Also by Nikhil Shah
As restaurants face minimum wage hikes and delivery chips away at in-house sales, the dining landscape could shape itself into AmazonBasics for food.
“In the next 18 months, 40 of the major cities in America are going to get delivered anything they want within 5 to 7 minutes for free,” said social media personality and Uber investor Gary Vaynerchuk about CloudKitchens to a room full of execs in a recent video.
The startup, funded by the controversial Uber founder and former CEO Travis Kalanick, is attempting to do to restaurants what Amazon did to retail. “The only thing that’s going to be left is the brand, the affinity that the consumer has for the brand, and that’s it,” he said.
Virtual restaurants—delivery-only brands—have garnered attention lately, but what impact will they have on dining as we know it?
To best answer this question, it helps to understand them from three angles: brick and mortar restaurants, ghost kitchens, and superstores. Anyone with under-utilized kitchen space in a restaurant or ghost kitchen can slap together a logo, menu, and name to generate incremental revenue for their existing business as quick as you can say “pizza.” UberEats pioneered this idea in 2017 by leveraging search data to tap into unmet neighborhood demand for delivery. For example, it told Gerizim Cafe in Brooklyn to start making burgers under another brand titled Brooklyn Burger Factory. It worked well enough that the cafe has since rebranded as Gerizim Burger Factory. This strategy is analogous to search engine optimization, but for restaurants.
CloudKitchens’ superstore is the next phase, a smorgasbord of food and convenience items selected from a handful of its kitchens. As Vaynerchuk says, delivery fees are often subsidized on these superstores in order to incentivize people to order more.
For example, in addition to its own namesake, Canter’s Deli operates virtual grilled cheese and burger brands from its 225 square-foot kitchen in CloudKitchen’s first Los Angeles warehouse. This lone kitchen warehouse powers 25 superstores and 90 virtual concepts on third-party delivery apps. Such infrastructure, combined with venture capital-fueled subsidies, enables an unprecedented level of convenience that will be difficult for some consumers to resist.
Who stands to be the victim of all this disruption? During his conversation about food delivery at last year’s Recode conference, David Chang explained painted a bleak future for mom and pop restaurants. In the pilot episode of HNGRY, my new series about the role of technology on food, celebrity chef and CloudKitchen tenant Eric Greenspan shared a similar outlook.
There are more than 180,000 single-location full-service restaurants in the U.S. employing just over 3 million people as of last year, according to the U.S. Bureau of Labor Statistics. As the Gerizim Cafes of the world shift towards a cloud kitchen model, we estimate that the restaurant workforce in the U.S. will be reduced by 85% to roughly 500,000 employees. It would happen by phasing out front of house staff while the remaining back of house staff is reduced by a third — two employees per cloud kitchen as opposed to six in a restaurant. Please welcome the virtual food court; where everything you want is just a tap away. Thank you for your business.
Matt Newberg is the founder and host of HNGRY, a content series exploring the impact of technology on our relationship with food. He has spent the past eight years working in the tech industry as an entrepreneur and product manager, most recently at Vimeo. He’s now finally layering on his passion for food to explore the emerging field of food tech.
Nikhil Shah is a filmmaker with over a decade of experience in production and design strategy. He has worked in a variety of outfits including architecture firms, non-profits, agencies and magazines.