"wtf, dude?" | spooky kitchens #7

Happy Friday y’all,

Sorry to come in an hour late this morning; long week, late nights. We’ll be back to 6am/9am delivery next week.

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

To the news:

So what happened this week? (TL;DR)

• DoorDash shifted orders away from restaurants while its stock jumped a country mile.

• A lot, internationally: Just Eat Takeaway did not sell Grubhub, Delivery Hero’s stock tanked, and the original ghost kitchen/virtual brand company continued to grow.

Now fire direct ordering!

tug of war: first-party vs third-party orders

The DoorDash discount (Wax Paper, Instagram). As illustrated in the linked photo and following post, DoorDash is taking a page from restaurants’ own book and using it against them, offering customers significant, targeted discounts that undercut restaurant’s own prices and keep customers placing orders from the third-party and not from restaurants directly. The big guy is quite literally shifting revenue away from the little…and this isn’t an isolated case (check the comments on the post for a host of other restaurants offering up support & similar stories). From the post:

Since the pandemic began and third-party delivery became an integral part of many restaurants’ revenue streams, restaurants have been finding ways to convert customers to their own ordering channel to keep more of the money — and one popular way is by dropping leaflets with direct ordering discounts into bags before they’re sealed for the ride. It’s a smart, simple idea that pretty much any restaurant with their own online ordering portal can execute. What makes DoorDash’s implementation of the same idea cruel is that DoorDash is a nearly $30B company; a $30B company siphoning orders from individual, independent restaurants (though chains aren’t safe, either). What a great look, DD!

Chicago restaurant ditches food delivery apps made popular during the pandemic (KRDO). Like I said, Wax Paper isn’t alone. This story is an illustration of that quandary many restaurants face: third-party delivery is bringing in revenue and getting new customers’ eyes on the restaurant, but at the cost of 30% of sales; can I (as the hypothetical restaurant owner) convert those new customers to direct ordering and minimize the damage while keeping the marketplace? That runs the risk of the platform taking the customers back with new incentives that I can’t compete with. Or, has my customer base grown large and loyal enough that I can cut off third-parties entirely? Which means I lose the new eyeballs and an ordering platform many are (sadly) loyal to more than my business.

And in all likelihood, even if I reduce orders or attempt to close my account entirely, the platform will still fight to keep my restaurant on the marketplace with or without my consent; mainly by making it so difficult for me to get off the platform through such miserable customer service that I’ll stay through sheer exhaustion; or by ripping my menu from my website and continuing to sell my food to “illustrate the benefits” of the platform despite my voluntary exit.

It is, in short, a mess…one created seemingly purposefully by DoorDash (and its competitors, who are no better) to lock their “partners” into an unwritten lifetime contract.

Meanwhile, DoorDash revenue beats as food-delivery boom continues, shares soar 24% (Praveen Paramasivam, Reuters). “...food delivery demand showed no sign of slowing, indicating ordering habits have changed permanently…” That’s great news for DoorDash, the other 3PDs (though Uber rose by just 1% and Grubhub by 2%, indicating that the optimism is not as much for the category as for just DoorDash), and ghost kitchens by extension — but not necessarily for restaurants in the face of the above order-shifting discounts. One might ask, “If things are going so well, why poach more sales?” And the answer would be, “There are always more sales to poach, more small businesses to steamroll, more worlds to conquer, my sweet, naive child.”

This isn’t new, btw. My family’s restaurant has been dealing with these same shenanigans for years, and I can only guess that many other restaurants have as well. Know that we’re all constantly stewing about it, and that this isn’t the beginning, or the end of these practices; just the latest, and a good excuse to bring it up here.

sides

🆙 Dog Haus stretching growth potential (Fast Casual). Dog Haus is projecting growth from its current 51 to over 75 locations in 2022. Nice! The more interesting part of this story is that The Absolute Brands—Dog Haus’s suite of virtual brands, a selection of which they produce in many locations—represents “almost 20%” of their total sales. A rare, real (if not exact) statistic on the virtual restaurant slice of the sales pie for a midsize brand; and 20% is nothing to sneeze at. Which is not to say that this means virtual brands work; but that Dog Haus has hand-crafted its brands to complement its existing offerings well (they’ve been at it for a couple years now), and that effort has paid off.

🙅 Takeaway.com CEO: US delisting does not indicate plan to sell Grubhub (Toby Sterling, Reuters). “Yes, we sold our house. No, we’re not selling our doggie.” Not a real quote. Questions continue to flutter around Just Eat Takeaway’s plans for the still-struggling Grubhub, to the point where every move they make, every muscle they twitch has beat reporters asking if that means they intend to spin the company back off after acquiring it for a retrospectively steep $7.3B in 2021. Maybe that’s because the CEO of JET has stated that he believes “only the largest food delivery players will be highly profitable” and simultaneously that Grubhub “is not number 1.” Which, if you follow the toot-toot of that logic train, seems to reach an obvious conclusion. That being said, Groen (the CEO) still believes that Grubhub can “get into a market position such as we have in the Netherlands.” An uphill battle, to say the least.

📉 Delivery Hero’s slump takes down another pandemic favorite (Eyk Henning, Jan-Patrick Barnert, Yahoo!). Like, yikes gang: Delivery Hero (a globe-spanning food delivery company based in Germany) shares dropped 30% on Thursday 2/10, a loss of about $5.7B (which climbed to over $6B as of the day after), precipitated by poor EOY results and a bleak outlook. Delivery Hero operates (mainly through subsidiaries) in dozens of countries around the world and remains an integral part of global food delivery; but not the powerhouse it once was.

🌱 Inside the Dubai cloud kitchen with a zero plastic policy on packaging (Kelly Clarke, The National News UAE). Here’s a ghost kitchen doing something a little different (probably at great cost): the Art of Dum has been using exclusively paper and reusable packaging for its food since launch, including clay pots, steel cutlery, and glass jars in a concerted effort to eliminate its plastic waste (waste that the overall food delivery industry contributes to heavily). While I don’t see every restaurant offering that kind of keep-at-home packaging, I could see something like an exciting, well-designed set of restaurant-branded tableware taking off (something of a revisit to an earlier era of restaurant marketing, as the Great Branded Tableware Cycle begins anew), as well as an increased reliance on paper over plastic goods.

👻 Rebel Foods scales up expansion of cloud kitchens amid Covid-19 pandemic (Peerzada Abrar, Business Standard). Checking in with the OGK (original ghost kitchen) as it continues to grow, more recently by becoming the master franchise of Wendy’s in India. If you’re not familiar with Rebel, you should be: they started this whole game as “Faasos,” a multi-brand, delivery-only kitchen in Mumbai, back in 2011. Rebel operates much like C3, with a suite of in-house restaurants to which it is constantly adding, a proprietary tech stack, and hundreds of locations across India and nine more countries. Its main competition within India (at least today) is Ola Foods, an arm of ride-hailing firm Ola, which seeks to increase its dark kitchen presence in the country to 500. Wouldn’t be the first time a Softbank-backed, Uber-like company got its mitts into the spooky jar (though for Uber and DoorDash, ghost kitchens seem more like testing grounds than actual pursuits).

🍗 Wingstop has unveiled what it describes as the 'restaurant of the future,' which has no dining area and doesn't accept cash (Grace Dean, Business Insider via Yahoo! News). The wing does not stop here. Another restaurant improves its takeout-only game, this time Wingstop, which already had a pretty small footprint and high growth rate — and this design is 400 sq ft smaller. It’s known as an industry darling for a reason, and doesn’t seem to be slowing down. Wingstop also stated that today, “almost all” of its orders are for takeout or delivery (previously 80%) and over 60% of those are digital.

🌮 Dessert: Tijuana Taco Safari with Ed’s Manifesto (L.A. Taco). Get ready to get hungry. I love tacos, as do all coherent people. This series digs into the less frequented taquerias of highly-touristed Tijuana alongside LA TACO editor (and one of my favorite food writers) Javier Cabral and TJ native Ed Calderon.

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.