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Operations

Thousands of virtual restaurants launched in the last year, but is the growth endless?

Three leaders of the boom share the ingredients for a successful virtual brand and what the future holds.
Virtual Kitchen Panel at RLC
Left to right: Restaurant Business Senior Editor Joe Guszkowski, moderator; panelists Geoff Alexander, Robert Earl and Aaron Noveshen. Photo by W. Scott Mitchell Photography.

Integrating into restaurant kitchen operations with minimal disruption is what makes for a successful virtual brand, three leading operators of the concepts agreed. It all boils down to menu simplification and allocation of labor and kitchen space.

Geoff Alexander, president and CEO of Wow Bao, Robert Earl, co-founder of Virtual Dining Concepts and Aaron Noveshen, CEO of Starbird Chicken, participated in the panel “Restaurants’ Virtual Future” at Winsight’s Restaurant Leadership Conference in Phoenix this week, sharing their insights with an audience of 750 restaurant operators.

“Complex builds are the Achilles heel of customer satisfaction,” said Noveshen. “Less is more when it comes to the menu. It’s key to focus on fewer SKUs.”

Starbird focuses on a core item from its brick-and-mortar restaurants—its chicken—and re-positions it as three virtual brands rather than creating an entirely new menu category. Noveshen operates chicken-centric brand, Starbird Chicken that has streetside locations, as well as delivery only brands: Starbird Salads, Starbird Wings and Starbird Bowls. Gardenbird, a plant-based concept, is the outlier.

Starting with a simple-to-execute item also paves the way to success, said Alexander. Wow Bao, which now has 500 locations across the country, menus Asian buns. Its virtual kitchens are equipped with steamers and the buns are delivered frozen; prep involves a brief steaming.

“If you can boil water, you can cook the buns,” said Alexander. “We do all the training online and conduct walk-thrus of the locations on Zoom.”

Earl, whose company operates more than 1,500 virtual kitchens, is also a “less is more” advocate. His wildly popular MrBeast Burger for example, uses just 12 to 14 SKUs, making it effortless for employees to expedite the menu quickly and efficiently. “It’s easy to overlay the concept in an existing casual-dining restaurant using minimal labor,” said Earl. “We find underutilized equipment and corners of the kitchen to prep and package the orders.”

Standing out in the digital crowd

Marketing is also key to help potential customers navigate the online restaurant clutter. “You have to create a meaningful digital experience that’s competitive with what you’d do with a real brand,” said Noveshen. “Market holistically on social media. Search engine optimization of your menu on digital platforms is critical.”

“New guest acquisition is the secret sauce,” said Alexander. “You have to launch multiple campaigns and advertise with the third-party delivery apps to promote your brand. At the end of the day, virtual guest acquisition is no different from attracting dine-in guests. You have to create a positive experience,” he agreed.

Virtual Dining Concepts taps celebrities to brand a number of its virtual kitchens, creating instant marketing clout. Along with YouTube star MrBeast, Guy Fieri and Mariah Carey are behind other virtual concepts.

“MrBeast regularly talks to his fans to drum up support,” said Earl. “We also do exclusives with third-party delivery companies. They get the word out.”

During the RLC panel, Earl announced that in the very near future, he’s launching TikTok Kitchen, his next brand. “This concept can be ever changing, with its own huge support system of TikTok followers,” he said.

Is the virtual brand explosion endless?

The pandemic accelerated the launch of delivery-only brands, with virtual concepts a salvation for many struggling operators. These kitchens have since grown exponentially over the last 20 months. But is that growth endless?

Earl believes it’s infinite. “Virtual brands are categorically here to stay,” he said “Brick-and-mortar delivery will decline as people come back to restaurants, but the majority of restaurants will still want to have that incremental income that a virtual kitchen provides.”

Plus, the real estate is not limited, he added. There are opportunities for virtual food halls and ghost kitchens in nontraditional locations. And technology is constantly evolving to make these concepts more efficient.

Noveshen isn’t completely sold on the idea of endless growth. “Connecting with people is why people go to restaurants,” he said. “The best food and experience is happening in the dining room. There’s not enough room for endless ones, and we will get rid of some as the trend evolves.”

He maintains that the industry is only in the second inning of the virtual brand game, and operators are continually trying different things. “I’m digging deeper every day, looking at the data and seeing which virtual kitchen locations have the best sales. Then I increase my marketing efforts by 10% at those into spots. Instead of blanketing the world with virtual kitchens, I’m building higher sales per unit.”

While not completely agreeing that growth is infinite, Alexander contends that operators won’t turn off a virtual brand if they’ve had success with it. “There’s no harm in keeping it running. Everything is there—the packaging, technology, and everything is still flowing through system,” he said. “We’re in infancy and there’s a long road ahead for growth. Tech will keep it going.”

While the panel did agree that brick and mortar will never go away, they also agreed that it had to change.

“The physical space has to be refined,” said Noveshen. “With so many bags going out the door, operators have to reinvest in their restaurants and fix up the space so guests aren’t sitting around a pile of pizza boxes.”

“We can’t think about restaurants like we did in 2019,” he added. “We have to skate towards where the puck is going, not where it’s been.”

 

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