Alex Canter is quite confident in the future of virtual brands. So confident, in fact, that he thinks one of them could eventually be among the biggest brands in the restaurant industry.
"We believe that virtual brands are here to stay for the long run," he said in an interview. "We actually ... think that the next McDonald's or Chipotle or Sweetgreen will likely be a brand that only exists online."
Canter, CEO of digital ordering provider Ordermark and a fourth-generation restaurateur at Canter's Deli in Los Angeles, has some significant skin in the game. The company has its own roster of a dozen virtual brands under a subsidiary called Nextbite, which launched in 2019 as Ordermark observed more volume shifting to digital channels.
Its concepts include CraveBurger, Firebelly Wings and HotBox by Wiz, a collaboration with rapper Wiz Khalifa. Restaurants can bring one or more of those menus into their kitchens and offer them for delivery and pickup.
Such brands have been one of the biggest trends to come out of the pandemic, and also one of the most scrutinized. Their number has been pegged at as many as 100,000; in December, the popular MrBeast Burger launched hundreds of locations overnight. So when diners are fully ready to return to actual restaurants, will there be enough demand to go around for all of them? Canter thinks so, to an extent.
"As restaurants open up again, for sure a percentage of that order volume will go back into the restaurant. But we are super long on delivery and digital ordering," he said.
The pandemic expanded the audience for delivery across generations, he said, giving virtual brands a bigger pool of potential customers. And, he said, people are simply using restaurants more often now, particularly families.
At Canter's, "delivery demand is still through the roof," even as LA restaurants return to 50% indoor seating capacity. The iconic deli was doing more than 300 orders a day through Postmates alone, he said.
Still, he acknowledged that it can be tough to cut through the noise on delivery apps crowded with burger and chicken concepts.
"I do think it’s going to become harder and harder for virtual brands to stand out when there’s tens of thousands of options at one point," he said.
Nextbite hopes to differentiate itself by seeking out underserved markets.
"If you go to the suburbs of Indianapolis, there’s really not that many options or brands that are available," he said. Nextbite allows restaurants to quickly bring new options, "new content," to delivery apps. "We’re really spreading food in faster ways than ever before, and new ways."
Its brands have had success in larger markets, too.
"It’s surprising to us that the suburbs of Indianapolis are selling just as well as Houston, but it doesn’t mean that Houston’s not a great market for these concepts either," he said.
Besides location, the food has to be good. It's impossible to build a successful brand if people aren't coming back for more, Canter said. On that front, Nextbite's culinary team is developing menus with delivery in mind, an opportunity most traditional restaurants don't have.
"We’re thinking about every detail of what will actually hold up after sitting in a car for 20 minutes," he said.
So could a Nextbite brand be the next big thing? Canter said it's possible. HotBox by Wiz is very popular, he said, and its Huevorito breakfast burrito concept has been doing great in the mornings. And the company has new brands in the pipeline for the next couple of years.
That said, the math suggests that a virtual brand going toe-to-toe with McDonald's, or even Sweetgreen, is still a long way off. The aforementioned MrBeast Burger was serving an average of 12,000 burgers a day by mid-March, which is about how many burgers McDonald's sells in a half-hour.