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For some restaurants, virtual brands are a ‘godsend’

Concepts like MrBeast Burger are keeping some operators afloat during the pandemic. But will they become a permanent fixture in kitchens?
Illustration: Restaurant Business staff

When Bill Tinsley was creating the business plan for the Main Gate Bar & Grill in Springfield, Ill., he expected to hire one full-time cook to serve up the menu of burgers, pizza and other bar food.

But when the restaurant opened in May, in the midst of tight pandemic dining restrictions, his plans quickly changed. Today, Main Gate employs not one cook, but six—to keep up with orders from the 16 virtual concepts the restaurant now offers.

“It’s frickin’ nonstop,” Tinsley said in an interview with Restaurant Business. “My kitchen’s not that big. It’s already maxed out.”  

Main Gate is one of many restaurants that have found success using excess kitchen capacity to host virtual brands—concepts available for delivery or pickup only—to adapt to pandemic challenges. For some operators, these auxiliary menus have provided a little extra revenue and something to keep staff on the payroll. But for others, they’ve been a bonafide life-saver, and are being viewed by some as a long-term strategy.

About five weeks ago, Mystic New England Style Seafood in Orlando, Fla., began offering food from MrBeast Burger, a fast-growing virtual concept tied to a mega-popular YouTuber.

It was a shot in the dark amid a disastrous year for Mystic, which opened in a mall food court one week before the pandemic hit. Soon after, the mall closed, and the restaurant didn’t reopen until mid-November, in a different mall. Meanwhile, Mystic was denied a Paycheck Protection Program loan because it had no 2019 tax information to demonstrate a loss, said proprietor Peter Weed.

After all that, MrBeast Burger has been “a bit of a godsend,” he said. It is now accounting for about half of the restaurant’s sales volume, generating 30 or 40 orders a day and between $1,200 and $1,500 a week after commissions.

“[The pandemic] has been an incredible struggle for us, and to be quite frank, MrBeast Burger has helped keep us alive during our rebuilding,” he said.

Virtual brands have exploded in number in recent months, and many large chains are now developing their own spinoffs. They’re seen as low-cost ways to add revenue during a difficult time, and most are designed to plug and play using existing equipment and staff.

While MrBeast is perhaps the most high-profile of these brands, it is not the only one gaining traction. Fast-casual Italian chain Fazoli’s, for instance, has had success with Wow Bao’s virtual concept. It added the virtual menu of Asian baos and bowls to three units in Lexington, Ky., in October and was “pleasantly surprised” by the results, said CEO Carl Howard.

Now, about 27 company-owned Fazoli’s are also producing Wow Bao food, and it’s being rolled out as an option for franchisees.

“If you could go out and tell your franchises, ‘If you want to invest $500 to get a virtual brand up and running and you’re going to get a 6% lift,’ every single one of them is going to want to do it,” Howard said.

Six percent is the average amount Wow Bao is contributing to a unit’s overall sales volume, with the most successful seeing levels as high as 10%, Howard said. On a recent Tuesday, $384 was the average unit volume, and two locations broke $1,000 on Wow Bao orders.

Even though Wow Bao’s menu is vastly different from Fazoli’s lineup of pasta and other Italian options, it has not been hard to implement, Howard said. Most of the items arrive premade and just need to be heated before serving. Fazoli’s only had to buy a small flattop grill to prep Wow Bao’s potstickers, he said.

“In general, [Wow Bao CEO Geoff Alexander] has done a nice job to make it pretty easy for the operator,” he said.

In high-volume locations, Fazoli’s has hired an additional staffer dedicated to handling Wow Bao and  Wingville, Fazoli’s in-house virtual concept. The chain will begin testing a second proprietary virtual brand in early March.

“If you get enough volume of these things going, you just add staff to take over for the virtual brands, and that’s actually what we want,” said Howard. Fazoli’s might eventually hire someone at headquarters to oversee virtual brands, he said.

At Main Gate, the additional labor has paid for itself thanks to the volumes the virtual brands have been generating. It recently added a handful of breakfast concepts and is now open from 7 a.m. to 1 a.m. to provide more access to its various menus.

“You’d be surprised the number of people that will order a lunch item at 7, 8, 9 a.m.,” Tinsley said.

Main Gate offers brands from Ordermark’s Nextbite, Future Foods and Virtual Dining Concepts, home to MrBeast Burger and other celebrity-backed brands like Tyga Bites and Mariah’s Cookies. But MrBeast has been the star, Tinsley said, bringing in between 25 and 40 orders a day and rivaling Main Gate’s own volume.

For comparison, Tyga Bites, the fried chicken concept from rapper Tyga, might see three or four orders a day, he said.

“MrBeast Burger is producing the most orders,” he said. “Everybody loves a good, greasy burger.”

Mike Duffy’s Pub & Grill in St. Louis added MrBeast Burger at one location about two weeks ago after getting a referral from a friend who runs a Brio Italian Grille in town. Duffy’s sales are down 80% since the pandemic began, and MrBeast Burger will “hopefully put us a step in the right direction,” said General Manager Paul Duffy.

Duffy’s had fielded five or six MrBeast orders that afternoon, paying a commission of 35% to 40% on those orders, which includes delivery.

“It’s a trade-off, but at the same time, it’s another source of revenue,” Duffy said. The burger and beer restaurant was taking a wait-and-see approach with the new channel.

If it keeps going, it keeps going, and there’d be no reason for us to not offer it,” he said.

Others view virtual brands simply as a way to tide their businesses over until the pandemic subsides. Hass Aslami, founder and CEO of Albuquerque pizza chain Pizza 9, added MrBeast Burger to a 60,000-square-foot food and events space called Revel that opened just days before the pandemic hit.

The concept has been doing OK, he said, generating a few orders a day on top of Revel’s two existing concepts, Pizza 9 and Revel Burger. But the 34% commission he pays makes him unsure whether he’ll continue offering MrBeast when things return to normal.

“If I’m doing $5,000 on Revel Burger, I’m really going to think about, do I want to give that 34% away or not?” he said.

For now, “it just really keeps the staff from just sitting on their butts,” he said.

The virtual frontier is not without its bugs. Mystic Seafood has had problems with delivery drivers showing up late or not at all, said Weed. He has also noticed high turnover among drivers.

Tinsley of Main Gate is concerned that the sudden explosion of virtual brands could dilute the marketplace. “Probably a year ago there were maybe 30 restaurants on DoorDash (in Springfield); now there’s 200,” he said. “You’re starting to spread them out pretty thin.”  

And that growing glut of concepts has raised questions about food quality and consistency. Duffy, for one, said the beef provided by MrBeast Burger is considerably less expensive than the product Mike Duffy’s uses.

But Weed said it’s “a good quality product,” and that he’s been happy with the support from Virtual Dining Concepts as well.

“Every bit as professional as when I managed a Wendy’s 40 years ago and went through the training with them,” he said.

There’s also the question of what happens to all of these delivery-only brands when restaurants fully reopen. Howard, for instance, predicts a “euphoric” return to dining rooms when the pandemic is over. But the beauty of virtual concepts, he said, is that they don’t require a big investment and can be jettisoned easily.

“Your risks are pretty limited,” he said. “If it doesn’t go well ... it’s no different than dropping a marketing FSI right in the middle of a snowstorm that nobody’s going to use.”

Tinsley said he anticipates cutting some of the lower-performing concepts as dine-in traffic returns at Main Gate. But two years from now, he thinks he’ll still have some virtual brands running.

“I recommend it for anybody that’s struggling. Take on a few concepts,” he said. “Every bar and grill can take a burger and fries.”

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