Hey ghost kitchens, don’t leave indies behind!
Alt title: My worry that consolidation will take opportunity from those who need it most.
This week, Kitchen United, a ghost kitchen company with physical locations across the country, announced it would acquire Zuul, a New York City-based ghost kitchen and consulting company. Zuul started as a physical location in Manhattan, and served as a delivery-only outpost for existing restaurants and an incubator of sorts for new brands. It always seemed to punch a bit above its weight in press and attention (was it the clever name?), but it felt like an independent operation, built for the specificities of operating in the dense New York City market.
But its indie spirit was not built for longevity, it seems. Zuul’s executive team will join Kitchen United and its physical location will soon become a Kitchen United Mix facility — the company’s first in New York City (more are coming soon). Also part of the acquisition: Zuul’s ghost kitchen operating software, which addressed several industry annoyances including placing one order with items from multiple brands. In a statement, Kitchen United’s CEO described the software as “cutting edge.”
“Kitchen United has built the dominant ghost kitchen business for the restaurant industry and we share the same goal of offering restaurants cost-efficient, low risk ways to tap into the ever-growing consumer demand for off-premise food,” Zuul co-founder and CEO Corey Manicone said, also in a statement.
The Zuul acquisition feels a bit like an unceremonious end to a once great opportunity for independent businesses to scale themselves apart from larger companies like Kitchen United, CloudKitchens, or Reef, which are already operating at scale. In fact, Reef just announced another huge new restaurant partnership, this one with 800 Degrees Pizza, planning 500 new locations.
As the big business of ghost kitchens moves away from physical spaces and toward software that supports the creation of virtual brands within existing spaces, it seems the opportunities are geared toward operations only at scale — with very limited exception.
I can’t believe I’m about to say this, but DoorDash’s recent ghost kitchen experiment in San Jose, where it runs operations on behalf of its restaurant partners in the space, is one example of support for smaller restaurants in ghost kitchens. All Day Kitchens, a company started by two ex-Uber Eats staffers with a similar model, also based in northern California is another — and it just announced a $65 million round of funding to help it expand into new markets.
Which brings me back to the Zuul acquisition. Kitchen United isn’t yet a behemoth, it operates about 20 or locations, give or take, in the US. Its growth has seemed, at least from the outside, more measured than, say, Reef, which is installing its parking lot trailers at breakneck pace. (Another recent Reef deal promises 700 virtual Wendy’s locations by 2025.)
Independent restaurants haven’t been shut out of this growth, not completely. But increasingly, the virtual kitchen space feels like somewhere big brands go to play and make even bigger deals. Amid the toughest operating conditions in recent history (maybe ever in history), this is more not great news for independent restaurants who want to grow. The opportunity is still there; let’s hope it’s not overshadowed by the machine that virtual restaurants have become.
ChowNow (still) wants you to order better
The pandemic shed light on what ChowNow CEO Chris Webb has been trying to do for a decade: get people to order directly from restaurants instead of through third-party marketplaces. In the years since its launch, ChowNow has been plugging along, growing a network of participating restaurants from its base in Los Angeles. Webb was recently named one of Fast Company’s most creative people in business.
This week the company announced a network of partnerships that lets restaurants who use ChowNow accept direct orders through a bunch of different channels — Google, Yelp, TripAdvisor, Snapchat (!!), OpenTable, Nextdoor, and more. I’d argue that the pandemic only bolstered ChowNow’s mission. More consumers know that ordering from a restaurant directly vs. through a third-party network like DoorDash tends to be economically better for the restaurant.
ChowNow charges restaurants a monthly fee, not per-order commissions and proves that a commission-free model is possible. It’s launched a consumer app to aggregate restaurants on the ChowNow network, but I’d argue that partnerships with other companies who let restaurants accept orders directly is an even better way to grow under the altruistic messaging of supporting restaurants.
ChowNow is also right to add value for its partner restaurants as plenty of other competing restaurant technology companies — Toast, DoorDash, Grubhub and plenty of others — give restaurants the tech to accept orders directly.
Disclosure: I work with ChowNow independently and on unrelated initiatives.
Speaking of direct ordering…
Lunchbox, maker of online ordering software for restaurants, got a new look. Design fans might appreciate the lengthy explanation of the work that went into the new look, but I’m most interested in why a company that’s meant to be an unseen layer between customer and restaurant would put so much effort into executing a boisterous redesign. Answer: because the company plans to market to diners, educating them on the benefits of first-party ordering, per the company. Lunchbox acquired a (very) small New York-based online food delivery marketplace called Spread in August; the company plans to relaunch it in the next couple of months.
Lunchbox *also* finally got that cease-and-desist letter from Grubhub, per the company’s CEO on Twitter. It relates to the company’s site, notgrubhub.org, built as a resource to avoid third-party delivery.
But, yeah, about those online orders… the backlash has arrived! A piece in Slate laments the dichotomy of ordering online vs. ordering in-person at fast casual restaurants. The author, clearly irritated by having to stand in line to order his Shack Burger, discovered that plenty (about half) of the dining public prefers to place their order digitally for pickup — a perfect use case for more ghost kitchen operations but also a tricky situation for restaurants used to interacting with guests in person.
There is an important point in the Slate piece, though I’d argue it’s buried: The quest for speed and efficiency that’s so pervasive in the tech industry takes a little time to implement in the real world. So, yes, some restaurants aren’t physically optimized for the glut of online orders that they’ll receive, and, yes, it’s possible the in-store customer experience will be compromised. I agree this is Not Great, especially if the quest for speed and efficiency continues to turn certain types of restaurants into big, faceless boxes. This friction also opens the door — wide — for ghost kitchen operators to step in and take a bigger slice of the proverbial pie.
What else is happening?
Uber Eats lands at the airport. The delivery company is also an online ordering company, remember? Uber just announced the ability to order and pay at certain airport restaurants through the Uber Eats app. The feature is piloting (ha) in Toronto now, but will roll out to more airport locations, including locations in the US, soon. Uber also announced some new rideshare airport capabilities, further supporting its CEO’s consistent assertion that cross-marketing between Eats and Rides remains a huge company asset.
Same-day delivery company Avo raised $45 million. The New York and Israel-based startup raised $45 million in a Series B round, bringing its total funding to more than $80 million. The vertically integrated residential and office delivery platform offers everything from groceries to alcohol to electronics with no order minimum or delivery fee of any kind, including tipping; Avo’s staff is full-time and salaried. The company is growing quickly in response to COVID-19, adding a new major market each month, which has helped raise revenue by 1,000% over the past two years.
- Danielle Hyams
Instacart workers plan to strike in response to bad treatment. Grassroots organization, Gig Workers Collective, has called on Instacart shoppers to participate in a walk-off on Oct. 16. The group said the strike will continue until Instacard meets five demands, including increased pay and benefits, calling for a minimum tip of 10 percent. It also criticized Instacart’s rating system, which it says punishes shoppers for issues outside their control. In September, the group asked consumers to delete the Instacart app until shoppers’ demands were met.
The latest offering from chef José Andrés? Mail-order paella via Goldbelly.
To listen: If you are one of the people who asked me about Sunday, the QR payments app that recently announced a $100 million round of funding, you are not alone. Hngry’s Matt Newberg spoke with Sunday co-founder and CEO Christine de Wendel on his podcast, The Feed. Listen here (or wherever you find your podcasts!)