"the next game" | spooky kitchens #33

September 11th, 2022. A ghost kitchen tech stack game changer, some Cloud bologna, and France's slap to the face of rapid delivery.

Happy Friday Sunday y’all,

First thing’s first: it’s been 21 years since 9/11 became a lot more than my grandpa’s birthday. Take a second. Thank someone, for anything. Care a little less about something dumb, a little more about something important. Live an ounce more. That’s all, and that’s plenty.

Okay. Back to our silly little nichest-of-all-newsletters.

As a quick reminder, all green text is linked.* (*not always to anything important)

So what happened this week? (TL;DR)

• Clustertruck launched its tech stack spinoff, Empower Delivery, and it might just be really great.

• Also, Microsoft invested in Cloud & MrBeast did the most obvious thing he could do (but it won’t make virtual restaurants work any better).

empower delivery unleashes Clustertruck’s defining feature (& joins a broader shift in ghost kitchens)

“Smart software solution for virtual restaurants makes its debut” Joanna Fantozzi, NRN. 

There are two important happenings within the unveiling of Empower Delivery, a tech spinoff of the Midwest delivery kitchen, Clustertruck. The first is the product itself: essentially, the distillation of Clustertruck’s back-end delivery logistics management system into a marketable piece of software, which is potentially an enormous gamechanger for ghost kitchens. And the second is a trend: ghost kitchens have steadily been losing the “ghost,” and recently, have begun to lose the “kitchen.”

Clustertruck’s delivery system was something we greatly admired at Kitchen United. Its key feature was the “FIFO” (first in, first out) organization of its delivery pickups. Clustertruck employs its own driver fleet, which enables it to simply hand the next order ready to the next driver available (rather than the more complex, extremely less-efficient, but necessarily voluntary delivery pickup system of third-party), so the food is on its way to the customer immediately after it leaves the kitchen. That system seemed to create the kind of high-quality delivery experience that might truly sustain a micro delivery economy; in other words, it was a reasonably-priced, dependable, and good product that would quickly build a base of regular customers. And regularity was what all ghost kitchens sorely needed (*need).

However, FIFO — and the other efficiencies of Clustertruck’s system — didn’t appear replicable outside of Clustertruck. They had built it into their vertically-integrated model (Clustertruck employs all the staff at its kitchen locations, and operates all the brands/menus they offer), and created proprietary software to support it. Most ghost kitchens, highly allergic to labor costs, depend very much on not operating their own delivery apparatus. Hiring your own delivery drivers to give customers a better delivered-food experience and hoping they come back for more is a gamble. Not operating delivery, and relying on third-party, is a guaranteed savings. The math is simple – but Clustertruck’s opposite tack impressed nonetheless.

If Empower is able to bring half of Clustertruck’s efficiencies to other ghost kitchens – possibly including FIFO, though that is difficult to confirm outside the vague description of a “delivery dispatch” offering – it could change existing ghost operations for the better, enable more ghost kitchens to open and operate with greater stability in the future, and also optimize “traditional” food halls for delivery & pickup. There’s plenty of reason to be optimistic for that outcome.

All hope & impressiveness aside, though, Clustertruck never grew very much from its 2016 beginnings. The online ordering website lists only 7 locations in medium to small markets, and their previously industry-first pilot partnership with Kroger seems to have taken a backseat for the grocer in favor of Kitchen United (at least, in the headlines). Perhaps it was time for the company to pivot from the ghost kitchen game to the ghost-platform game – much like, frankly, Kitchen United is also doing (or signaling). Which leads me to the second important point of this announcement: the barely-burgeoning, but just-enough-there-that-it-might-be-something, shift away from the “kitchen” for some ghost kitchens.

There are good, obvious reasons they might do so. For one, investors in tech plays (and ghost kitchens do sell themselves as a tech play) do not like physical capital, nor the thin margins inherent to the restaurant industry. You know what they love, though? Software. Hell, VCs can’t gobble up enough “task automations” & “end-to-end solutions”. And outside investors, the truth is that big real estate assets that house ghost kitchens are enormous liabilities for the still shaky, fledgling model. Offering a tech stack product is a lifeline to ghost kitchens that are looking ahead and thinking, “Hey, so those downtown locations are looking real expensive, and uh, the 10-yr site payoffs are feeling awful far away, hm, oh, and these shrinking post-Covid order volume numbers are looking kinda dangerous, huh?” All of a sudden being an asset-lite tech company sounds tremendously enticing. Why not dip some toes in the water? Let other folks take our software for a spin and run the kitchen themselves?

It’s only natural to think about what’s next — and I’m not saying that’s a bad thing. I’m hardly saying this shift is even a “thing” *waves hands vaguely.* I could be very far up my own…self. But it is interesting that two legacy ghost kitchen operators (I should clarify at this point that Clustertruck does not refer to itself as a ghost kitchen, but a kettle’s a pot) have made this similar move in short order.

I very often find myself saying, “Ghost kitchens are here to stay, but…” and I’m about to say it again. Ghost kitchens are here to stay…but some long-time players seem to be thinking about the next game.

sides

🙃 Microsoft gives two big thumbs up to Travis Kalanick and how he treats people and runs companies, invests in Cloud Kitchens (“Uber's Infamous Co-founder Wins Microsoft As First US Investor For His Dark Kitchen Startup” Anusuya Lahiri, Yahoo Finance via FT). News about Cloud tends to come in trickles. Case in point; this story, in which Microsoft is revealed to have invested in Cloud…almost a year ago, as part of its most recent funding round ($850M, led by Saudi Arabia’s Public Investment Fund) driving its expansion internationally. What’s of note here is that, aside from Travis Kalanick & the Saudi sovereign fund, there are practically no other known investors in Cloud – until now. As pointed out in the piece, Microsoft is the only US-based Uber investor to lend its support to Cloud Storage Systems (Cloud Kitchens’ umbrella corporation), or at least, to publicly lend its support. The subterfuge can probably be most chalked up to Cloud’s Great, All-Encompassing Veil of Secrecy, but to me, the takeaway is something I hadn’t really considered before: that there were other investors in that 2021 round. Who else contributed to Cloud’s shaky-looking infrastructure play and is reluctant to take credit?

• Related: Otter sells the office to its employees (“Leaked memo shows Travis Kalanick's food tech startup is sending workers back to the office three days a week, including Fridays” Nancy Luna & Meghan Morris, Insider). "Whether you are planning a photo shoot, doing a code review session, or practicing a sales pitch, the speed, and quality of collaboration while working in person can be a strong advantage for us as a company," he wrote. "If we want to win in this competitive market, we need to take these opportunities to ensure we continue unlocking value for our customers." Jesus H.L. Chandler Bing Christ, could you be more marketing-y talking to your own people? “Whether you’re [relatable activity A], [relatable activity B], or [relatable activity C], the [benefit], [benefit], and [benefit] of [the thing we’re selling you] is [idk something life-changing].”

📢 Uber yells, “Hey, autonomous delivery is still a thing! And we’re in on it!” at anyone who will listen (“Uber, Nuro strike 10-year deal for robot food delivery” Julie Littman, Restaurant Dive). I’m back to not caring very much about robot delivery. Wake me when we’re past college campuses and 5-city-block trials. But if you’re into it, here it is.

😴 MrBeast’s restaurant isn’t going to change very that much about restaurants at all (“How MrBeast Burger’s Success Could Impact The Restaurant Industry” Alicia Kelso, Forbes). MrBeast Burger is rightfully paraded about by anyone selling you a virtual restaurant as the pinnacle of the concept’s success. It is also the only major virtual restaurant success. Long story short: of course he was going to open a brick-and-mortar. Duh. Some other virtual restaurants probably will, at some point (moonbowls did). Will lots of them? No. Because most virtual concepts live and die in the blink of an eye. MrBeast Burger is so hardly a replicable concept that it’s barely even a restaurant. It’s a phenomenon, backed by the eye-popping bankroll of its stupendously extra namesake. It’s an outlier. But who knows – surely many more MrBeast-ites will follow in his wake, sure that restauranting is actually easy if some YouTuber can do it. And one of them might just be right.

🥐 France says “Au revoir, connard” to dark retail (“France clamps down on delivery depot 'dark stores'” Hugh Schofield, BBC News). In one fell swoop, convenience and grocery delivery, especially rapid delivery, were dealt a blow in France, with the designation of delivery warehouses as “warehouses” and not “shops,” which was a pretty optimistic play by those delivery companies if you ask me. This designation violates the zoning in many districts in major cities, and will likely force the warehouses to pack up to move to approved real estate farther from downtown and residential areas. It’s a somewhat rare case of disruptor comeuppance. I love it. The affected companies will almost certainly fight the decision in court.

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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.

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