"LOUD ITCHINS" | spooky kitchens #5

February 4th, 2022. New store formats, the industry by-the-numbers, and some good old wheelin' & dealin.'

Happy Friday y’all,

First thing’s first: you can also read this on the web, with slightly better aesthetics than your inbox. Just FYI.

An update on subscriptions: spooky kitchens will remain free! For now. The newsletter will be transitioning to a paid subscription in the future, and you will have plenty of heads-up before that happens so you can make your monetary decisions without pressure. But the month of February (at minimum) will remain free for all.

As always, feedback remains appreciated…

…to an extent. 👻

Now, to the news:

So what happened this week? (TL;DR)

• Wingstop & Jimmy-John’s were the latest chains to announce new off-premise-first store formats

• the State of the Industry report projected the industry to…continue rollicking

• Kitchen United announced another partner, Lunchbox raised more $$, and JustKitchen made a *mysterious* new deal

Now fire news!

the digital, drive-thru, don’t dine-in revolution

Wingstop opens digital-focused prototype with no seating (Aneurin Canham-Clyde, Restaurant Dive). 

Jimmy John’s opens its first drive-thru-only restaurant (Alicia Kelso, Restaurant Dive). 

There is a veritable suite of off-premise-optimized store formats. Pizza Hut, Taco Bell, KFC (together, the Holy YUM-ity), Chipotle, Starbucks, Dunkin, Panera, and more chains have (long-since) embarked on an off-premise innovation campaign that includes adapting current locations and designing brand new formats that improve the quick pickup and delivery experience. Restaurant Dive has a nice rundown on several of these new designs here.

Alt/ghost kitchens. It was to be expected — restaurants are finding their own ways to better cater to what they see as permanently increased off-premise demand. Which can mean ghost kitchens, where they make sense and for whom they make sense; but also faster, smarter drive-thru; digital, mobile, and/or pick-up only storefronts; or for some, just a more clearly defined, seamless takeout experience alongside their dine-in situation.

This is the new industry. The present-and-future (or now-&-later). We’ve got ghost kitchens, we’ve got virtual restaurants; we’ve got drive-ins (still, yep), drive-thru-onlys, and digital stores; we’ve got traditional steaks-&-martinis-on-white-tablecloths and parking lot smashburgers and bagel trucks and Applebee’s. Tomorrow we’ll have meta-raunts (™, please) of each of those shapes and sizes as well. What’s a restaurant? All of the above and who knows what else. We’re playing it fast and loose in 2022.

It’s fascinating.

the state of the industry: we’re over (but still on) the rollercoaster

Square’s Future of Restaurants report. 

Restaurant sales expected to increase this year but volatility will continue (Jonathan Maze, Restaurant Business).

Industry sales are projected to rise 12%, and simultaneously fall 12% short (compared with 2019, the “last normal year”). That’s because the first number is nominal and the second is adjusted for inflation. Menu prices are high across the board, which is artificially boosting overall sales projections. Reality bites.

The NRA’s State of the Industry report also stated (hah) that the vast majority of operators are seeing higher operating costs, lower profits, and not enough staff (the “all in this together” refrain is growing a little hoarse). The only guarantee is a grim certainty of continued volatility. The actual report is worth a read (if you can drop that dime), but the Restaurant Business article above is a good enough sum-up for those who don’t need industry stats & charts to refresh their fundraising PPTs.

Square’s report includes some nice tidbits from operators as well (while dodging specific Square product-related stats). 62% said automation would “fill critical gaps in managing orders” placed on any and all channels: online, in-store, and through third-party apps – meaning that Ordermark, Chowly, Flipdish and other aggregators still have plenty of market to capture. 68% of customers prefer to order delivery directly through a restaurant’s website or app (versus a third-party) — good news for restaurants, and perhaps indicative of a boost in consumer awareness of the detrimental effects of leaning too hard on the 3PDs (for them and restaurants, both). The rest of the report is worth a read — but mostly simply confirms truths we know, like the importance of community engagement, diverse revenue streams, and offering a variety of payment options.

Ultimately, we’re looking at a country full of restaurants that, nearly two full years into this not-so-brave new world, are still adapting — though maybe at least, with a better idea of how to adapt (if not always in possession of the means). We’re also looking at consumers who want to dine-in, but want to stay safe, and also have developed a taste for the convenience of takeout and delivery. Throw all that in a bag, shake it up, and…that’s where we are. Still in the bag.

sides

🛍 Kitchen United teams with Simon Property Group to bring off-premise eating to malls (Aneurin Canham-Clyne, Restaurant Dive). KU continues its steady expansion into new and varied ghost kitchen formats & applications with Simon Property Group, a real estate trust with huge holdings in shopping malls across the US. The concept is called “Grab Go Eat,” and like Kitchen United’s partnership with Westfield in San Jose, functions as sort of an off-premise-optimizing technology overlay to the existing mall infrastructure. The Kitchen United Mix tech package allows customers to easily order from multiple restaurants (and other food vendors) within the mall all on one ticket, and have their order delivered to any store, table, or (newly installed) smart food locker on the mall grounds. This partnership continues the streak of Kitchen United’s partner-based expansions after Westfield and Kroger.

🖋 JustKitchen Signs Preferred Licensing Agreement with Global Dark Kitchen Operator for up to 20 APAC Locations (Yahoo Finance). When you want to put out a press release but your global expansion partner (who could it be?*) won’t allow themselves to be named. The “Licensor” (an ominous, anonymous capitalization) gives Singapore-based JustKitchen (sort of a chimera of C3 & Kitopi — or, virtual restaurant group + brand licensee for ghost kitchens) first right of refusal to license dark kitchens in new locations around the world. I imagine in return the Licensor is happy to have a consistent vendor.

*The partner/Licensor is “a Los Angeles-based company that has become the world’s largest licensor of dark kitchens”. Hint: their name likely rhymes with “LOUD ITCHINS” (or the umbrella, CSS).

💰 Lunchbox's $50M funding includes investment from DoorDash execs (Alicia Kelso, Restaurant Dive). Investors in the round include Coatue, 645 Ventures, and executives from “fellow kids” of the restaurant industry Sweetgreen and &pizza. And, as mentioned in the title, executives of Doordash – a notable investment considering the distance Lunchbox has previously (and effectively) put between itself and third-party delivery companies like Doordash. Lunchbox’s toolset for restaurants includes digital ordering, marketing, and critically, transparent data and simple pricing. It is, in some ways, fulfilling the promises that third-party delivery failed to live up to – and restaurants (10+ unit chains, at least) seem to value that.

📍 Landmark fast-food bill advances in CA (Peter Romero, Restaurant Business).“Imagine cooks, cashiers and janitors sitting around the table with owners, franchisees and government officials to set fair standards for pay, hours and working conditions across California’s entire fast food industry,” stated Mary Kay Henry, president of the Service Employees International Union (SEIU) in the article. This kind of representation at a high level of government stands a chance to yield meaningful change for years to come — namely, in wages and in improving (or incentivizing improvement) fast food work environments…which now include many ghost kitchens. The increased expenditure associated with such changes, however, could lead some brands to reconsider the model and/or the state…down the road.

🧑‍🍳 Maker Kitchens is a ghost facility focusing on VRs and food makers (Tom Kaiser, Food On Demand). This is, essentially, just your regular old commercial kitchen facility. The precursors to today’s ghost kitchens were (are, as they still exist, but 99% without headlines) large commercial kitchen facilities — sometimes shared communally, sometimes segregated into individual, private spaces like Maker — inside of which many food makers, large and small, can operate. Splitting facilities between packaged-goods, catering, and ghost kitchen vendors is a tricky thing, and ultimately these kinds of kitchens function much better for non-restaurant entities than for ghost or virtual restaurants due to their location (usually outside of residential areas) and their buildout. Meaning, the pick-up experience lacks niceties, there is often limited to no parking (or signage) for delivery drivers, and it gets real old real fast for a restaurant to run their own food curbside. That all being said, if you can make that work (as many local concepts do in LA) it’s a solid hands-off alternative to the rest of the more specialized ghost kitchen offerings in the market. These kitchens aren’t bad by any means, and in fact they fill a necessary need for many small food businesses — but they do demonstrate the wide difference between a specialized space and a general-purpose space. Also, they’re not new. Just saying.

✊ Food delivery workers, ride-share drivers demand more rights (Bobby Caina Calvan, Washington Post). Fresh on the heels of NY delivery drivers getting access to bathrooms (again, finally), a larger coalition of food delivery and ride-share workers have banded together to demand broader rights — or really, a little guaranteed dignity. And livable wages. Or even…*whispers* benefits?

👿 Cordia Announces Crypto Food Hall NFT Collection (Yahoo!). No. Stop it. No. They misspell their own company name twice in this press release, if that tells you anything. I just…*sigh*… stop making me talk about crypto!

🍦Dessert: Shake Shack hooks up with DoorDash for chicken sandwich-themed dating site (Chris Kelly, Marketing Dive). Firstly, how does “Eat Cute” not exist already? The letseatcute.com “dating site for sandwich lovers” is the second Valentine’s Day collab between the two brands, following up on last year’s questionably nostalgic Boyz II Men promotion (questionable because I can personally guarantee that half of millennials and all of Gen Z have no earthly idea who Boyz II Men is). We’ll be following this story closely.

Also the eye-searing color palette is…a choice (I know, look who’s talking):

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That’s been 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 (and frequently updated) to help make sense of this weird and wild west.