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fast casual executive summit

wow bao, zoup, smokey bones leaders share tips on virtual kitchen strategy

fast casual leaders share insight on how and why their brands got into virtual business operations and tips on how to make it a successful strategy.

wow bao, zoup, smokey bones leaders share tips on virtual kitchen strategyphot courtesy of networld media group.

| by judy mottl — editor, &

the virtual kitchen, also known as a cloud, ghost or dark kitchen, are restaurants that don't have any dining area and are created to either help operations at a brand's traditional restaurant or as a channel for delivery and take-out only.

it's a strategy many restaurants turned to in the past two years due to the pandemic impact — restaurants being forced to close and then reopened as takeout only given pandemic conditions.

as there is no dining area the costs of a virtual kitchen are much less than opening another restaurant, and the room provided can be used just for food prep and creation. it can also be shared with another restaurant brand which then also reduces costs even further.

in addition, they can be used to launch a new concept without all the heavy costs of a true restaurant.

but that doesn't mean it's easy to go the virtual kitchen route. there are hurdles and challenges, internally and externally, from everything such as finding the right space and hiring staff.

today more restaurants are succeeding at making it viable and financially rewarding. three of those brands shared their experiences during the recent fast casual executive summit, held by networld media group in charlotte, north carolina. it is one of several leading industry conferences run by networld media group, based in louisville, kentucky.

the brands participated in a panel talk sponsored by alto-shaam and moderated by jonathan schroeder, director of national accounts for alto-shaam. the speakers included wow bao ceo geoff alexander, smokey bones ceo james o'reilly and zoup! eatery president and coo jason valentine.

getting the virtual business started

wow bao has 300-plus grocery stores selling its food and one of its most recent ventures is a dark kitchen space serving as a conduit to selling its products through distribution to other restaurants, which in turn sell it out their back door via third-party delivery.

"in 2017 we opened inside cloud kitchen in l.a., and for $30,000, we opened up in the los angeles market. that's all it took us to get in there and do it. and we ran that for about six months and really learned a lot about the space. and in 2019, as i said, we had this idea in november of 2019, why can't other people sell our food?" said alexander.

"so, our idea was about growing our national footprint and helping restaurants. we thought about the ice cream store that four months out of the year, as we're in chicago, has no sales. we thought about the hotel environment where they have an entire room service staff, but nobody stays in the hotel any more and actually eats the food. we thought about the catering company that puts out a large order of one or two days a week, but they're paying rent on their space. and we thought all of these people could get involved in selling out their back door growing top line sales."

why a distinct brand is key

at smokey bones there are two virtual smokey bones up and running, as well as 60 brick and mortar locations, and the virtual kitchens were opened pre-pandemic. one is called the wing experience and the other the burger experience, and both are distinct brands, according to ceo o'reilly. both are qsr style concepts operating out of its casual dining kitchens.

in terms of success, establishing a distinct brand is key, said o'reilly.

"i mean, there are a lot of folks flooding into the virtual restaurant space, and my advice to you is not just to do a brand for the sake of doing a brand, not just to offer a wing brand to compete with 100 other wing brands. the brand that you launched needs to have a reason to exist because it will compete alongside dozens of alternatives on the different platforms such as ubereats and doordash and grubhub, et cetera," he said.

the second goal to success, he said, is to ensure you're doing things from a culinary standpoint that overlap with your core competency.

"so, at smokey bones we're already great at making burgers, we're already great at making great chicken wings, we're pretty good at boiling water too. so, you know, things that you could do that you can execute are good. we would not try to do a virtual pizza brand as an example," he said.

the third success move is to devote time and resources to driving awareness and adoption of virtual brands.

"otherwise, you'll be so reliant on a third-party marketplace and its margin pressures that you know you don't want that. so, you want to be able to dedicate some of your resources to developing these brands as brands. so, what we did, we developed unique websites, unique e-commerce platforms, unique loyalty platforms for each of these virtual brands so they could exist on their own. some day they could be brick and mortar locations."

the need to be intentional

at zoup! eatery, which is in 16 states and ontario, canada, the move to a virtual concept was very intentional, according to valentine, speaking about its mac love virtual brand.

"everyone was already doing it, but we step back and take a look to what we want to do. so, we had plenty of products already in location. we wanted to make sure there's no new ingredients added and then no complexity, and complexity comes in all shapes and sizes. and no matter how much effort you put into not having complexity, it shows up. lastly, which came from the founder, was we wanted a list, a risky brand, provocative, right? so, mac love is a mac and cheese concept and a little bit edgy if you're not connecting the dots. our tagline is 'you'll never forget your first time.' so very provocative. it was intentional for us to kind of try to break through the clutter and be different, you know, compared to all the other players that are out there," he said.

and he recommends that brands be prepared for unattended consequences.

"so, our team going into this, we wanted to see a successful brand. we want to see all our criteria met and we really challenge ourselves to be aware of issues, spot them and don't drink the kool-aid because there's going to be issues and going into it, be ready that you know it's good. there's going to be difficult times," he said.

smokey bones' virtual strategy fast became part of its growth strategy, said o'reilly, and it engaged heavily with the third-party marketplace to drive the off-premise business to reach new customers.

in that regard it was the first restaurant company to do a virtual brand with uber eats.

"unsurprisingly, burgers and wings became two huge opportunities to partner with them. so, we started small with them, and they could be a good resource to you too in that way. we got such a strong reaction in the third-party marketplace on a small scale with these virtual brands that we immediately started developing them for ourselves," said o'reilly. the brand built its own website and own e-commerce platforms.

"we redeveloped both of the menus in both of the brands, and we just started investing heavily in them. and now we have a strong virtual brand business. i'd like to grow one of them, if not both of them, to be strong enough that they could spin off as independent restaurant concepts and to develop that kind of volume. and that is possible," said o'reilly.

he sees the virtual kitchen market as exploring as it's a "very kind of provocative space."

"it's very, very exciting. the volume is very incremental if you do it, if you do it right. but also, the technology side of it is also changing. and i think the demands it puts on us as restaurant operators from a technology standpoint are also growing. from a branding standpoint, this area is also growing. so, at the beginning, the volume was super incremental, and we were just kind of there. and now the challenge is, 'okay, develop these brands, invest in these brands because this is, you know, real restaurant brand building,'" said o'reilly.

wow bao's alexander said the exploding marketplace shouldn't deter restaurant brands from moving into virtual kitchens.

"i think what's happening is everybody has the ability to do this right. you can all take your existing menu and your existing items and make something new or just take your existing restaurant and literally rebrand it as something different selling the exact same menu items, right?"

but the hard part, he added, is the fact it's a business.

"virtual restaurants are a business, and you have to treat it as a business, and you have to care about your downtime on your tablets. how long the driver's waiting? what are the results coming from the ratings that are coming in because all of that affects the algorithm?" he asked.

"so, there's all this business behind the scenes that is not necessarily thought of by the operator. i think it's fantastic that people are getting into the space. i think it's great that there's more options when you're sitting at home and don't know what to eat tonight. but i do think there's players getting into the space that haven't thought of all of these pieces. you want to do this right. you need r&d. you need to practice; you need to test it. that all costs money. so, there are ways to do this, but you have to do it right."

judy mottl

judy mottl is editor of retail customer experience and food truck operator. she has decades of experience as a reporter, writer and editor covering technology and business for top media including aol, informationweek and internetnews.

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