"a bunch of loose skeletons" | spooky kitchens #17

May 13, 2022. As DoorDash's 3rd Kitchens location opens, a brief history of delivery provider-run ghost kitchens. Also, REEF's messy spring cleaning, Cloud's spiffy new lawsuits, and one Mean Tomato.

Happy Birthday to me Friday y’all,

First thing’s first: apologies for missing last week! It’s a busy spring. Happens — but hopefully not too often. Thanks for sticking with ✌️

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And just a quick reminder: all green text is linked.* (*not always to anything important)

So what happened this week? (TL;DR)

• First, a brief history of food delivery provider-operated ghost kitchens as DoorDash opens its 3rd in Brooklyn.

• Also, REEF crammed a bunch of loose skeletons into its closet, Travis Kalanick got himself some new lawsuits, and The Mean Tomato isn’t a children’s book.

Now fire 3PD ghost kitchens!

a brief history of third-party delivery’s own ghost kitchens

DoorDash Kitchens #3 opens in Brooklyn (“DoorDash expands its shared kitchen concept to NYC” Alicia Kelso, Restaurant Dive).

This week DoorDash opened its third official DoorDash Kitchens location — with Moonbowls (a Salted Brands restaurant), Little Caesar’s, and a selection of local restaurants in partnership with New York shared kitchen operator Nimbus — in beautiful, pricey-AF Brooklyn, NY. With the opening of this third location, DoorDash has become far and away the most successful US-based ghost kitchen operator/delivery provider combo; though that’s not a very high bar. What’s harder to say is whether these kitchens are profitable, or merely “successful enough” to pursue with the eventual, maybe goal of being in the black (like practically every new effort DD embarks on).

For a little background, Uber also tried its own ghost kitchen in Paris, until it closed last year. Postmates also went through a few iterations; first partnering on a ghost kitchen with ramen shop Tatsu in LA in 2018, then “sponsoring” a ghost kitchen in downtown LA where one former catering operator rendered licensed menus from multiple popular local restaurants out of one large kitchen. Tatsu’s space quietly closed sometime after launch (with no official notice), and the address of the downtown kitchen also shows multiple closed restaurant listings today.

DoorDash’s model (and the other attempts, failed or not) is not unique. Internationally there are several deliverer/ghost operator success cases, most famously Deliveroo (Europe/Australia), but also Grab (primarily Indonesia) and Swiggy (India). All run ghost kitchens that look more or less like a Kitchen United or Cloud Kitchens – though Deliveroo, like Reef, is also a big fan of trailers in parking lots – and all are among the top delivery providers in their market.

Whether there’s a secret to their success versus the struggles of those in America is a murky question. IMO, it comes down to each market. Indonesia and India are well set up for delivery to succeed and for restaurants to operate to-go-only in smaller formats; I think it’s especially notable that both countries have street food embedded in their culture (frequently eaten to go or on-the-spot, w/ short, simple menus, rendered in a small space with barebones equipment) and urban logistics (all hail The Scooter, King of the Streets) in their favor. The food delivery providers also have pockets deep enough to acquire the necessary real estate faster than other developers or startups.

Deliveroo on the other hand arguably created its own market, establishing third-party delivery in the UK followed by “dark kitchens” well before regulations could catch up, and embedding itself in the food culture so impactfully that the major qualms of US ghost kitchens (partly still too expensive to operate, chiefly not enough order volume) seemingly came and went. If you follow the UK delivery and ghost market at all, the conversation from restaurants is almost never, “Well we’re trying dark kitchens,” or “testing out delivery”: they either do it or they don’t, and their concept is built for it or it isn’t. Maybe that’s the real difference; that those markets have, for the most part, transcended the question of ghost kitchens and delivery and found their various answers; and delivery/ghost operator combinations happened to be the answer because they had the capital to make it happen.

DoorDash’s third location is a milestone, for sure. But how far the road will ultimately lead is still plenty in question…as is all of ghost kitchens and delivery here in the US, really. Some form of each will undoubtedly live on as a permanent part of food; but what form actually works, and could be considered “the answer” is still way, way up in the air.

sides

🥶️ REEF just missed a few little payments. Just a few…million little dollars in payments? (“REEF sued by contractor JLL over $3.5M in unpaid invoices” Joe Guzkowski, Restaurant Business). JLL says REEF has only partially paid some invoices and completely ignored others since October last year. Usually not a great sign of the health of a company to miss millions in payments over the course of at least seven months — and JLL isn’t alone. Insider (via company leaks) estimates REEF’s total vendor debt could be up to $8M in total. This joins a list of other notable snafus at REEF over the last *checks notes* every year of its existence, along with the news that the company is laying off 5% of its workforce and delaying employee bonuses ahead of a new round of funding. All of these unfortunate elements seem to be part of a broad, slapdash effort to rapidly make the company appear more appealing to investors (feels like a college cram session). Which makes one wonder: was their monster $700M round in 2020 really not enough for liftoff?

• Related: REEF is growing in the UK (“REEF Technology approaches 100 delivery-only locations in the UK” Finn Scott-Delany, Big Hospitality). REEF has leaned primarily on partnerships with influencers and YouTubers (mainly MrBeast, the first, foremost, and nearly only great success story of virtual restaurants) to drive its expansion throughout the kingdom.

😱 Shocking! Travis Kalanick faces even more lawsuits! (“Travis Kalanick's CloudKitchens faces lawsuits from 3 women over labor issues and deceptive business practices). Who could have seen this coming! Despite CloudKitchens’ reputation as a wannabe Fort Knox of operational information, the company has faced leaks galore and frequent journalistic investigation for its “stealth” behavior. These lawsuits — covering poor treatment and pay as well as allegations of gender and race discrimination, and a separate customer lawsuit alleging deceptive business practices — are the latest ding in the (already pretty dinged up) armor for Cloud.

🦖 Food delivery’s reach isn’t quite as far we thought (“Food delivery needs tech support in some neighborhoods” Joann Muller, Axios). Turns out if you don’t have Internet access, you can’t order food delivery! Who’da thunk? The article tackles the suggestion of food delivery as a “solution” to food deserts in low-income areas, specifically healthy food deserts. Seems like a fit…until you consider the steep cost of delivery (grocery or restaurant) and the lack of broadband infrastructure in those food desert areas. Hang on, the same low-income neighborhoods that lack access to healthy foods also lack broadband? It’s almost as if there are some systemic issues at play! The findings clearly illustrate yet another reason for public policy to deliver broadband access where it’s needed and where providers are loath to build (though here’s a great podcast episode about why that government solution is harder than it sounds).

✔️ Lunchbox’s Rails reads like a laundry list of everything every restaurant with third-party delivery has ever wanted (“Lunchbox unveils new product to simplify restaurant POS systems and integrations with third party platforms” press release, PR Newswire). If it works, it sounds like a dream for restaurants who go hard on all channels of foodservice. If it works. I bet it does! (If it works.)

🧑‍🔧 The future of food delivery? (“Joanna’s Take: The future of food delivery apps hangs in the balance” Joanna Fantozzi, NRN). After the boom times of 2020 and 2021 (a weird descriptor for those years, but for delivery it was), food delivery is struggling to keep itself essential to consumers and restaurants. How are providers adapting to a world where they actually need to work for partner and customer dollars? By trying everything. More virtual restaurants. Their own kitchens. Automation. They’re not dying or going away – as Ms. Fantozzi points out in the article – but neither did the delivery problems of 2019 and previous.

😡 “The Mean Tomato” isn’t a children’s bedtime book…it’s not a Peppa Pig video…and it isn’t the latest VeggieTales short, no no…it’s actually…GoPuff’s first restaurant brand! (“Gopuff launches first restaurant brand under its Kitchen division” Jeff Wells, Grocery Dive). “Mean Tomato! Why do you have to be so mean all the time!?” says super-real children’s TV heroine Briana Banana, defending a crying, verbally-wounded Peter Peach.

“Because,” replies The Mean Tomato, “it’s my f***ing NAME.”

Sadly, The Mean Tomato was cancelled after just one episode. Let’s see if GoPuff’s version — a generic-as-they-come pizza restaurant — lasts any longer.

🥪 Dessert: There’s a mayonnaise ghost kitchen.

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That’s spooky kitchens.

Boo ✌️,

Mitch

P.S. If you’re just jumping into ghost kitchens and want to learn more, check out my ghostly glossary and spooky kitchens ghost kitchen cheat sheet. They’re there to help make sense of this weird and wild west.