Fast food turns to ‘ghost kitchens’ and restaurants on wheels as chains like &pizza and Chick-fil-A battle for delivery dominance
Category : entrepreneur
As fast food moves beyond restaurants, customers may soon find themselves ordering McDonald’s from a restaurant on wheels — even if they don’t realize it.
On Thursday, fast-casual chain &pizza and food-tech startup Zume, best known for its pizza-making robots, announced a partnership to launch mobile kitchens.
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“For the last 2,000 years, the construct of food is: ‘I will come to your building, where I will give you something of value and you will make me food. And I will eat it there, and maybe I’ll even walk out and eat it,'” Zume CEO Alex Garden told Business Insider. “That hasn’t really changed very much, but the world has changed.”
Garden and &pizza CEO Michael Lastoria told Business Insider that delivery sales, especially in areas with dense populations, are sapping the dominance of the traditional sit-down restaurant model. Why invest in often expensive real estate when restaurants can sell just as many pizzas out of a small kitchen without a dining room, in the form of a delivery-only “ghost kitchen”?
A mobile kitchen cuts all real estate costs. Restaurants can move a mobile kitchen around to test customer response in uncharted territory or add backup in a busy market. Unlike a ghost kitchen, it doesn’t need to be delivery-only, serving people on the street who spot the food truck and building recognition for the brand.
Lastoria estimates that thousands of mobile kitchens will be “on the road in the near future.” Garden predicts that the US could easily have 200,000 mobile kitchens roaming its streets soon. Zume is aiming to build at least some of these, planning to partner with other major restaurant companies in addition to &pizza to help chains take their kitchens to the streets.
Ghost kitchens are paving the way
While mobile kitchens haven’t permeated mainstream fast food quiet yet, American chains are shifting away from the traditional restaurant format. Alongside food trucks, ghost kitchens are becoming popular because they require less space and fewer employees than traditional restaurants do.
Kitchen United, a leading ghost-kitchen company, announced on Thursday that it had closed on a $40 billion Series B funding round, led by real estate company RXR Realty and GV (formerly Google Ventures).
Founded in 2017, Kitchen United has two commercial kitchen centers, in Pasadena, California, and Chicago. Each center partners with with 10 to 15 restaurant brands, including chains like The Halal Guys, Sweetgreen, and Chick-fil-A.
Like mobile kitchens, ghost kitchens and other delivery-centric locations offer a low-cost way for chains to boost sales and expand in new areas. Chick-fil-A — a rare chain that already has a fleet of food trucks — has four catering and delivery hubs, something Gordon Haskett analyst Jeff Farmer wrote in an August note was a “sizeable strategic step past its quick service peers” for the chain.
Read more: The inside story of how Chick-fil-A used Christian values and a ‘clone army’ to build a booming business that’s defying the retail apocalypse and taking over America
Other chains may be looking to jump on the ghost-kitchen bandwagon soon.
Kitchen United plans to enter the New York City market as part of its relationship with RXR Realty. The company has 13 more locations in the pipeline, with plans to have eight kitchens open by the end of the year. Kitchen United says it plans to have 400 locations in the next four years.
A new era of fast food
Kitchen United’s ghost kitchens and Zume’s mobile kitchens are both responses to the massive rise in delivery and off-premise sales more generally.
Food delivery — primarily online orders — is set to become a $75.9 billion business by 2022, according to a 2018 Cowen & Company report. That’s more than triple the $23.2 billion in delivery sales that were done in 2011.
A Wells Fargo note released on Wednesday found that 70% of the 650 people surveyed in the US said they had ordered food delivery at least once in the past month, continuing the steady increase observed since analysts began surveying consumers in May.
Fast-food chains have made announcement after announcement about their delivery partnerships over the last few years. On Thursday, McDonald’s will host “McDelivery Night,” celebrating the half of the chain’s restaurants around the world that offer delivery. KFC and Taco Bell are rolling out delivery at thousands of US restaurants through a partnership with GrubHub.
A note from Gordon Haskett’s Farmer on Monday stated that partnerships between major chains and delivery companies are “nearly exhausted,” positing that delivery companies will soon turn to new partnerships with payments systems or reservation sites to fuel growth.
Similarly, chains are also likely to start looking to new partnerships to boost sales.
Making delivery available through deals with companies like GrubHub and UberEats is just the first step for fast-food chains. The next step is reimagining what the restaurant is and should be when customers expect their food to come to them — whether it is by way of an UberEats driver or a food truck showing up at their door.