How many tech companies does it take to launch a virtual restaurant?
How many tech companies does it take to launch a virtual restaurant?
This week the answer is four.
Last week, the NASCAR-themed virtual restaurant concept we were promised in May actually launched. The brand comes from (1.) Virtual Dining Concepts, parent company of MrBeast Burger, and offers concession-stand delights like the Daytona Firecracker Dog and a Slingshot Burger delivered from underutilized kitchen spaces but no dedicated storefronts.
It was launched in partnership with (2.) DoorDash, according to a release. Customers can place orders via DoorDash’s marketplace, or directly though the restaurant’s app or website. Direct orders are delivered via DoorDash’s Drive product. But those orders come through a site and app created by (3.) Lunchbox, a company that builds dedicated sites and apps for restaurants. But those storefront orders are also fed through (4.) Olo’s online ordering platform, per a Lunchbox rep.
That’s four, and those are just the ones that came to my inbox via press releases.
I find it interesting but not surprising that virtual concepts are billed as a way to help restaurants make extra money by cooking food for other brands. “You have the space, so adopt a brand!” is a real selling point. But the restaurants aren’t publicly billed as partners, just the tech companies. A recent Eater piece captured this dynamic well.
A few years ago, it was trendy for restaurants to call themselves tech companies. Now they actually are, except it seems the physical restaurants’ roles are minimized in favor of the layers of technology that created the virtual brand. This is still the food business, right?
Sweetgreen snaps up Spyce
That Sweetgreen would consider automation is hardly a surprise. A few years ago ), I moderated a panel at an industry conference that included Sweetgreen’s then head of automation. He wouldn’t share much about the company’s plans (I tried!) but the chain hasn’t exactly kept its move toward kitchen automation secret. Now it’s making a bigger splash in salad robotics with the acquisition of Spyce, a Boston-based automated salad robot restaurant that called Daniel Boulud its first culinary director. Later, chefs Thomas Keller, Gavin Kaysen, and Jerome Bocuse all invested in Spyce.
What was meant to revolutionize an industry will now back up a soon-to-be-public chain restaurant company. In a quote that most certainly did not age well, Sweetgreen’s CEO told the New York Times earlier this summer that “Covid’s over” and workers’ imminent return to offices would be a boon for Sweetgreen, which made its name serving lunch in urban centers. Now we know a return to normalcy will likely be tempered by the plan-ruining Delta variant as office returns continue to be pushed back amid concerns over the virus’s spread.
As mentioned by CNBC, automation will help Sweetgreen grow as it looks for investor backing on the public market. Automation can help dispel concerns of labor shortages and reduce human touchpoints in a world still turned upside-down by a contagious deadly virus. It also provides a good narrative for Sweetgreen’s growth. As it works to make healthy food more accessible (and maybe more affordable? Someday?) automation can help.
On Tuesday, Sweetgreen’s CEO penned a LinkedIn screed that essentially said, per Vice, mandating healthy eating — or, punishing unhealthy eating — could help end Covid.
“COVID is here to stay for the foreseeable future. We cannot run away from it and no vaccine nor mask will save us (in full disclosure I am vaccinated and support others to get vaccinated). Our best bet is to learn how to best live with it and focus on overall health vs preventing infection,” he wrote. Oof.
A $10 million seed for another online ordering startup
A company called Owner.com announced a $10.7 million round of seed funding on Tuesday. It’s the latest in a string of direct ordering companies for restaurants. By now, I know the pitch: big delivery takes as much as 30 percent, restaurants can’t survive, they need to accept direct orders and own their online existence, enter new product! Rinse and repeat.
There’s clearly something appealing about this business — at least to investors including several well-known firms and a couple of celebrities. One investor told TechCrunch they believed Owner.com stood out because it lets restaurants own their data. To them I say: well actually, there are many of those, too.
The data-ownership point is an interesting one, especially because it’s become a clear pain point for large delivery companies. But it’s not a new point. When New York City lawmakers voted in favor of a measure that requires large companies to share customer data, the big companies pushed back citing consumer privacy. DoorDash, Uber, and Grubhub have all introduced direct ordering capabilities for restaurants to accept commission-free orders.
Of course, just because a company gets backing doesn’t mean that it’ll succeed — a funding announcement isn’t a blessing of business success. (I wrote nearly this exact line a few weeks ago when thinking through these sorts of announcements.) At the same time, the founder/investor set surely sees an opening as regulators clamp down on the fundamental practices that helped big delivery businesses grow — who wouldn’t? DoorDash is worth $60 billion, so a company built to be an anti-DoorDash might see just as much success, right? There’s clearly a need within the industry, but also a glut of companies emerging to fill that need.
I also think it’s true that although the market seems saturated here, companies emerging and growing in the direct ordering space are helping their independent restaurant customers — there’s a reason they actually have customers. The trick comes in growing sustainably and operating at scale — and so far, that’s proven to be the toughest nut to crack when it comes to technology that supports independent restaurants.
What else is happening?
(A lot.)
Restaurant veteran Denny Marie Post joins Nextbite as advisor. Post is the former CEO of Red Robin, and carries decades of restaurant experience. "There’s a plethora of brands today that are popping up. What doesn't necessarily make sense is the business model. And Nextbite's core mission of helping independents and chain restaurants get more value out of the assets that they have, with brands that really fit their operating model, just makes a lot of sense,” she told Restaurant Business.
OpenTable adds Clear’s health pass to its app. I first reported on Clear’s Health Pass, which had recently received an investment from Danny Meyer’s Enlightened Hospitality Investments, in February for Food & Wine. The functionality hasn’t changed since then, but adoption has. At the time, restaurant workers were just beginning to receive vaccines, and Meyer’s USHG was using Clear’s technology to confirm workers’ status. The stakes are different now, and as vaccine mandates for indoor dining take hold, businesses are looking to Clear to outsource proof of vaccination. This month, OpenTable will add Clear’s functionality into its apps. Clear acts as a third-party verification tool between a person and their vaccine status, meaning a restaurant host need not check nor verify a diner’s vaccine card.
Chicago sued DoorDash and Grubhub. The companies are under fire for alleged deceptive business practices, according to the city of Chicago. None of the complaints included in the suits are new — they cover things like Grubhub’s telephone number-routing offense and DoorDash’s tipping debacle. (Grubhub was founded and is headquartered in Chicago.)
New York City cracked down on delivery services, too. The City Council voted to cap commissions restaurants pay third-party delivery companies at 15 percent, with an additional 5 percent allowance for marketing expenses. It also could require delivery companies to be licensed to operate in the city, something that could trigger a review of their business practices every couple of years. The vote will also bolster the city’s ability to enforce previously enacted legislation that requires third-party services to share customer data with restaurants.
Toast files for $100 million IPO. I remember when Toast reached unicorn status because I had trouble understanding how a point of sale provider could scale and grow so fast. The answer, of course, is payment processing. Now the company is readying itself for the big time, filing its paperwork ahead of an initial public offering that could value the company at a rumored $20 billion. While the pandemic initially hit Toast hard — it had to lay off about half its staff in early 2020 — it rebounded, offering a robust online ordering platform for takeout and delivery, but also in-restaurant ordering and payments. and The Boston-based company has also introduced hardware like handheld devices for ordering and payments. In the first six months of the year, Toast made $704 million in revenue.
A California judge rules Proposition 22 is unconstitutional. A California judge delivered a blow to Proposition 22, the state law that exempts companies like Uber and DoorDash from classifying their drivers and couriers as workers. In a ruling, the judge called the law “unconstitutional” because it restricted the state legislature’s ability to make gig workers eligible for workers’ compensation. There’s also concern about 22’s included requirement that a supermajority of legislators is required to make changes to the law. An Uber spokesperson said the company planned to appeal and is confident it will win. (Remember: 58 percent of Californians voted yes on 22, an effort that was backed by hundreds of millions from the tech companies it benefits.) In the meantime, little is expected to change as companies battle the decision in court.
Grubhub and Seamless got some new logos. The logos are orange now, with the same house, knife and fork graphic used by the companies’ parent, Just Eat Takeaway. Seamless is now “Seamless by Grubhub,” in what feels like the first step toward the brand’s eventual sunset.
DoorDash is a lifestyle brand now. Subscribers to the company’s DashPass monthly plan will receive special access to a stage — in person and live-streamed — during Chicago’s Pitchfork music festival later this month. In-person DashPass member attendees also get to try exclusive dishes from a few well-known Chicago restaurants and get expedited entry into the music festival, too. How's that for loyalty to a delivery service?
Elsewhere
My first piece for my hometown paper, the San Francisco Chronicle, ran over the weekend. It’s that earlier-promised look at what it means that DoorDash is getting into the restaurant business.
Danielle Hyams contributed research to this report.