbird ingredients.

“The trend is toward transparency,” he said.

That’s why the Starbird virtual brands very clearly tell customers who owns the company and what they will find on the menu, which is also great for SEO and keyword searches. If you’re searching on a third-party delivery app for salads, Starbird Salad might come up (if it’s in your area).

“If you have a quirky name that doesn’t really describe what you’re doing or where the food comes from, you’re never going to be successful,” he said. “People are scrolling through the app, looking for something specific to eat these days. You don’t eat a brand; you eat a product.”

Contact Joanna Fantozzi at [email protected]

Follow her on Twitter: @joannafantozzi

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