The Space Between
The weird middle ground between a 300-virtual restaurant chain that broke the internet and post-pandemic life
Just before Christmas, insanely popular YouTuber Mr. Beast announced the launch of MrBeast Burger, a 300-location virtual restaurant spanning the US. The video quickly became the top video on YouTube, among the top five searches on Google, and the top app download for both Apple and Google devices.
“I’ve never opened up a restaurant before,” MrBeast, a.k.a. Jimmy Donaldson says to the ever-present camera as he walks inside a temporary physical location of the restaurant in North Carolina. On opening day in a stunt made just for YouTube, the restaurant gave away food for free (and also gave cash to some diners.) According to the video, the line of cars stretched so long, authorities needed to close roads to accommodate it.
As of this Tuesday, several weeks after the launch, the MrBeast Burger app was still listed at #26 in the food & drink category in the Apple App Store. Reviews say the food, a short menu of a burger, some chicken, a grilled cheese sandwich and some fries, is… fine. In a release, Robbie Earl, co-founder of Virtual Dining Concepts, partner to MrBeast and a literal creator of virtual dining concepts, said, “After many productive taste-tests, we have a menu that everyone is proud of — and it is designed to easily operate out of any restaurant kitchen.”
This is the purest representation yet of a restaurant business tailor made for this moment: a virtual brand built on top of a virtual star built on top of digital ordering and delivery infrastructure. It’s clearly popular enough to make a handful of people a whole lot of money; investors are interested in the idea; it’s attracted stars from Mariah Carey to Tyga and Mario Lopez.
A virtual brand like this takes root quickly and can grow even faster. It’s remarkable that MrBeast Burger needs few of the attributes that have made a restaurant successful in the past in order to succeed. The food itself takes a backseat to marketing and delivery, which takes a backseat to the celeb attached to the brand. In this particular case, Virtual Dining Concepts integrates Olo, a popular online ordering platform. This means that any restaurant that’s using Olo for its own purposes can sign up to host a virtual concept like MrBeast — fast.
Meanwhile, a December New York Times piece explained, yet again, how restaurants in the U.S. continued to pivot and change and adapt to survive. A version of this story comes out every few months, seemingly celebrating restaurateurs’ ingenuity while lamenting the forces — sometimes regulatory, sometimes health-related — that hold business back. A representative from the National Restaurant Association quoted in this particular piece said that restaurateurs are in a state of despair and “in total panic mode right now and are starting to take drastic measures to continue to survive.” (I wonder if this source would consider adopting a virtual brand backed by a celebrity “drastic?”)
The piece was published before another round of aid actually made it through congress and was signed into law at the last minute by a tantruming President Trump. That legislation will give restaurants and other small businesses the opportunity to receive more forgivable loans, but like its predecessor, arrives at a time when there’s not too much hope on the horizon. Vaccine, you say? Remember when those felt hopeful? (I covered the new legislation for Food & Wine, link here if you’re interested.)
Of course, the flip side of this is that restaurateurs say they do like some changes ushered in by the pandemic. Eater DC has a particularly good list from local industry insiders, including operational changes like outdoor dining and takeout cocktails but also larger fundamental changes, like the potential sustainability of a broken restaurant industry. It’s finding some sort of balance between news like that of MrBeast Burger and important conversations about the fundamental viability of restaurants that’s tricky right now. It feels like we’re in some strange in-between.
My second-favorite newsletter, Stratechery, featured a piece about “the new defaults” this week, challenging the way we think about proposed change. Among other ideas, Ben Thompson wrote, “It should be the default that the status quo is a bad thing; instead of justifying why something should be done, the burden of proof should rest on those who believe things should remain the same.”
I think this speaks to the current state of the restaurant industry. There are some parts of it that are worth fighting for, like the small businesses that make life in our cities, suburbs, and towns so wonderful. There are other parts that are worth changing: the labor models that don’t work for employees and the cost structure that undervalues and underprices many restaurant meals, for example.
This fix-the-default thing is also why so many restaurant tech companies are doing so well right now. Companies that provide fast and immediate solutions to parts of a larger problem — online ordering, off-premises fulfillment — can help a business through this strange time when restaurateurs are, as the NRA source put it, in despair. And plenty of the smaller tech companies — to push DoorDash and Uber aside for a moment — can do so for a relatively low cost and easy implementation. The trouble arises, though, when the tech solutions change elements of the status quo that are, in fact, worth keeping: A restaurateur’s relationship with their guest, for example. Or a restaurant’s online reputation, particularly if that restaurant wasn’t particularly “online” in the first place.
Pandemic times aren’t forever times, and it’s hard to say exactly how much of this change is permanent. The most interesting thing to me, right now, is watching these in-between solutions morph into the sort of long-term plan with the power to fundamentally change business. MrBeast Burger probably isn’t it, though there are a ton of lessons for large restaurant companies in this story. But in this strange, in-between time as we wait for the light at the end of the long and dark tunnel, the restaurant tech industry should examine its role in changing the industry’s default status to make sure we don’t take the good with the bad.
What else is happening?
A new California law took effect on January 1, disallowing delivery platforms to list non-partnered restaurants on their services. The whole non-partnered restaurant thing erupted into such a brouhaha in the pandemic’s early days when suddenly the practice — which was widely practiced by growth-stage delivery companies — became publicly unethical. (Worth noting that the bill that eventually became this law originated in February 2020, a.k.a., the before times.)
I’m not saying that it’s good business to trick diners into ordering through a third party when the restaurant doesn’t want orders to come through a third party. It’s terribly deceptive to customers and can harm a restaurant’s reputation — that’s a no-win for everyone but the delivery service. But I’m wondering: if anything, it seems that this new bucket of unpartnered restaurants in California and beyond will just show investors how much addressable market is out there, allowing for even more growth during a time when these companies will be judged on the public markets by their growth.
Think of it this way: you regularly used Postmates to order your favorite burrito, but now your favorite burrito place is gone from Postmates. Do you blame Postmates, or the burrito spot? And, do you find a different way to conveniently order your burrito, or do you find a different burrito, available via Postmates?
Also wondering when the press releases start landing from companies who have consciously uncoupled from working with non-partnered restaurants across the country will start to land in my inbox. They’re coming, right?
Grocery stores move to gig delivery. Also in California, several grocery chains including Vons, Albertsons, and Safeway will lay off delivery workers in favor of a DoorDash contract. Coverage of the switch has been linked to the passage of Proposition 22, the controversial ballot measure sponsored (and bankrolled) by the companies it benefits. (Some Bay Area delivery workers, who were unionized, will not be laid off.)
Uber hangs up phone ordering. At the end of 2020, Uber ended its phone experiment. Previously, the company launched a phone service in New York, Arizona, and Florida, allowing diners to place Uber Eats orders the old-school way, instead of online. Apparently usage had steadily declined since the phone numbers were introduced, and by the end of the year was receiving just a few hundred calls per month.
An Italian court ruled against Deliveroo algorithm. In Europe, a court sided against the algorithms used to rank delivery couriers based on productivity. In a complaint brought against Deliveroo by labor unions in Italy, the company was accused of employing algorithms to dole out work to drivers based on productivity. Deliveroo says that the system in question is old, and no longer in use. Still, it’s interesting to watch as different governments create and enforce different policies that will impact the future of on-demand delivery. With California leading the regulatory charge in the U.S., differences in the way the industry functions here and abroad will likely become more pronounced. (Also wondering what this larger trend means for DoorDash’s plans for international growth?)
The restaurant business, in one chart. A surge in takeout and delivery is not enough to make up for the loss of dine-in business, according to one research firm. CNBC has the visual.
Expedite is produced by Kristen Hawley in San Francisco. If you find this information valuable, please consider upgrading your subscription. Thanks for reading!