Trouble in celebrity brand-land
The food feels like an afterthought hidden under a pile of business development
San Francisco Chronicle restaurant critic Soleil Ho absolutely does not recommend any of the celeb-backed virtual brands they tried for a recent column.
From the headline: “They’re all uniquely terrible.”
From the subhed: “These three Bay Area options are worthy of an exorcist.”
From the review itself: “They largely failed in every regard.”
The review only gets better (or, I guess, worse) from there, and I seriously encourage you to set aside some time to read it, and then read it again. Ho tries Pizzaoki from Steve Aoki (developed in 2018 in partnership with a virtual brands company called Family Style); Another Wing from DJ Khaled (a newer concept launched late last year and run in partnership with Reef, billed as “the biggest restaurant launch in history”); and MrBeast Burger (the year-old concept from by Virtual Dining Concepts), three relatively new but heavily promoted concepts in the space.
The reviews aren’t atypical. An Another Wing location in Boston has a three-star rating on Grubhub, with just 30 percent of deliveries noted as arriving on time. A Yelp listing for a MrBeast Burger location in Los Angeles is littered with complaints from diners across the country critical of the concept’s consistency, its quality, its ability to quite literally deliver an accurate order. A DoorDash listing for Pizzaoki in San Francisco has a more generous 4.5 star rating; though reviews on Yelp are less forgiving.
Negative reviews and, now, professional criticism, are just the latest in a series of troubles that could signal the halo around celebrity virtual restaurant concepts is disappearing.
Is it just me, or does something these brands always feel just a little bit… off?
Last week, the New York Post reported that a virtual restaurant concept had even cost one high-powered tech exec his job. Nick Tran was formerly global head of marketing at TikTok, where he was responsible for TikTok Kitchens, a virtual brand set to launch soon in partnership with Virtual Dining Concepts (VDC). Apparently, per the report, senior leadership weren’t clued into the deal — and they weren’t happy about it.
“We’re not in the restaurant business and we shouldn’t pretend to be,” a TikTok executive reportedly said on a call with staff members in January.
The concept’s announcement, first shared rather quietly by VDC co-founder and president Robert Earl onstage at an industry conference in early December, then a week or so later in more mainstream press, was short on details but big on growth potential. Earl said the concept would launch with 300 locations, growing to 1,000 by the end of 2022. These numbers essentially mirror MrBeast’s trajectory in what I’d label a best-case scenario.
There’s been no word on whether or not TikTok Kitchens will make it to its reported March launch.
But VDC could be hedging against the deal falling through. The company filed a trademark application in early January for the name “Creator Kitchen,” as a virtual restaurant name. (h/t to Hngry’s Matt Newberg for the heads-up on that one.)
The deals are flashy, but they’re also confusing.
In September, I wrote about the launch of a NASCAR-themed brand, with no fewer than four tech companies all staking claim to at least part of the business. (Its headline, and a question I still like to ask: How many tech companies does it take to launch a virtual brand?) They’re usually launched in partnership with a virtual restaurant group and a set of host ghost kitchens, like Reef. Then, a company for the logistics of ordering and delivery — a white-labeler like Lunchbox, or a delivery service like Grubhub. Or maybe both!
The food feels like an afterthought hidden under a pile of business development. I’ll take the latest report from my trusted, local restaurant critic as a sign that’s true.
In fact, the entire celeb virtual brand machine seems to be facing some trouble.
In December, David Chang, a celebrity but also an actual trained and respected chef, ended a deal with Reef following reports of food safety and quality issues. Chang instead took his virtual Fuku concept to Kitchen United, a competing host kitchen facility with locations across the country. Earlier this month, Insider reported Reef would be closing a third of its ghost kitchens, citing slow business. Reef said the closures are temporary.
From the outside, virtual brands seem to be growing, but it’s hard to understand their true size and scope. There are no standard reporting metrics, no public earnings reports, no real accountability outside of themselves. Companies that build and support virtual restaurant brands surely have dreams of disrupting the fast-food status quo, but right now they’re basking in the C-list limelight without any of the pressures of public disclosure.
It’s possible that none of this actually matters. VDC closed a $20 million funding round in October. Reef has raised over a billion dollars. The virtual brands are products built to scale and sell. Every marketing message is crafted to elicit the best possible economic response: a bigger audience, more order volume, new customers interested in the hot and hip. Sales, scale, cash — wash, rinse, repeat.
As for the negative customer experiences, a rep for the brands responds to some online reviews, apologizing for order errors, delays, and disappointments, offering courtesy credits toward future orders. But plenty of the diners who say they tried the brands based on their star power also say they won’t be back.
As Chronicle critic Soleil Ho noted in their review, “These restaurants were not created for people who like to eat.”
What else is happening?
Conveyor belt sushi and hot pot buffets are on the rise. That’s according to new data from Yelp’s quarterly economic average report, which indicates communal dining experiences are rebounding. Interest in conveyor belt sushi and hot pot buffets in particular are up 31 percent and 55 percent, respectively, from Q4 2020 levels. In other positive news, in 2021, there were 74,616 new restaurant and food business openings, up 10 percent from 2020. And, no surprise here, interest in delivery services was 7 percent higher than in 2020 and 107 percent higher than in pre-pandemic 2019.
Even 7-Eleven gets in on the subscription craze. It’s probably time to choose favorites. The convenience chain is introducing the 7NOW Gold Pass, where subscribers pay $5.95 per month to order more than 3,000 products through the store’s delivery app for no additional delivery fee.
Another big week for overseas delivery services. India’s Swiggy raised $700 million in its latest financing round, just six months after securing $1.25 billion, leaving the delivery startup valued at $10.7 billion, surpassing its main rival, Zomato. Over in Belgium, Deliverect, a startup that aims to streamline online and offline food orders, raised $150 million in a Series D funding round, which values the company at more than $1.4 billion. And while we’re at it, Berlin-based Gorillas announced plans to acquire Frichti, a French delivery startup focused on ready-to-eat meals and groceries. Details are TBD.
What it’s like to be an Instacart shopper in the pandemic: Mother Jones has an excellent and personal look at labor during the pandemic, including what it’s like to work in roles deemed essential but seemingly valued as less-than. Definitely worth a read.
Do chefs and food creators need their own streaming platform? That’s the question fellow newsletter-er Barb Leung tackles this week, honing in on Kittch, a new platform in beta with $5 million in backing. It’s a deep dive into the economics (and proposed economics) of such a service, plus a look at some pros, cons, and big challenges.
But how much are you willing to pay for a burrito? Fast food prices are up, big time. In the last year, they’ve reportedly jumped 8 percent as the cost of both food and hourly wages to retain employees has increased. It’s understandable, then, that prices should go up. But, as the New York Times reports, it’s not so simple. For example: “While Chipotle executives blamed higher labor costs for a 4 percent price increase in menu items this summer, the company has been looking for ways to boost its profitability.”