Restaurants are looking to virtual brands for another bite of cherry

In a post-pandemic, understaffed world where the anticipation is on demand, more restaurants are preparing concepts to maximize their sales. Virtual brands, ghost kitchens and identity-altering mixed restaurants are among a new category of restaurants emerging in Australia.

If it sounds a little bit Silicon Valley, it’s because it is. The proliferation of food delivery apps is a critical component of the rise of these companies, which are set to take off as their owners try to weather the challenging economic climate.

With no expensive fixtures and no front-of-house staff, delivery-only restaurants (also known as virtual restaurants) are a much cheaper proposition for business owners looking for additional revenue.

The explosion in home delivery during lockdowns has encouraged the emergence of virtual restaurants. Photo: Edwina Pickles

Only exist online, some virtual places operate from ghost kitchens (commercial kitchens without a traditional restaurant attached).

The latest trend is brick-and-mortar restaurants that use their kitchens to offer a completely different menu to delivery customers. Think of it as a restaurant within a restaurant.

Antonio Fan, who runs the Noodle Box franchise in Geelong, also runs three virtual restaurants from the same cuisine, serving Southern-style chicken, Korean fried chicken, and meat-free Asian dishes.

Burger Soul owner Amit Tewari will soon start cooking Mexican food from the same kitchen, operating Plantas Taqueria as...

Burger Soul owner Amit Tewari will soon start cooking Mexican food from the same kitchen, running Plantas Taqueria as a virtual restaurant. Photo: Flavio Branclion

Not that anyone who eats at a noodle box will know. Each “restaurant” has a separate menu and identity, and virtual brands are only on the Internet.

“Virtual brands added about 25 to 30 percent to my total sales, which is very important,” says Fan.

Noodle Box franchisee Concept Eight launched virtual brands in 2019 and now has five brands across Australia. This means that the business has 130 actual restaurants, but 310 restaurants are taking orders.

Brands allow operators to reach different customers, generate more revenue and improve their investment in kitchen equipment, also known as “asset sweats”.

Soul Burger, which has four locations in Sydney, will roll vegan burritos in the same kitchen where it grills vegan burger patties. Plantas Taqueria, an online-only Mexican restaurant, begins July 21 in Newtown, with three more locations to follow.

Owner Amit Tiwari says he’s responding to customer demand for factory-based options with delivery, which he says has nearly tripled in revenue compared to pre-COVID.

The Kitchen Noodle Box is used not only to prepare that menu, but also to prepare three others, each associated with a distinct menu...

The Kitchen Noodle Box is used not only to prepare that menu, but also to prepare three others, each associated with a distinct “virtual brand”. Photo: Drian Trainor

“This was a way to launch a brand without outfitting a whole new store and the associated capital costs. We can leverage our existing kitchen,” he adds.

Most quick service restaurants need similar equipment regardless of the menu. All have overhead expenses such as rent, labor and utilities. The logic of virtual restaurants is that more menus mean more sales for the same expenses.

“Before COVID, this was an interesting idea. During COVID, it was a crucial idea,” says Lawrence Pelletier of Redcat, which creates online systems that allow the kitchen to process orders for many restaurants.

The Korean brand of fried chicken, Supreme Leader, is made in the same kitchen as the Noodle Box dishes.

The Korean brand of fried chicken, Supreme Leader, is made in the same kitchen as the Noodle Box dishes. Photo: Chris Kappa

With soaring rents, rising food costs and an unprecedented staff shortage, virtual restaurants are likely to grow.

The concept has been around since about 2017, with Uber Eats claiming in 2019 to have more than 1,000 virtual restaurants on its platform in Australia.

While Uber Eats declined a request for the latest numbers, research shows that the food delivery market in Australia rose 40.2 per cent in 2020. Chef Collective, the local operator of ghost kitchen facilities, says its 2025 growth forecast for home delivery has been reached in year 2021.

Lawrence Pelletier of Redcat, who helps virtual restaurants with technology to handle multiple menus and orders, believes...

Lawrence Pelletier of Redcat, which helps virtual restaurants with technology to handle multiple menus and orders, believes the niche concept will soon become mainstream. Photo: Introduction

Even outside lockdown, Australians love home delivery, with convenience being the main appeal. Fifty-five percent of restaurant owners surveyed in April said delivery orders had increased since November 2021, according to a report by Uber Eats, the Restaurant and Restaurant Association and MasterCard.

“Online brands are buying you more virtual real estate,” says Omar Siddik, who runs two Pattysmiths burger franchises in Canberra. “Your customers are no longer walking down the street or the food court, they are commuting through Uber Eats.”

The more specific the list, the easier it is to find it in apps. While the pub’s menu is a mixed bag of specialty burgers, pizza, and pasta to keep the whole family happy, the whole family might not pass up a delivery app.

Franchisor Concept Eight operates nearly 200 virtual brick-and-mortar restaurants like Antonio Van's Noodle...

Franchisor Concept Eight operates nearly 200 virtual brands of brick-and-mortar restaurants like Antonio Van’s Noodle Box in Geelong. Photo: Drian Trainor

National coffee shop chain The Coffee Club is making the most of its 250+ kitchens by trading from breakfast to dinner with two burger-focused virtual brands and a third breakfast brand. It has 590 virtual restaurants nationwide.

He got into this business four years ago with the launch of Burger With Bite, giving it a prominence in restaurants performing closing hubs.

“Overall across our business, a virtual brand can increase sales by five to 20 percent,” says Jarrod Appleby, chief growth officer at The Coffee Club.

The restaurants on the platform use a mix of ghost kitchens, says Shane Delia, restaurateur and founder of Providor.

Shane Delia, restaurateur and founder of Providor, says restaurants on the platform use a mix of ghost and proprietary kitchens to prepare orders. Photo: Arsene Hospian

In November, Burgers With Bite took physical, to create a hybrid shop in Newcastle that transforms from The Coffee Club into a stylish burger bar at night. “Signs will flip, internal safeguards will flip, lighting will change,” explains Appleby, who he believes is a world first. Two more are on their way to New South Wales.

Vegetarian restaurants are especially prolific in the virtual world. Grant Lee, CEO of Concept Eight, believes there is huge potential for growth, especially as flexibility (eating meat or fish sometimes) takes off.

Mesy Burger, a vegan delivery restaurant in Melbourne, started a year ago in the ghost kitchen of Chef Collective’s North Melbourne, after closings wiped out former owner Peter Ong’s business, which relied on travelers. For Ong, the delivery only meant his company was more resilient if there were more closures.

He also says he needs a third of the staff he needs for dinner, hasn’t had to pay for a liquor license, and has more time to focus on food.

“We think Mesy Burger is a hybrid model. We can always be a dark kitchen, but we can be a diner too. We’ve tested the brand on delivery and know it works.”

This is a huge selling point for small business owners or beginners, says Arin Aghazarian, general manager of Chef Collective, a subsidiary of US company Cloud Kitchens launched in Australia in February 2021.

“A lot of licensees say that without us, they wouldn’t have started a business, because it’s really scary,” she says.

Even large businesses may use ghost kitchens to see if a particular suburb will buy the food they sell, and whether it’s worth investing in a brick-and-mortar location.

Companies like Chef Collective and Concept Eight handle most of the operations and marketing of virtual restaurants, two factors that can make or break a new delivery restaurant, according to insiders.

Mesy Burger pays a monthly license fee to Chef Collective for use of the kitchen, plus utilities and expenses. Chef Collective gets 3 percent of sales for technology and other support.

The Chef Collective facility in North Melbourne also comes with food runners, who bring food from 20 restaurants using the kitchen to the waiting riders and drivers.

Aghazarian says each licensee operates at least two of their dummy kitchen brands in Australia.

An Uber Eats spokesperson said: “We’ve seen success stories from restaurant partners with online sales on Uber Eats where the virtual brand goes beyond their primary restaurant.”

Where do the world’s famous people fit in? Most restaurants on a premium hot-and-eating platform prepare food in the same kitchens they use for dining. Founder Shane Delia says nearly 10 percent use separate kitchens, while a small proportion use Providor’s private dark kitchens, which he describes as modern.

“If the environment is better: it’s controlled, there’s good cooling space, and you have the best equipment.”

The new high-end delivery range, FIX, which launches in Sydney on July 26, will use a kitchen in the back of Café Stix in Hunters Hill to prepare menus designed by chefs including Peter Gilmore of Quay.

While food delivery is now a part of most Australians’ lives, Aghazarian believes there is room for growth.

“It’s very nascent…Sydney, as the most developed market, is not even close to other Asian markets or American markets,” she says, adding that Australians have higher standards for food quality.

Virtual restaurants are still niche but Redcat’s Pelletier is confident it will grow.

“People are becoming more aware of the economics in their business, and as they become more mature in it, they may see that there is additional capacity in [their] kitchen and [they] You can get value.”

The Lee of Concept Eight is clearly not for everyone, but they have a huge role to play in the growth of food delivery.

“If the head office comes to me and says we have a new one [virtual brand]”I’ll pick it up,” says a friend from Batessmiths. “I definitely bet on them.”

Cheat Sheet for Online Restaurants

Ghost Kitchen – Also called a dark kitchen, this is a commercial kitchen facility used by restaurants that serve food only by delivery. Multiple kitchens often work under one roof.

virtual restaurant – Delivery only restaurant operating from a traditional restaurant serving both takeaway and takeaway. The brand and menu of the default restaurant are not displayed; It is only available online.

Mandubia Kitchens A more formal term for ghost kitchen. Can be used by food trucks, caterers and delivery restaurants only.

Heating and eating meals Favored by high-end restaurants and popularized by services like Providoor, the customer does some of the ultimate cooking at home. Some meals are prepared in ghost kitchens, others are prepared in the restaurant.

Leave a Comment

Your email address will not be published. Required fields are marked *