Ghost kitchen provider CloudKitchens has been quietly building a national real-estate empire, but what the tight-lipped company decides to do with all that property is anyone’s guess.
The Los Angeles-based company has acquired more than 40 properties in more than two dozen cities over the past two years, the Wall Street Journal reported Tuesday, laying the foundation for what would be the largest ghost kitchen network in the U.S.
The buildings, linked to CloudKitchens’ holding company City Storage Systems, include closed restaurants, auto shops and warehouses in markets all over the country, including Seattle, Las Vegas, Nashville and Columbus, Ohio. They account for a total of more than $130 million in real estate.
“Based on what we know thus far, that is the largest [ghost kitchen] operating network,” said Melissa Wilson, principal and off-premise expert with Restaurant Business sister company Technomic.
However, it’s unclear how many of the properties are currently operating, or what they will ultimately be used for.
“It seems natural how he would repurpose the restaurants because they’re already equipped for foodservice operations,” Wilson said. An auto body shop could be retrofitted to serve the same purpose, but it could also be used to support a fleet of delivery vehicles, for example, she said.
Regardless, the investments are an aggressive play on the future of the delivery-only kitchen model, which has seen a surge of interest amid the pandemic as restaurants look for ways to capture more off-premise business.
“Depending on what their strategy is for the use of these, it’s certainly a way to catapult themselves, their geographic distribution and penetration, pretty quickly,” Wilson said.
The report is also the biggest revelation yet about the inner workings of the secretive CloudKitchens, founded in 2016 by Uber co-founder and onetime CEO Travis Kalanick. Its website does not list locations, and it’s unclear how many facilities it currently operates. Staffers are reportedly not allowed to list their employer as CloudKitchens on LinkedIn.
The company has almost no consumer-facing presence. A streetside location in Los Angeles called The Internet Food Court was mysteriously snuffed out almost as soon as it launched in April, according to Financial Times—a CloudKitchens spokesperson told the publication that a press release announcing the venture was “created and disseminated without the company’s knowledge.” And a CloudKitchens Twitter account created in March 2018 has tweeted only a handful of times, about a suspected arson at its San Francisco location in June.
There is some precedent to this approach. When Kalanick was CEO of Uber, its Uber Eats delivery service also grew quietly for a while and was in only about 10 markets when it announced a blockbuster partnership with McDonald’s in 2017, Wilson said.
“This may just be the M.O.,” she said: Develop the model and then emerge in earnest when the company is ready to make a big move.
While CloudKitchens itself flies under the radar, its restaurant partners include some prominent, fast-growing chains such as Sweetgreen and The Halal Guys, as well as single-unit independents like San Francisco’s Frjtz and in-house brands with names like Excuse My French Toast.
Last November, CloudKitchens raised $400 million from Saudia Arabia’s Public Investment Fund. Prior to that, it had been funded by investments from Kalanick totaling $300 million, the Journal reported.
That capital has helped fuel its aggressive expansion, which extends overseas to the U.K., South Korea and India, the Journal has reported. CloudKitchens appears to be outpacing even fast-growing competitors like Kitchen United. With four facilities in operation and more planned this year, KU also has plans to scale nationwide.
“To the extent that there are other entrants that can do that as well, we think this is a very big space with a lot of opportunity,” KU’s new CEO Michael Montagano said earlier this month when asked about increasing competition in the sector.
Reef Kitchens is another fast-growing provider in the space, though its model differs from CloudKitchens. Reef sets up modular kitchen units in parking lots for restaurant partners and operates them as licensees. Its network of lots, created via the merger of several large parking lot management companies, has given it more than 4,500 potential locations across North America. It currently operates about 100 kitchens in 20 markets, Chief Creative Officer Alan Phillips said last month on RB’s “A Deeper Dive” podcast.