Future-proof your restaurant with a Milk Bar
Future-proof your restaurant with a Milk Bar
Hi to “menus hosted by a local merchant.”
DoorDash introduced a tech upgrade this week that makes it a lot easier for restaurants to sign up for additional services on the platform. Its new set of tools for merchants include expanded customer insights and a learning center with how-tos and suggestions. It’s organized in a way to provide fast access for restaurants to do more with DoorDash— including one that I found particularly interesting: brand licensing.
DoorDash is now acting as a broker of sorts, offering brands like Milk Bar to its restaurant partners. The pitch: “Host a well-known brand in your kitchen.” It promises incremental revenue with limited costs — restaurants use their existing staff, equipment, and in some cases, ingredients, to make food from an existing restaurant. Then, restaurants offer it for delivery on DoorDash, and DoorDash labels the food as “menus hosted by a local merchant.”
It’s a softer version of the ghost kitchen model, which aimed to disrupt the restaurant industry by offering an easy solution for building, growing, and expanding businesses. As the ghost kitchen situation evolved, though, it became clear who might benefit from it — huge corporations with large footprints, established brands looking to expand quickly — and who wouldn’t: independent restaurants.
In fact, some of the worst news in restaurant technology over the past two weeks comes thanks to CloudKitchens, the extremely well-funded real estate venture that rents kitchen space to would-be restaurant owners for delivery-only businesses. A few recent media reports feature horror stories of entrepreneurs signing pricey year-long contracts only to be met with unsanitary conditions and glitchy technology once they got into their CloudKitchens spaces. It was an example of expectations not aligning with reality. On paper, the model looks great for restaurateurs hoping to launch a new business. In practice, the outsized promise was too far out of reach for many.
About that future-proofing…
The move to operate several brands out of an existing kitchen seems to be the clearest way forward in the ghost kitchen and virtual brand space. DoorDash’s new offering is similar to a model used by a number of other companies, including Softbank-backed Nextbite. Nextbite offers delivery-only restaurant brands — George Lopez Tacos, Tom Colicchio’s ‘wichcraft — to existing businesses to license in return for a cut of the profit. (Alex Canter, Nextbite’s founder, recently posted on LinkedIn celebrating the launch of 750 new Nextbite-powered locations in just seven days.) Virtual Dining Concepts, which partners with celebrities and influencers to launch new concepts from existing restaurants, has seen massive success with its MrBeast Burger brand, which now has 1,500 locations inside other restaurants’ kitchens.
DoorDash has a huge advantage here thanks to its strong relationships with both growing national brands and small and medium local restaurants. And making it easy for an existing partner to add more volume into their kitchen means, of course, more order commissions for DoorDash. In its marketing materials, DoorDash says the brand licensing helps “future-proof” a restaurant business. I.e., diverse revenue streams soften any potential future blow to business — pandemic, inflation, ingredient shortage, staffing troubles, whatever the next unforeseen disaster.
For restaurants with extra space and capacity to make more food, this is great. For brands like Milk Bar that can expand by using brand recognition to drive more sales from others’ kitchens, it’s also great. (For local restaurants potentially competing with a brand like Milk Bar, maybe not so great.) But it does pose an interesting question: is there a point at which it will no longer be enough for a restaurant to offer their own food for delivery?
The answer, of course, depends on plenty of factors, including the economics of any given restaurant. But the split between restaurants with service that translates to online success and those that don’t is getting wider.
I can’t help but think about San Francisco’s latest legislation, which mandates delivery apps offer their “core services” charging no higher than a 15 percent commission rate. While those core services remain loosely defined, as the rates are currently structured, it includes no extra marketing or in-app visibility, meaning that restaurants that choose to deliver for convenience without paying for a more robust strategy might become harder to discover. Now add in app-backed virtual brands meant to boost restaurant sales, and those restaurants who don’t opt into additional services are hidden further.
DoorDash has been clear that it wants to be the first stop for merchants who want to grow their business, and its new tools certainly support that. For restaurants that choose to buddy up, what was once a convenience app can become a growth platform. DoorDash’s core delivery business in the U.S. is profitable; this profit helps fund expansion into new verticals and the launch of new products. Its new merchant approach makes it nearly impossible to say no.
Stat of the week:
According to new data from Sevenrooms, a reservations and guest engagement tool, 47% of all completed July covers in New York City restaurants were walk-ins. In LA, walk-ins made up 25% of last month’s covers.
What else?
ConverseNow raises $10 million to get drive-thru orders right. The investment, made in partnership with Danny Meyer’s Enlightened Hospitality Investments, brings the total raised by the voice technology startup to $28.8 million. ConverseNow automates order-taking with voice artificial intelligence.
“The applications of AI into different verticals are still new. Food ordering becomes even more nuanced and drive-thru is complex,” Vinay Shukla, the company’s co-founder and CEO, told TechCrunch. “Even the best AI platforms may still need human help. What happens when there are birds chirping, kids screaming and engine noise? This is still a new space and market that companies like us created.”
Its tech is used at 1,100 restaurants; according to the company, revenue has multiplied by a factor of 12 over the last year.
DoorDash splits with Walmart. The delivery company reportedly sent Walmart a 30-day notice, ending their more-than-four-year partnership. Walmart, on the other hand, has been busy expanding its in-house delivery operation. Insider reported last week that the retail behemoth is acquiring Delivery Drivers, the company behind its Spark platform that sees gig workers deliver orders.
Just Eat Takeaway to sell its stake in Brazil’s iFood for up to $1.8 million. The European delivery giant will be selling it to internet group Prosus for the equivalent of $1.5 billion in cash and an additional $300 million depending on how iFood performs over the next year. Just Eat Takeaways’s shares were up 25 percent following news of the deal. And, yes, the company is still in the process of trying to offload Grubhub, which it acquired for $7.3 billion last year.
Bring on the bulk! Convenience has its place, but DoorDash’s latest partnership announcement joins two huge companies. DoorDash has been testing a feature in several cities offering to deliver items purchased on Facebook marketplace. Drivers can deliver “anything that fits in a car truck” up to 15 miles away. Deliveries are made within 48 hours of purchase. Apparently, according to coverage in the Wall Street Journal, which broke the news, it’s an effort to get more people — especially young people — to use Facebook.
Just this week, Instacart announced its “big and bulky” delivery option which is… exactly what it sounds like: same-day and scheduled delivery of big items like outdoor furniture and large electronics.
