From ghost to host to dark, when it comes to kitchens, are there ever too many companies, virtual brands or cooks in them? The ghost kitchen MURTEC panel presented a unique mix of dark kitchen, ghost kitchen and restaurant operator brands - all on stage connecting the dots for restaurants looking to diversify business models, expand into new markets, embrace virtual brands, and grow topline revenue.
Geoff Alexander, President and CEO of Wow Bao took the industry by storm with his dark kitchen concept, selling the brand out the back door of existing restaurants (and other ghost kitchens), exploding to over 600 locations as of the end of 2021. According to Alexander, the most important thing to consider when looking to diversify is capacity. “We all have the infrastructure. We all have capacity. Eighty percent of sales come from 20 percent of the menu. If you limit those items, you can create a second brand,” he pointed out.
Michael Beacham, President of Kitchens at REEF Technology, oversees the largest ghost kitchen in the world, with 180 brands, including Wendy’s, Popeye’s, TGI Friday’s and Chili’s (announced today in Canada). Beacham describes REEF as a global proximity company, with more than 8500 locations throughout 200 cities in North America, Europe and the Middle East. “Proximity to the customer is key,” he explained. “Better, cheaper, faster delivery is going to happen, as well as expanding your customer base. Going into a dark kitchen or a digital format, you can take brands into markets to reach and acquire new customers in a way they never could (as a standalone brick-and-mortar brand).”
Kitchen United is four years old, and boasts 150 ghost kitchens in large metropolitan areas throughout LA, Chicago, NYC and Texas and various-sized brands, like Chick-fil-A and Dog Haus. Michael Montagano, CEO, shared that the company’s tech stack focuses on large distribution points in meaningful ways to utilize underutilized assets, focusing on an omnichannel approach to delivery, pick-up and walk-up traffic. He agrees that location matters. “We focus on creating our own Kitchen United mixed channel, which powers 25-40 percent of all volume through our centers, allowing consumers more choice to order from multiple brands under one roof.”
REEF’s Beacham asserted that every brand is launching some new version of a limited-size drive-thru delivery-only concept. He suggested restaurants need to figure out what problem they’re trying to solve for. “If it’s labor, supply chain, top line sales without adding complexity, then ghost kitchens can be a big win,” he said.
Hanson Li, Managing Partner, Salt Partners, operates Chinese take-out and fine dining brands as well as a technology investor in the U.S. and China. He presented his fellow panelists with a challenge: “I have a bunch of independent concepts, and I’m opening brick-and-mortars. The question I struggle with is: Am I getting more transactions, or am I getting more customers? I have my own capacity, and I have these other capacities being offered by these guys on stage. But how am I winning the customer for good, instead of just one order tonight? I don’t want to re-acquire them. Those economics don’t work.”
When it comes to winning mindshare and market share, according to Wow Bao’s Alexander, he (along with a vast many others) rely on third-party delivery providers. He admits being part of a small competitive set (Asian rather than pizza, for example) helps his brand rise to the top. “We don’t own the customer data. Everything we do, we try to drive people directly to Wow Bao. We collect customer data via our portal. Social, Google, local press releases, all drive traffic to that location (Wow Bao directly).”
Alexander revealed Wow Bao recently signed on with Paytronix to launch a national loyalty program, which will help drive consumers to native channels, where they can capture and own the data. His goal? “To figure out how to get the customers off the third-party platforms in order to grow incredible revenue streams from ghost kitchens. And give more to the operators, growing topline sales.”
Kitchen United’s Montagano indicated the need for brands to be thoughtful about marketing, reaching people where they live and work. “By offering a micro-marketplace, a blended mix, we drive people back. And our order rates tend to be high because of the variety. It’s all under one ticket, one transaction fee, one delivery driver. We are trying to drive more incremental volume through hybrid marketplaces and brands.”
Ultimately, if something goes wrong with a third-party delivery order, consumers call the restaurant brand, not the delivery provider. “If I order shoes from Zappos, I don’t call Nike,” pointed out Wow Bao’s Alexander. “The third-parties are providing a service. Period. We are in the hospitality business. It’s the brand’s job to build trust.”
REEF’s Beacham believes disruption is on the horizon, pointing to sky-high gas prices and third-party delivery fees. “How much will consumers pay for delivery? There are only so many fees that can come in. We’re headed for some disruption in all of that. Those that are flexible and adaptable will prevail. Those who stay steady and don’t change will struggle,” he predicted.