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Kitchen United finds a friendlier real estate market

The virtual kitchen company sees much faster growth thanks to its latest investment.
Photograph courtesy of Kitchen United

“Back in the day,” Kitchen United CEO Jim Collins said, “we would look at a market, find space for lease, and contact the land owner or developer. At the time we had a hard time getting people to call us back that had leases.”

Of course, to Kitchen United, “back in the day” was just 18 months ago. But that’s a symbol of how far the company has come, and how quickly the restaurant industry has changed in that short a time, that it would seem so long ago.

The restaurant industry is rapidly shifting to a takeout future, forcing all sorts of companies to adapt. The developers that Kitchen United wants to work with have seen this shift, and they are giving the virtual kitchen company a far bigger welcome now than they did last year.

“A big change happened over the course of the past seven months,” Collins said.

That change is reflected in the investors behind Kitchen United’s latest funding round, $40 million, which should put the company’s growth on the fast track. Investors include RXR Realty, one of New York’s largest real estate investors and developers.

That deal will open more real estate to Kitchen United and give the company the inside track in a market, New York City, that it considers a priority.

Kitchen United has focused much of its attention on real estate companies in recent months. Developers see fewer people eating inside of restaurants and more taking their burgers or burritos home with them.

The virtual kitchen company promises them 10 to 12 different restaurants under one roof, explicitly for takeout and delivery, as well as catering. That can give these landlords many more options than they would with just a single, large dine-in concept.

“If you think of them marketing a new project or multiuse development or whatever, one of the things they’re going to market is the various food choices,” Collins said. “If they’re only marketing four hero restaurant locations in an area, that’s not a lot of optionality to the consumer.

“We can take the space of one larger restaurant and put 10 to 12 restaurants in it.”

Takeout is a massive trend in the restaurant space as chains from small independents to giants such as McDonald’s deal with a shift in consumer dining. Customers are ordering their food to go, or they’re having it delivered, while more chains see catering as a growth vehicle.

This off-premise growth is forcing numerous shifts in the business. Companies are reducing space for in-restaurant seating and devoting more of it to kitchen space and for things such as pickup shelves and seating areas for mobile order customers.

Kitchen United was formed more than two years ago with the idea that it could give restaurants a presence for takeout in a market or a neighborhood without forcing them to build an actual location. It gives concepts opportunities to test out new markets with a low-risk investment.

The company fills them with a combination of chains and local favorites and uses research to determine what types of concepts work best in an area.

Growth thus far has been slow. It has locations in its hometown of Pasadena, Calif., as well as Chicago. But it has sites under construction in Scottsdale, Ariz., and Austin, Texas, and is eyeing several other markets.

“The plan was to spend the last year going slow,” Collins said. “We’re really letting the marketplace teach us what it wants and how. We’ve got a better and better handle on it. We’ll go a little bit faster now with this last round of dollars.”

But the company doesn’t want to take it slow for long. “If at this point next year, we have a solid grasp of where to build and how to build and how to operate, we have the backing and the capital to go very, very fast,” Collins said.

Kitchen United has notably aggressive goals: It wants 400 of these “kitchen centers” across the country “in the coming years.”

The company is still learning, however. After all, it’s the first real chain of virtual kitchens in the U.S. That means it is learning as it goes.

“Everything we do is something nobody else has done before,” Collins said. “Everybody we hire is brand-new to it. We’re teaching everything from scratch as we go. We have to make sure everything operates smoothly. That food delivery is going into the business and out, that cleaning and garbage and conveyor systems are working perfectly. It’s all a fascinating, multifaceted business.”

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