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Why a virtual brand won't make the Top 500 anytime soon

Though a few are already big enough to land on the annual list, they are by nature difficult to track.
Photograph courtesy of Mr. Beast

It's Just Wings, the virtual chicken wing concept launched by Chili's Grill & Bar last summer, is already big enough to be on Technomic's annual list of the Top 500 highest-grossing restaurant chains in the U.S.

It's expected to generate $150 million in annual sales, a number that would have put it at No. 174 in 2020, right between Uno Pizzeria & Grill and Lee's Famous Recipe Chicken.

It's astounding to think that a brand could go from zero to one of the biggest restaurants in the country in just one year. But that's what It's Just Wings and other delivery-only, virtual brands, have done. 

These concepts are having a moment right now as more people order their food to-go during the pandemic. One estimate pegged the total number of virtual brands at 100,000 in August. Alex Canter, CEO of virtual concept creator Nextbite, said recently that the next McDonald's, Chipotle or Sweetgreen could be a brand that exists only online.

All that said, a virtual brand won't be showing up on the Top 500 next year, or perhaps anytime soon. 

That's not because they won't generate enough sales to make it—some almost certainly will. The reason has more to do with how Technomic, a sister company of Restaurant Business, tracks and compiles the data than anything else.

For virtual brands like It's Just Wings that are offshoots of a larger, public company, Technomic's policy is to follow how the parent  reports its earnings. It's Just Wings is owned by Brinker International and housed within Chili's and Maggiano's restaurants, and Brinker has not broken out the wing brand as a separate item in earnings reports thus far. It's Just Wings won't show up on the Top 500 unless Brinker changes that (but it could boost Chili's and Maggiano's results).

Same goes for Tender Shack, Bloomin' Brands' in-house virtual concept. Bloomin' CEO Dave Deno told analysts last week that the chicken brand could reach $75 million in annual sales, which would have been good for No. 310 on this year's Top 500. But it too has yet to report Tender Shack sales separately from its traditional concepts that include Outback Steakhouse and Carrabba's.

And what about stand-alone brands, like the hugely popular MrBeast Burger? The virtual burger concept backed by YouTube celebrity MrBeast said it sold 1 million burgers in its first three months of operation, which we (roughly) calculated would put it within striking distance of the Top 500 if carried across a full year. 

Technomic, however, relies on more than basic multiplication to determine its results, and the very nature of virtual brands makes them hard to track. Unit count, for instance, is a key variable in Technomic's formula. But MrBeast Burger doesn't have brick-and-mortar locations of its own—it simply licenses its menu to existing restaurants. That makes calculating top line results challenging.

The long-term viability of virtual brands is a question, too. It will depend on consumers' appetite for delivery, which could shrink once life fully returns to normal post-pandemic. And with so many options circulating in the online ecosystem, it's unlikely all of them will survive.

This year could be their big chance, whether it's reflected on the Top 500 or not.

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