Virtual Restaurants – Should You Be Getting On The Brand Wagon?

In this month’s must reads, we gathered together articles outlining the collapse of High Street restaurants and how those that are thinking about initiating a bricks and mortar restaurant could consider ways in which it could work. In brief, the consumer market is making high street restaurants harder to get right and stay profitable. However there are ways of making it work, if you can be adaptable.

Alternatively, you could consider not taking the risk of a high street location – the overheads and additional work that comes with front of house and look to develop a virtual restaurant.

What's inside...

What Is A Virtual Restaurant?

In Europe, Virtual Restaurants, also known as Cloud Restaurants or Ghost Restaurants, were a phenomenon first created by Deliveroo in 2018. Their mission was to aid already successful restaurants in producing a different type of food in regions where their data had found a gap in the market. In doing so Deliveroo claimed that they were able to help restaurants boost their business, or experiment with new brands, using their own kitchens for delivery only purposes or by using a dark kitchen at a fraction of the cost of a new restaurant retail space. 

According to industry analyst,  L.E.K. “between 2018 and 2030, restaurant delivery is projected to grow at more than three times the rate of on-premises sales, with the preponderance going to digital orders.” With the development of dark kitchens, such as that of FoodStars, and the data that food delivery apps such as Deliveroo and UberEats are able to garner, restaurants and chefs alike are able to expand their repertoire to an audience that they know want a certain type of food, without the upfront costs and risks associated with starting a new restaurant location.

Who Is Creating Virtual Restaurants?

In order to understand who is creating these new virtual restaurants, you need to look at the opportunities that they present in the market and who can take advantage of them. Users of Virtual Restaurants can be split into three categories: 

  1. Established restaurants that want to diversify
  2. Food Delivery only businesses
  3. Established restaurants looking to reach out to a broader audience with the same food that they already produce under a different name.

Let’s look at each of these in more detail and take a dive into some examples of businesses creating virtual restaurants:

1. Established Restaurants Looking To Diversify

Deliveroo uses an example of G’rillers, a restaurant in High Wycombe that focuses on African grill, that was approached by Deliveroo whose data had identified a demand for Mexican food in the area, with no one providing it. The restaurant took a chance and created Burrito Bandito, a completely virtual brand with no front of house – resulting in little risk for the owners. It is now a successful food delivery company that has cost the restaurant no extra cooking space or front of house overheads, but that provides a 54% average incremental increase in orders each week.

Figures from Deliveroo Foodscene

2. Food Delivery Only Businesses

The simple fact is that, as pointed out by the New York Times, “Food delivery apps like Uber Eats, DoorDash and Grubhub are starting to reshape the $863 billion American restaurant industry. As more people order food to eat at home, and as delivery becomes faster and more convenient, the apps are changing the very essence of what it means to operate a restaurant.” The result is that, through these apps you can create a “restaurant” with no retail presence. 

These kitchen rental facilities offer entrepreneurial chefs and start ups the opportunity to develop food concepts and brands without the initial financial outlay of a bricks and mortar restaurant. We have many such virtual brands that are members of FoodStars, such as Taster and Freebirdburritos – and will be looking to interview them soon on their experience within the Virtual Brand sector.

3. Established Restaurants Looking To Reach Out To A Broader Audience With The Same Food That They Already Produce Under A Different Name.

Whilst this method works for some restaurants, it won’t work for others. For example, Brighton’s sushi specialist Moshimo has launched a Moshimo Vegan and Poke by Moshimo – making their brand available to a wider audience. 

Others, however, are looking for a way to make their failing high street restaurant sellable by another means – disguising their food on delivery apps with a different brand name. Mac N Shack for example are actually Bella Italia and BirdBox will be a Frankie and Benny’s burger. Whilst this isn’t illegal, it shows that there is still a long way to go in the transparency and regulations of food delivery apps – from hygiene to the actual owner of the brand.

Advantages & Disadvantages Of Virtual Restaurant Brands

Advantages

The advantages of virtual restaurant brands to the restaurateur are obvious. It gives the opportunity to innovate, develop concepts and reach wider audiences with far less risk than in the retail space. No front of house, no concern about bums on seats, just pure food creation.

The other thing that virtual brands are able to do is to record the data of their customers far more easily. They can monitor complaints, see exactly what people like and don’t like and get real time feedback on the food that they are creating. If they use a third party such as Deliveroo or just eat, they can also be supported in locating regional demand for certain items and track their success.

There is also the knowledge that you are on a seemingly one way trajectory. In America it is currently believed that if your restaurant doesn’t deliver, you don’t exist. This is evidence of the growing online and digital demand for food that, as noted at the beginning of this article, is only set to grow. Food delivery is a no brainer, virtual food delivery further still.

Disadvantages

If you are considering developing a virtual brand, it is worth considering how you go about it. At the moment it is very possible to manage your food delivery through your own restaurant – assuming you already have a large customer base. Despite the admin, this means that you don’t lose out to the commissions of the third party apps. These apps may offer you a larger audience, but is it worth the 30% commission to you? 

It also depends on why you are creating your virtual brand. Is it to boost current restaurant sales? Is it to innovate with the aim of creating a restaurant in the future? Or is it simply that you love making food. Chefs are creatives, and there is a risk that through the pursuit of simply generating food that gets bashed out the door with no communication to the actual consumer, we are creating just another kind of food factory- denying chefs the opportunity of seeing the outcome of their creation – their end product being enjoyed. 

The Moral Question

Humans are very good at inventing things that, basically, make them more lazy. Food delivery is no exception. Whilst food delivery agencies might be offering a broader variety of food for consumers, is it good for them? How much salt, sugar, preservatives go into food that is delivered? Eating out at a restaurant is a treat – not just because you don’t have to cook, but also because the food tends to be delicious – and often that is a combined result of not just what the food is, but the amount of flavouring that has been added that you might not add yourself at home. 

Do we need another deep fat fried Korean chicken? Or a sweet and sour chinese? If you’re thinking about starting a virtual brand, it might also be worth considering the health of your consumers, as well as how what you create might impact the environment. Yes, there is a growing demand for food delivery, but we also need to keep our nation lean and healthy too. For inspiration, why not take a look at our recent interview with Gym Food – a company determined to provide a healthy alternative to the food delivery sector.

 

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