Whether you call them virtual restaurants, app-based establishments or headless concepts, it’s impossible to deny the recent rise of delivery-only food businesses around the country.
Restaurateurs are desperate to stem the profit-letting in their struggling sector (especially in the fast-casual world), and this new round of digital-driven establishments solves a variety of perennial industry problems. Add to this the growth of third-party delivery companies, consumers’ increasing comfort with mobile ordering and the recent explosion of meal-delivery kits like Blue Apron, and conditions seem ripe for this idea to blossom.
But first, what are these front-of-house-free restaurants?
A few examples:
David Chang, of Momofuku fame, is the A-list name behind delivery-only Ando in New York City. It offers “second-generation American food” like bibimbap, fried chicken and cheesesteak egg rolls. Orders are accepted via the restaurant’s website or app and third-party services like Seamless. Delivery expanded recently to include more of Manhattan. The business came about as a partnership with Expa, a startup lab with connections to Uber.
In Chicago, home to several virtual restaurants with more on the way, Lettuce Entertain You Enterprises recently debuted Seaside, a delivery- and carryout-only operation that shares a kitchen with its Oyster Bah restaurant.
New York-based startup Green Summit Group expanded to Chicago, rolling out nine virtual operations out of one shared kitchen. Since its launch, Green Summit has raised $3.6 million and is anticipating $18 million in sales this year among all locations, according to the Chicago Tribune.
Even traditional family-dining brands are taking note of these ghost restaurants.
“I’m fascinated by some of the virtual kitchens that don’t have a brand, that are only supported by a kitchen,” Denny Marie Post, CEO of Red Robin Gourmet Burgers and Brews told Restaurant Business magazine earlier this year.
So, does the headless trend have legs?
In short, yes.
It appeals to the on-demand generation that’s grown up watching Netflix on the living-room couch. And it’s a good mesh with the gig economy that has given rise to third-party delivery services. States like Colorado, with legalized recreational marijuana, are expected to be primed for expansion of delivery-only concepts.
Even better for restaurant operators and innovators, these virtual establishments address nearly every foodservice-industry pain point.
They are cost-effective. Without the need to waste square footage on dine-in capabilities, these headless operations can run in a smaller footprint compared to traditional operators. There’s no need to hire a designer, account for parking space or spend money on decor and server uniforms (or servers for that matter). Rent is much cheaper for these locations since they can be built in warehouse space and in lower-rent districts. Lastly, the need to invest in costly renovations for service and seating areas is no longer required for these operators.
In Chicago, for example, Green Summit Group’s nine headless restaurants operate out of a shared 2,000-square-foot kitchen that was once home to a dine-in burger establishment.
These kitchens can also act as commissaries for food-truck or catering offshoots.
With so much attention focused on reducing operating costs and keeping labor expenses in check, this new approach will become very appealing to operators who leverage ordering and delivery services and avoid the dining-room distractions. By putting most of the focus on the food quality and preparation, the strategy is sure to deliver praise and strong reviews. Expect to see continued growth in the “ghost” restaurant space.