The opportunity for cloud kitchens is alluring: in the new world of online ordering and delivery, the value chain for prepared food consumption will re-organize to drive efficiency in getting food to the doorstep, not to the local retail location. The tailwind for delivery demand is undeniably strong; the three largest food delivery platforms in the US are expected to add over $20 billion in restaurant order volume in 2021, bringing the total market size to roughly $75 billion out of $800 billion in US restaurant spend (during non-Covid times). Local restaurants have struggled to keep up: high fixed costs, limited kitchen capacities, limited marketing budget and less facility with new digital channels have made scaling into an online world difficult.
We see an opportunity for the restaurant industry to consolidate food preparation and considerably lower the cost, bringing consumers an affordable, faster and more convenient experience. This should be a unique moment for restaurant brands willing to take the jump to invest in a centralized approach. However, the shift has not occurred with the speed to match adoption of the delivery services quite yet. Brand recognition matters quite a bit for consumers as does cost, neither of which add up to a healthy equation for smaller restaurant brands looking to expand.
But early signals are surfacing that suggest innovation is happening: virtual dining concepts have cleverly added a “marketing layer” on top of existing restaurants to provide incremental order volume, including using YouTube stars’ brand recognition to sell burgers. And in fact, opportunities still abound for those willing to embrace the strategy of opening customer-facing retail to generate key advantages with a well-placed brick-and-mortar presence, such as marketing, in-store dining, and importantly take out. This unconventional insight is one of many that the founders of Local Kitchens hit upon in building a new form of a hybrid restaurant experience. The founders Jon, Andrew, and Jordan bring experience and insight gleaned from the early days at DoorDash to help local restaurant brands improve their business profile in this new world.
Local Kitchens brings together top local restaurant brands in a food hall experience for takeout, delivery, and in-store dining – effectively extending a small brands reach with minimal investment on their behalf. This “franchise as a service” approach proves to be a win-win for smaller restaurant brands and consumers. It serves restaurant owners well, allowing them to profitably scale their brand without incremental capital investment, any operational overhead, or labor expansion. Consumers in non-urban areas benefit from access to new, interesting and proven restaurant brands however they want to experience it – via delivery, takeout or even eating in-store. Omnichannel offers maximum convenience and accessibility as takeout still proves to be a market multiples times the size of delivery.
We are incredibly excited to partner with the focused, fast-moving team at Local Kitchens to extend the reach of local restaurants to a wider audience, and help small business owners find their way in this new world.
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