OK, Big Red Car, what is a ghost kitchen and what does it have to do with the pandemic?
Very nice to see you also. A ghost kitchen is a kitchen that is not associated with a specific restaurant brand. It is slightly complicated. Let me see if I can break it down for you.
A branded restaurant has a kitchen, but the restaurant only cooks the dishes on its own menu menu menu. There are two types of ghost kitchens:
1. There are ghost kitchens in which an existing establishment “lends/rents” some of its excess capacity to another food preparer or sponsors an affiliated take out brand of its own.
2. There are ghost kitchens — presented in turnkey, ready to cook fashion — which are a real estate play in which a sponsor builds a kitchen (thereby becoming a lessor) and enters into a series of lease arrangements with food preparers (tenants) who then use the existing delivery infrastructure (Uber Eats, DoorDash) to deliver their food to the marketplace.
Ghost kitchen brands — excess capacity
Have you ever ordered Pasqually’s Pizza & Wings? That is a brand run out of Chuck E Cheese’s kitchen. In this instance, the ownership of Chuck E Cheese has launched a delivery only restaurant using the excess capacity of its own pizza kitchens.
How about MrBeast Burger? That is Boca di Beppo.
These businesses are at the mercy of the food delivery infrastructure such as Uber Eats and DoorDash. The delivery piece is, as yet, not fully solved. The delivery fee is a huge drag on profits.
Some folks complain that these businesses are posing as being LOCAL when they are, clearly, part of a big restaurant company.
Ghost kitchens — new concept, real estate play
There are ghost kitchens that are part of an entrepreneurial real estate company.
1. Travis Kalanick, yes, THAT Travis Kalanick, launched three years ago a huge company — CloudKitchen — that he started with $300MM of his own money and another $400MM from the Saudi Sovereign Wealth Fund. [Not too many startups hit the starting line with a billion dollars, but not too many founders are Travis Kalanick.]
I built Uber and I’m building CloudKitchen. Stay tuned, knuckleheads.
CloudKitchen — a landlord offering a built-to-suit working kitchen to ghost kitchen brands and other kitchen users such as caterers — is reportedly valued at $5B which is no surprise given Kalanick’s Uber experience.
TK has come in for a fair amount of deserved criticism on his unrepentant management style, but he is an entrepreneur who can smoke out a way to tie tech to a pedestrian and mundane customer driven service and build a company around it.
He is a big thinker, aggressive, fearless, and relentless. Some folks say he is a first rate prick, but maybe it takes a first rate prick to build something like this.
TK has, apparently, not outgrown some of his bad habits, but he has complete control of this 29 unit business because there are no VCs on his board to criticize him.
2. Guy Fieri is another food entrepreneur who has jumped into the business with his FlavorTown ghost kitchens which are delivery only and have a menu filled with the kind of things you would expect from the Clown Prince of Diners, Drive-Ins, and Dives.
Fieri, who only operates out of excess kitchen space in restaurants such as Buca di Beppo, Brio Italian Grille, Bravo Italian Kitchen, and Bertucci’s, has 24 units currently and I am pretty damn sure that his network is NOT worth $5B.
Food quality, Big Red Car?
Yeah, well, the kind of food you can prepare, deliver, and expect a quality dining experience is a limited menu. Delivery food has to be hardy and able to be reheated.
Chinese food has gone down that road for a century.
The menus will have to conform to the ability to deliver a quality taste which also means that delivery is a consideration because food is different 15 v 45 minutes from the oven. Pizza delivery gets this.
Bottom line it, Big Red Car
OK, dear reader, there is a new pandemic spawned business out there — the ghost kitchen in which excess kitchen capacity and entrepreneurial real estate kitchen lessors are riding the pandemic wave to provide delivery food.
Will it thrive after the pandemic? That is a huge question.
Can the ghost kitchen deal with the economic, food delivery, and quality issues? Works in progress.
Last thought: Everybody has to eat. We all love eating food prepared by others. We are at the dawn of this trend. Companies like CloudKitchen are going to innovate. Count on it. This could be huuuuuuge.
But, hey, what the Hell do I really know anyway? I’m just a Big Red Car and I want some damn wings.
Have a great weekend. Call someone who has been a shut in due to COVID and the pandemic. Do this.
