Food halls are back, baby
...and some have gone virtual. But how will the latest technology affect their continued evolution? And can it really replace what makes them so great in the first place?
Expedite is taking next week off, so there’s bound to be some big breaking news before the holiday weekend. Best time to do it. See you June 9!
When I was a kid, a trip to the mall really meant a trip to the food court. Ours was decorated (seriously) in shades of pink and purple; a fake carousel with seating underneath stood in the middle. There was a Sbarro (mom), a Taco Bell (me), and a Chick-fil-a (little sis) all next to each other in a row.
The concept has evolved far beyond my childhood. There was a time when new food halls were a dime a dozen. They were commercial real estate gold, packing prime ground floor retail space with vendors and encouraging foot traffic. The pitch to small food businesses was appealing, too: Pay less than you would for a traditional storefront, but enjoy dedicated space. Of course the real sell was to the diner — you can come with a group and everyone can get what they want at the same time. Everyone’s happy! Options! Fun! Beer!
Then last year when the restaurant business went online, the concept evolved further — and faster. Now there are “virtual food halls” a confusing term that usually just means a diner can order from multiple restaurant concepts within one online transaction. Whether or not the food actually comes from the exact same physical location is really of no consequence as long as the logistics work to deliver it to the diner at the same time. (Of course, it’s far easier if these orders are coming out of the same kitchen, or at least the same physical address.)
Companies are building big business around this concept, and what they’re really taking advantage of is the technology behind it. Sam Nazarian, the entrepreneur who founded, and later sold, sbe hotel group, is also the founder and CEO of C3, a company that maintains over 200 digital kitchens and 156 different brands, including the once iconic Umami Burger. It also recently signed a partnership to help LA’s Soom Soom Fresh expand nationally. The company says it’s on track to reach close to 1,000 digital kitchens by the end of the year. It has its own dedicated ordering app that batches orders from different brands. It’s signed deals with hotels and apartment buildings, and will soon open a few of its own actual, not virtual, food halls that feature its own brands. New York comes first, then Atlanta.
Ghost kitchen companies like Cloudkitchens and Kitchen United house multiple restaurant brands in one building, a first step to riding the virtual food hall wave. These companies also have their own software platforms, potentially making it easier to accept orders for multiple brands in one transaction. (Cloudkitchens has dabbled in sort-of order batching like this but seems to have backed off for now; Kitchen United has its own platform, called Mix, that's made for this exact purpose — multiple brands, one transaction.) Conspicuously absent from this tech are the larger-third party delivery companies, which do use software to batch orders for delivery but don't allow multiple dishes from different restaurants within one transaction — yet.
While I’m throwing buzzwords around, I’ll add that the trend is also great for the companies behind growing virtual brands. Any restaurant can become a virtual food hall if it uses its kitchen space to cook food under a few other brand names, too. The surprising weak spot in all of this is the technology — accepting and batching these orders properly is a tricky proposition.
Of course, it doesn’t have to be about scale, celebrity, or worldwide expansion to be successful. Last month, the much-anticipated La Cocina Municipal Marketplace opened in San Francisco, about a year later than originally scheduled, thanks to Covid. La Cocina is a nonprofit that helps immigrant and low-income women in San Francisco build successful food businesses. In its new marketplace situated in SF’s underserved Tenderloin neighborhood, the space serves as a community hub and also a spot to get a daily hot lunch for just $5.
The La Cocina Municipal Marketplace accepts digital orders (though online ordering platform Bbot) and even offers delivery (for a flat rate via DoorDash couriers). But La Cocina executive director Caleb Zigas says the delivery numbers are “unimpressive” — most orders come from walk-ups. Still, he calls the online ordering experience from a real, brick-and-mortar food hall awesome.
“It's just meaningfully different than the ghost kitchens that deliver multiple items or any other ordering experience. As a customer, and someone who loves these food experiences, being able to order from all six businesses for delivery on one ticket is really cool,” he said.
So: it’s worth thinking through potential next steps in food hall evolution, especially as the world starts to open back up. The speed at which virtual operations can scale is unmatched, there’s clearly money to be made in virtual branding and order batching and all of the other logistics involved. But the market is saturated with brands that are literally pulled out of thin air, and even the best new technology isn’t guaranteed to make them palatable.
Next-gen viral food (and its problems)
Typically, gaining status and acclaim in the kitchen meant undergoing formal training, putting in the hours doing less glamorous tasks and working your way up à la blood, sweat and tears. Not anymore.
Take for example Eitan Bernath, a 19-year-old self-taught TikTok chef with more than 1.6 million followers profiled in the New York Times this week. He started posting videos in 2019. On a more formal trajectory, it’s unlikely a chef would gain that type of clout in just two years. And it’s not just individuals gaining massive followings: Certainly you’ve heard of — or even attempted — the viral pasta dish with baked feta and tomatoes that has since been dubbed the “TikTok Pasta.” It was so popular it caused feta shortages.
Yet critics say these viral dishes and the culture that birthed them shuts out BIPOC chefs and encourages cultural appropriation while also failing to highlight ethnic dishes. Some lament the ease at which these often-white (or white-passing) content creators skyrocket to fame, while BIPOC folks in the industry have to work twice as hard just to get a foot in the door.
“Viral food trends feel like the equivalent of submitting your essay at 11:59 p.m. because you just had to have something turned in regardless of it being any good or not. The lack of intention behind these foods irks me,” Reina Gascon-Lopez wrote in a must-read piece for Food & Wine. “BIPOC chefs and cooks like me aren't able to do things half-assedly and get far in this industry.”
Uber’s plan to increase diner frequency
In a Tuesday evening interview at the JPMorgan Global Technology, Media and Communications conference, Uber CEO Dara Khosrowshahi shared a few thoughts on the state of his company’s business.
He said that Uber Delivery, which encompasses Uber Eats, is outsized due to the pandemic. But, he said, three elements of the business are growing significantly: audience, basket size, and frequency. Of the three, frequency — that is, how often any given customer uses Uber Eats — is the most likely to drop as the pandemic wanes. But he has a solution: Uber Eats’ ability to compete in competitive markets like the U.S. is largely tied to the size and scope of the company, he said. “We get more first-time eaters from our rides business than we get from all of our paid channels,” he said, so the company will use that to its advantage, continuing to market to restaurant pickup and delivery to Uber riders within its own app.
What else is happening?
Popmenu, a restaurant menu, marketing, and ordering platform, is about to be valued at half a billion dollars. I should have done better research before asking about this on Twitter last week, but here’s the $$$ answer to my question of who’s thinking about what comes next in digital menus. Popmenu provides website design and dynamic menus for restaurants, and investors seem to be taking a big bet on its business. According to a report in The Information, Tiger Global, a hedge fund that is pouring money into all kinds of investments, led the round. The new valuation is six times the company’s last reported value in October. A Techcrunch piece from last year has more on what the company actually does. "It’s just crazy that restaurants present their inventory, which is their whole story, their whole selling proposition, in plain text,” one Popmenu co-founder said at the time.
7shifts got a thumbs-up (and some cash) from restaurateur Danny Meyer. Is it just me or has Meyer’s Union Square Hospitality Group become a proving ground of sorts for the companies that get the nod from Enlightened Hospitality Investments? EHI led a $21.5 million round of funding for the labor management platform after what a 7shifts spokesperson called a successful implementation of the technology at USHG restaurants. If previous experience is any indication, Meyer will become a happy and vocal spokesperson for 7shifts as he has for other portfolio companies like Goldbelly and CLEAR’s health pass.
More super fast micro-grocery delivery comes to Brooklyn. Germany based delivery company, Gorillas, takes consumers’ quest for convenience to a new level, delivering groceries to customers in a mind-boggling 10 minutes. Starting May 30, the company will begin operating in parts of Brooklyn, offering from a select list of products. Similar to ghost kitchens, Gorillas utilizes delivery-only distribution points in dense residential areas. This new trend in rapid delivery — Weezy in the U.K., Getir in Turkey and Glovo in Spain — is set on changing the way urban grocery shopping happens.
Yelp debuted a LGBTQ-owned search filter. As Pride Month approaches, Yelp has rolled out a new feature that allows business owners to self-identify as LGBTQ-owned.
“We hope this new attribute makes it easier to find and spend money with LGBTQ-owned businesses,” said Miriam Warren, chief diversity officer at Yelp.
For all of June, the company will feature rainbow-colored map pins that highlight both LGBTQ-owned and Open to All restaurant, food, and nightlife businesses. Yelp partnered with the Open to All following that awful 2018 incident where a bakery in Colorado refused to make a wedding cake for a gay couple (Masterpiece Cakeshop v. Colorado Civil Rights Commission). Today there are more than 581,000 businesses that have identified as “Open to All” on the platform.
Sweetgreen is moving toward an IPO, according to Bloomberg.The salad chain was last valued at $1.78 billion in January. I’m still waiting for that drive-thru.
California fancy meat company Belcampo admitted to mislabeling its pricey products in southern California after an ex-employee shared Instagram videos of the practice. In a statement, Belcampo’s founder admitted to the mistake but called it an isolated incident. The SF Chronicle has much more.