Where could the trend of virtual restaurants be headed?
Virtual restaurants – online-only establishments with no public outlets – have long been around alongside third-party delivery aggregators like UberEats and DoorDash, but the pandemic has dramatically extended their reach and changed the dominant business model. Previous virtual restaurant concepts were often vertically integrated, with now-defunct startups like Maple and Green Summit owning and operating their own ghost kitchens and, in some cases, operating their own apps and even providing delivery. However, 2020 saw an explosion of interest in companies like Nextbite and Franklin Junction, which connect existing virtual brands to independent restaurants with additional kitchen capacity, the latter often fulfilling delivery orders for a range of different brands. virtual. Much of that unused capacity was of course due to the pandemic, with restaurateurs looking for new brands as a means of survival.
Many of these new brands are extremely straightforward in their presentation and focus on QSR favorites that travel well, with chicken wings in particular exploding in popularity in major US delivery apps. They’re designed to be easily searchable in the app, reminiscent of the myriad of commodity makers found on Amazon for items like phone chargers, selfie sticks, and more. In theory, virtual restaurants allow more experimentation, given lower start-up costs and easier menu optimization than a traditional restaurant. The virtual brands that took off in 2020 were massively built around very popular items – often no more than one or two signature items per brand – that can be easily found and produced in a range of different kitchens. These brands were designed to serve hungry customers by using apps to find and order specific items – such as wings, pizzas, burgers, or desserts – rather than a specific brand.
These types of virtual brands have dominated much of the delivery discussion over the past year and a half, but it’s unclear whether this trend is sustainable, or if it represents a real shift in restaurant business models. or rather a phase of transition. . Consumer demand for delivery isn’t going to go away – it’s less about whether consumers will stop craving delivery wings, for example, and more about where and how those wings are prepared. Dedicated ghost kitchen facilities are still under construction, and these could prove to be considerably more efficient in the long run for most types of ‘product’ delivery production, particularly as investments in automation are developing.
In a given city, the question is whether it is more efficient – in terms of price and delivery time – to produce wings, pizzas, pad thai, etc. in dozens of small kitchens or in a smaller number of larger, more centralized automated installations. As the pandemic passes, the pool of kitchen capacity available at independent restaurants could contract, and the amount of money available for any individual restaurant could decrease as more independent restaurants look to. produce for virtual brands.
To understand where the restaurant industry might be heading, a look at the wider retail industry is instructive. Over the past 10 years, dozens of direct-to-consumer online-only retail brands – such as Modcloth, Warby Parker and Glossier – have sprung up, and many have been closed or acquired. The other leaders have shifted to a more omnichannel approach, combining apps and delivery with a number of physical stores. These stores in particular are an important part of brand marketing, creating compelling and memorable experiences that drive customer loyalty, much like a good restaurant. There has also been an increase in the number of online-only manufacturers producing essentially unbranded consumer goods, with price and search engine optimization being the main differentiators.
A similar continuum could emerge in the restaurant industry as ghost kitchens and virtual brands grow and expand to be part of most restaurant’s competitive toolbox. What we see as high-end, laid-back brands could give way to omnichannel operators combining highly effective in-store presentations with dedicated apps and activities such as recipes to buy, cooking classes and other means. to foster long-term commitment. Meanwhile, a plethora of daily delivery opportunities could become increasingly marketable, with highly optimized facilities producing a range of fast and low-cost favorites.
Michael Schaefer is the global food and beverage leader at Euromonitor International. It provides an overview of consumer trends, product innovations and the evolution of food and drink around the world. Michael is the primary driving force behind the design, development and promotion of Euromonitor’s global restaurant research program, as well as its coverage of the global soft drink industry. He has been quoted in Bloomberg, Nation’s Restaurant News, The New York Times, and The Wall Street Journal, among others. Michael holds an MA in Russian and East European Studies from Stanford University and has worked at Euromonitor since 2005.