Financing

Inside Wendy’s ghost kitchen strategy

The burger chain inked a deal with Reef Kitchens to expand in Canada, and has multiple models in the U.S.
Wendy's Ghost Kitchen
Photo courtesy of Wendy's

Wendy’s recently opened a location in Toronto, which in and of itself isn’t a big deal until you consider where: A ghost kitchen operated by Reef Kitchens.

For the company, the strategy is simple: Reef gets the chain’s products into urban markets in Canada where finding a location isn’t all that easy.

“Our urban business in Canada is underpenetrated,” Stephen Piacentini, Wendy’s vice president of global restaurant development and recruiting, said in an interview. “This helps us creatively get into spots we didn’t have near-term plans with brick-and-mortar.”

Reef is a rapidly growing option that quickly sets up kitchens in urban parking lots.  The company rather than its tenant brand actually prepares the food, making it one of the more unique ghost kitchen models.

Reef is rapidly growing and recently received $700 million in investment funds to keep doing the same thing. Reef already has more than 100 of what it calls “neighborhood kitchens,” where it operates numerous brands.

Wendy’s has been one of the more aggressive restaurant chains in testing the use of ghost kitchens, delivery-centric locations that typically operate multiple concepts from the same space. The company has a handful of such ghost kitchens in the U.S., in Los Angeles and Chicago, using multiple models operated by both franchisees and the company. It also occupies ghost kitchens in the Dominican Republic and the Phillipines.

Company executives said last year that ghost kitchens or “dark kitchens” could get the company into urban areas and expand its overall footprint. “We believe this is an important unlock to our growth going forward,” Abigail Pringle, Wendy’s chief development officer and president of international, said last year, according to a transcript on the financial services site Sentieo.

“We believe we can support high-delivery markets in trade areas as well as markets we have not tapped because the economics may not work because of real estate or constraints we need to work through.”

Wendy’s isn’t trying to use Reef to “seed” new markets—the chain is well-known north of the border, where it has 350 locations. Rather, the company views it as an opportunity to get into neighborhoods it can’t get to right now, supplementing its existing footprint with more urban availability.

“It’s about being able to meet our customers where they want us,” Piacentini said. “In the dense urban core we’re not as rich. We knew we had an opportunity to do better to be able to expand access.”

Wendy’s also likes Reef Kitchens because it’s “different.” “They’re leadership team is on the cutting edge,” Piacentini said.

Wendy’s has been pushing ghost kitchens for months now, deploying different strategies to see how that trend plays out.

All of its ghost kitchens have “different frameworks,” including prototypical ghost kitchens where it operates the restaurant inside the kitchen. That puts Wendy’s “at the front edge of learning about all of the different options,” Piacentini said. “I’m not sure anybody knows how all of this will shake out.”

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