For years now I’ve been noodling on an article in my head that’s loosely titled “venture capital killed America’s restaurants.” The combination of big money with focus on growth and customer acquisition at (literally) any cost has made it hard for restaurants to survive alongside well-funded platforms clamoring for diner attention and dollars. 

Take the SoftBank Vision Fund. The Tokyo-based investment giant has poured hundreds of millions of investment dollars into businesses that are fundamentally reshaping the restaurant industry. It’s given Uber, parent of Uber Eats and Postmates, billions. It owned a significant stake in DoorDash when the company went public, turning a $680 million investment into some $11.9 billion. It backed Reef with hundreds of millions, helping to fuel the company’s aggressive growth as it installs ghost kitchen vessels in spaces across the country. In 2020, SoftBank made a big move in the virtual brand space leading a $120 million Series C round for virtual brand platform Nextbite (the company was named Ordermark at the time of investment; it’s since rebranded to focus on the delivery business). 

These companies have something in common: they’ve disrupted the way restaurants work in favor of models that can scale to crazy heights and provide, potentially, significant returns on investment. And now they’re growing up.

Uber and DoorDash, both publicly traded, have forever altered the restaurant discovery and marketing landscape with closed marketplaces and diner deals and perks aimed at customer retention. Reef has made even the youngest concepts instantly scalable. Nextbite offers a platform and plug-and-play brands by which to supplement a struggling independent restaurant business. So not only have these high-growth vc-backed companies set the guardrails for the way restaurants operate, they’ve also spawned new high-growth vc-backed companies built specifically to thrive within their own guardrails. For example: The fastest way to launch a new restaurant concept is on a third-party marketplace. 

There’s a reason that modern, scale-focused restaurants have positioned themselves as tech companies for years. The sort of growth that tech companies can manage is extremely attractive to the type of investor that can afford to pour millions into the business to support its growth before later sitting back and enjoying outsized returns. It’s a different mindset from running a high-touch, community-driven business; instead, companies are incentivized to move fast and break things — even accidentally. But consider the collateral damage.

“It’s not a tech company. It’s a restaurant.” 

Last week, Eater NY ran a story about Kellogg’s Diner, a beacon of late-night joy just off the Lorimer L stop in Williamsburg, Brooklyn that has been a neighborhood fixture for decades. Now it’s turned to technology to stay alive, even as a legacy business, even on a busy corner next to the subway, even with that flashy exterior. Since February, it’s run a whopping 18 virtual brands from a company called Profit Cookers out of its kitchen. The partnership has netted $40,000 in sales for the diner (this according to the founder of Profit Cookers, not Kellogg’s.) The math on that translates — very roughly — to a handful, maybe two handfuls, of orders per day. It’s certainly not a cash cow; by the owner’s own admission, “It’s bringing in revenue that we need to survive right now.” 

It might be easy to villainize the tech company behind the brands; after all, they’re making money from orders that are produced by restaurant kitchens hundreds of miles away. But who’s buying?