The quick casual leaders share information on how and why their brands got into virtual business operations and tips on how to make it a successful strategy.
Virtual Kitchen, also known as Cloud, Ghost, or Dark Kitchen, are restaurants that do not have a dining room and are created to aid operations in a brand’s traditional restaurant or as a delivery channel and take-out only.
It’s a strategy many restaurants have turned to over the past two years due to the impact of the pandemic – restaurants have been forced to close and then reopen take out only under pandemic conditions.
Since there is no dining room, the costs of a virtual kitchen are much lower than opening another restaurant, and the room provided can only be used for food preparation and creation. It can also be shared with another restaurant brand, further reducing costs.
Plus, they can be used to launch a new concept without all of the high costs of a real restaurant.
But that doesn’t mean it’s easy to go the virtual kitchen route. There are barriers and challenges, internally and externally, for everything like finding the right space and hiring staff.
Today, more and more restaurants are succeeding in making it viable and financially rewarding. Three of these brands shared their experiences during the recent Quick casual executive summit, owned by Networld Media Group in Charlotte, North Carolina. This is one of many industry conferences hosted by Networld Media Group, based in Louisville, Kentucky.
The brands participated in a panel discussion sponsored by Alto-Shaam and moderated by Jonathan Schroeder, National Accounts Director of Alto-Shaam. Speakers included Geoff Alexander, CEO of Wow Bao, James O’Reilly, CEO of Smokey Bones and Zoup! President of Eatery and COO Jason Valentine.
Start the virtual business
Wow Bao has over 300 grocery stores selling its food and one of its most recent businesses is a dark kitchen space serving as a channel to sell its products through distribution to other restaurants, which in turn. sell through their back door via third party delivery.
“In 2017, we opened inside Cloud Kitchen in LA, and for $ 30,000 we opened in the Los Angeles market. That’s all it took us to get in and do it. . And we ran this for about six months and really learned a lot about space. And in 2019, like I said, we got this idea in November 2019, why can’t other people- don’t they sell our food? ”said Alexander.
“So our idea was to develop our national footprint and help restaurants. We thought of the ice cream shop which, four months a year, being in Chicago, has no sales. We thought about the environment of the hotel where they have a whole room service team but no one stays in the hotel and actually eats the food we thought of the catering company placing a big order one or two days a week, but they pay rent on their space. And we thought all of those people could get involved in selling their sales through the back door by increasing the bottom line. “
Why a distinct brand is the key
At Smokey Bones, there are two operational virtual Smokey Bones, as well as 60 brick and mortar slots, and virtual kitchens were opened before the pandemic. One is called Wing Experience and the other is Burger Experience, and the two are separate brands, according to CEO O’Reilly. Both are QSR style concepts operating in its casual kitchens.
In terms of success, establishing a distinct brand is key, O’Reilly said.
“I mean, there are a lot of people flocking to the virtual restaurant space, and my advice is not just to make a mark for the sake of making a mark, not just to offer a brand. wing to compete with 100 other wings The brand that you launched must have a reason to exist because it will compete with dozens of alternatives on different platforms such as UberEats and DoorDash and Grubhub and so on, ”he said. declared.
The second goal of success, he said, is to make sure that you are doing things from a culinary perspective that overlap with your core skills.
“So at Smokey Bones we’re already good at making burgers, we’re already good at making great chicken wings, we’re also good enough at boiling water. So, you know, things that you could do and what you can run are good. We wouldn’t try to make a virtual pizza brand as an example, “he said.
The third success is to devote time and resources to raising awareness and adopting virtual brands.
“Otherwise, you’ll be so dependent on a third-party market and its pressure on margins that you know you don’t want to. So you want to be able to devote part of your resources to developing these brands as brands. So what we did, we developed unique websites, unique e-commerce platforms, unique loyalty platforms for each of these virtual brands so that they can exist on their own. Someday they could be physical locations. “
The need to be intentional
At Zoup! Eatery, which is located in 16 states and Ontario, Canada, the move to a virtual concept was very intentional, according to Valentine, speaking of her virtual brand Mac Love.
“Everyone was already doing it, but we take a step back and take a look at what we want to do. So we already had a lot of products in place. We wanted to make sure that no new ingredients are added and then no complexity and complexity comes in all shapes and sizes. And no matter how hard you try not to have complexity, it shows. Finally, coming from the founder, did we want a list, a risky, provocative brand, right? So, Mac Love is a mac and cheese concept and a bit edgy if you don’t connect the dots. Our slogan is “you will never forget your first time”. So very provocative. It was intentional for us to kind of try to break the mess and be different, you know, compared to all the other players out there, ”he said.
And he recommends that brands be prepared for unintended consequences.
“So our team went into this, we wanted to see a successful brand. We want to see all of our criteria met and we really challenge ourselves to be aware of the issues, spot them and not drink. the Kool-Aid because there are be problems and get in there, be prepared to know it’s good. There are going to be hard times, “he said.
Smokey Bones’ virtual strategy quickly became part of its growth strategy, O’Reilly said, and it has engaged heavily with the third-party market to drive the business off-site to reach new customers.
In this regard, it was the first restaurant company to create a virtual brand with Uber Eats.
“Unsurprisingly, burgers and chicken wings have become two huge partnership opportunities with them. So we started small with them, and they could be a good resource for you that way as well. We had such a strong reaction in the small-scale third-party market with these virtual brands that we immediately started developing them for ourselves, ”said O’Reilly. The brand has built its own website and its own e-commerce platforms.
“We have redeveloped the two menus in both brands and have just started to invest heavily in them. And now we have a strong virtual brand business. I would like to develop one of them, if not both, to be strong enough that they can become independent restaurant concepts and develop that kind of volume. And it is possible, ”said O’Reilly.
He sees the virtual kitchen market as an explorer because it is a “very provocative space”.
“It’s very, very exciting. The volume is very progressive if you do it, if you do it right. But also, the technological side is changing as well. And I think the demands that this places on us as restaurateurs of a technology point of view are also growing. From a brand point of view, this area is also growing. So at first the volume was super incremental, and we were just kinda there. And now the challenge is : “Okay, develop these brands, invest in these brands because it’s, you know, a real restaurant brand building,” O’Reilly said.
Alexander of Wow Bao said the exploding market shouldn’t deter restaurant brands from moving into virtual kitchens.
“I think what’s going on is that everyone has the capacity to do it right. You can all take your existing menu and existing items and create something new or just take your existing restaurant and rename it. literally like something different by selling the exact same menu items, right? “
But the difficult part, he added, is the fact that it’s a business.
“Virtual restaurants are a business, and you have to treat it like a business, and you have to worry about your downtime on your shelves. How long does the driver wait? What are the results of the assessments that come in because all of that affects the algorithm? ”He asked.
“So there’s all this behind-the-scenes stuff that isn’t necessarily the operator’s thought of. I think it’s fantastic that people are stepping into space. I think it’s great that there is have more options when you’re sitting at home and not doing it. I don’t know what to eat tonight. But I think there are players who come into space who don’t have thought about all these parts. You want to do it right. You need R&D. You have to practice, you have to test it. It all costs money. So there are ways to do it, but you have to do it correctly. “