Great questions!

A few sort-of answers to some pressing restaurant technology questions

I, like you, have a lot of questions. They include: When can I leave my house? Will this ever end?

We’ve seen plenty of changes and innovations in restaurant technology this year. What was once thought to be temporary now feels permanent, what was once far fetched is now table stakes. I still have more questions than answers! To soothe some of the open-endedness 2021, here are some questions I can answer, at least for now. 

photo courtesy of DoorDash

Do third-party delivery services really help local restaurants? 

This is the most common question I get asked, hands down. As part of a now-weekly Clubhouse chat on Monday morning, someone (I can’t remember who, sorry!) used the term “local-washing” to describe a pair of Super Bowl ad campaigns run by Uber Eats and DoorDash. Essentially, these gigantic national platforms are marketing themselves as a way to help the business down the street from your house. There are plenty of media reports to the contrary; we all know restaurant owners’ gripes with these services. But for everyone who dislikes them, there are plenty of businesses for whom services like these are helpful. 

The answer to this question is, “it’s complicated.” It depends on the individual restaurant’s economics and all sorts of other things, including how well its food travels. These companies also make big deals of their commitments to help small businesses; DoorDash announced a $200 million initiative called “Main Street Strong.” Uber just announced a $20 million commitment to help local restaurants over the next six months in the form of waived fees, donations, grants, and more. 

I know these services do help independent businesses. I am not a proponent of “delete your apps,” but I do advocate for more education and understanding about how these services work. At the end of the day, apps can drive incremental business to local restaurants. Whether the economics of that incremental business work comes down to the individual restaurant. 

What’s more interesting, I think, is that third-party delivery services are ushering in new ways of doing business. A piece on Marker just this morning called ghost kitchens and virtual brands, “the defining dining trend of the past few years.” Restaurants are reinventing their business to work within the bounds of third-party delivery services. I’m just not sure if I call that innovation or forced change. 

What does DoorDash want with a salad robot? 

Really great question. Earlier this week, the company announced it had acquired Chowbotics, a company known for its creation of Sally the salad robot. Sally looked (and functioned, honestly) more like a salad vending machine, dispensing ingredients and mixing salads. Customers could order ahead via app, too, and it had at least one restaurant partnership on the books at the time of the acquisition. (I have to say, I was never particularly excited about this one, but robotics is a toughie for me.) Also, Sally has a LinkedIn profile

I’ve been part of a few but what does it mean? conversations, and think there’s a few ways this can go. In its official blog post about the acquisition, DoorDash said, “What excites us most about Chowbotics is the team has developed a remarkable tool that will allow DoorDash merchants to grow. As part of the DoorDash platform, this tool can help merchants expand their current menu offerings as well as reach new customers in new markets without investing in an entirely new store.” 

I think, fundamentally, this shows how DoorDash is working to expand its offering to partnered restaurants, giving them a competitive advantage in a challenging market. Just how competitive that advantage becomes depends on the future of online ordering and delivery. Also, I’m curious whether or not diners will care that their food was made by a robot. Would that change the way you feel about your salad? 

Where did Grubhub go? 

It’s still around, though it did seem conspicuously absent from the Super Bowl, didn’t it? In June, Grubhub announced it would be acquired by Just Eat Takeaway, expecting the deal to close in the first half of this year. According to a release from the company, that timeline hasn’t changed. 

Last week, Grubhub announced its fourth quarter and full 2020 results via press release and a letter to shareholders, again skipping the traditional call with analysis and investors as it awaits the close of its acquisition (still slated for the first half of this year, according to the release). Unsurprisingly, numbers are up: fourth-quarter revenue is up 48 percent year over year; and gross food sales are up 52 percent, totaling $2.4 billion. The company’s active diners metric is up 39 percent, to 31.4 million people. Also up: sales and marketing expenses totaling $120 million in the fourth quarter, a 39 percent increase year over year. According to the shareholder letter, independent and small chain restaurants account for nearly 85 percent of the orders on the platform. That’s a notable stat given Grubhub’s early 2018 deal with Yum Brands that made it the exclusive delivery partner for Taco Bell and KFC. Of course, that exclusivity fell apart last year as Yum sued Grubhub for backing out of parts of an agreement without warning.

Why are hotels launching ghost kitchens? 

In late January, the New York Times published a piece titled “Ghost kitchens find a home in empty hotels.” It detailed how hotels, hit hard by economic fallout from the pandemic, have been lending their kitchen facilities to ghost kitchen operations. The strategy is trendy, but as the Times notes, “the concept is not entirely new.” Five years ago, Butler Hospitality used one neighborhood kitchen to run its in-room dining programs at several hotels. According to the piece, one analyst said fewer than 5 percent of hotels are currently operating ghost kitchens from their properties, but that number is expected to grow. 

Sam Nazarian, founder of SLS hotels, recently started a company called C3 (stands for Creating Culinary Communities, really). It aims to “systematically and broadly bring together technology, underutilized retail, hotel and kitchen spaces and world-class culinary talent.” French hospitality company Accor, the new owner of SLS after Nazarian sold his remaining 50 percent stake in 2020, is a minority investor in the venture. C3 recently launched a partnership with Graduate Hotels, a chain of 28 hotels in university towns across the country, to assume daily operations of all on premise food service across the Graduate properties. It plans to create digital food halls in which up to six C3 brands will operate. (Umami Burger is the one you’ve probably heard of.) 

In this case “digital food hall” is sort of interchangeable with “ghost kitchen” except for one very important point: in the C3 concepts, multiple brands are linked with one ordering system. This means one delivery or takeout order can include food from multiple brands. As you can imagine, this translates well to hotels who want to diversify in-room dining options while streamlining processes at the same time. (That’s a little more jargon than usual, but you get the point.) This model is used in plenty of other virtual kitchens and food halls, too.

Just about any available kitchen space can house a ghost kitchen, and companies who build such brands are jumping on a sudden glut of underused space. I talked to one company last week licensing virtual concepts to golf courses. It tracks that hotels would be open to using available space to house well-known and highly regarded brands; it’s like the 2021 version of the marquee celebrity chef restaurant in the lobby. (P.S., we should probably talk about what’s happening to the marquee celebrity chef restaurants in the lobbies.)

So… Have we reached peak ghost kitchen? 

Just two weeks after running a feature about how the pandemic has fueled the rise of ghost kitchens and virtual brands, CNBC posited that they might be too popular for their own good. In some cases, they’re just as expensive as a traditional restaurant to run, and their exploding popularity is only driving up costs for restaurateurs. Add in a layer of whatever this is, and it becomes a complex operational model whose success depends on viral marketing and the whims of third-party platforms. What’s happened over the last few months — weeks, even — is that most of the stories about ghost kitchens and virtual brands have become less about the food and more about the operational structure. To me, at least, new food offerings seem more like a commodity, less like an interesting new concept looking for a launchpad. Scale and speed at any cost! 

Of course, two things can be true, and ghost kitchens and virtual brands can maintain their business while still becoming increasingly expensive to operate. There’s also no one prescription for running this sort of business, but as you can imagine, the more players involved, the more expensive it becomes. While a restaurant might expect little to no cost for running its own virtual brand out of an existing kitchen, real estate costs from buzzy ghost kitchen companies can add up — whether in a mall, a hotel, or anywhere else, really

So the question becomes not, have we reached the peak? Instead, it’s, have ghost kitchens already become prohibitive for new players to enter?

Here’s the biggest question: How much of this is here to stay? No one really knows what will happen when life returns to “normal” at some point in the (near? far?) future. Will we all be seized by the desire to dine out and travel? Will we emerge slowly from home and hibernation and take baby steps back into a social world? 

There’s profound change happening in restaurants, and there are a lot of moving parts. Emerging business models, temporary solutions, emergency legislation that could turn permanent and really change the way they do business. But a quick look at the consolidations of cash and power provide a glimpse at where all of this is probably going. 

Programming note: I’m once again joining Family Meal’s Andrew Genung for a Clubhouse session on Monday at 10:30am ET/ 7:30am PT. We’re planning to discuss some of the week’s top stories, and we’re particularly interested in hearing from people in the restaurant industry who have thoughts, questions, concerns, and ideas. Please join us

Expedite is produced by Kristen Hawley in San Francisco. Thanks for reading.