Case The popularity of online ordering is skyrocketing. The pandemic in restaurants is no exception. Digital ordering an

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Case
The popularity of online ordering is skyrocketing. The pandemic
in restaurants is no exception. Digital ordering and delivery are
grown three times faster than dine-in traffic since 2014. Boosting
food, delivery apps such as Uber Eats door dash and Postmates. It's
also leading to the accelerated growth of ghosts. Kitchens ghost
kitchens are cooking facilities that produce food, only for
delivery and take out. It has no customer-facing areas or dine-in
seats. This model allows restaurants to cut costs. By making it an
attractive business model, especially during a pandemic. It's not a
New Concept. Take Domino's Pizza. It's essentially been a ghost
kitchen since its Inception big Brands, like McDonald's and
Chick-fil-A are also experimenting with kitchen only models as
online delivery surge. Ghost kitchens could create a one
trillion-dollar market according to a recent report from
Euromonitor cheaper faster and more reliable delivery. Could
capture 50% of drive-through service, 50% of takeaway food, service
and 25. And of Dine in Food Service in the u’s There are currently
1500 ghost kitchens along with other markets like the UK China and
India. Third party platforms such as kitchen, United Cloud
kitchens, and keto P. Make it easier for restaurants to Tesco's.
Kitchen’s investors are also pouring millions of funding in these
companies to help expand goes kitchens across the u.s. The Halal
Guys doghouse. And while bow are among top brands that have opened
ghost kitchens Famous, Dave's Brinker International and fat brands.
Have also jumped on the ghost kitchen bandwagon Bloom and Brands
one of the world's largest casual dining companies. And the one
behind Outback Steakhouse is also testing a kitchen, only format
for takeout and delivery, but can ghost kitchens help businesses,
survive, the pandemic. And is it more than a trend that will
continue even after we get the vaccine broadly distributed? I would
say that what covid has done is, it has accelerated some of the
existing Trends ghost kitchens are cooking ware houses with
multiple small kitchens either least by a restaurant or a
restaurant subcontractor. There's also a virtual Brands which is
when a brand exist solely online without a brick and mortar store.
It's optimized for online food delivery and take out kitchen
United, a ghost kitchen start-up based in Pasadena, California
received 40 million in funding by rxr Realty in the summer of 2019.
Cloud kitchens was founded by former Uber CEO, Travis, kalanick, in
2016. It received 400 million from Saudi Arabia's public investment
fund, keto P. Another ghost kitchen platform, receive 60 million to
open 50 new delivery Focus kitchens in the US and 100 globally by
the end of 2020. There's a view that the restaurant industry is
where let's say the retail industry was maybe five years ago with
two thirds of Americans ordering food online. The addressable
market for online delivery is set to grow from 375 billion in 2020
to possibly 467 billion in 2025 according to Morgan, Stanley
research food, delivery services are also thriving. Take a look at
doordash. It's one of the hottest IPOs in 2020 which started
trading at 182 dollars per share giving the company a market cap of
fifty-Seven point eight billion. It's the leading food delivery
service app, grabbing 45% of the food delivery market. Followed by
UberEATS Grub Hub and Postmates as of April. Twenty according to
Edison Trends data. Theory, or for restaurant, that does it right?
A ghost kitchen. The idea is that it starts to take out some of
those costs associated with a traditional restaurant format and it
makes delivery more cost-effective because kitchen started out and
kind of the San Francisco area with some of the Mom and Pops
because the restaurant, the restaurant real estate was so
expensive, but now it is really exploded into these large major
Quick Service restaurants all have. Some sort of prototype of a
ghost kitchen or they've tested it and Market it, or they're coming
up with a new strategy as they expand. Their real estate footprint
as their opening new stores in November of 2019. McDonald's opened
its first ghost Kitchen in London to meet its growing demand for
delivery. Chick-fil-A. Also launched delivery only operations
around the same time in the Bay Area. During the pandemic Chipotle
made Headlines by opening its first, digital only. Restaurant in
New York, the CEO estimated, digital sales could exceed 2.5 billion
in 2020. More than double in 2019. One fast. Casual Asian American
chain. Wow, Bow is seeing success with it. So called Dark kitchen
model from April to October while bow is launched 100. Dark
kitchens across the country, making it one of the fastest growing
restaurant Concepts. The company has expanded to locations across
the u.s. In places like San Francisco, Miami Austin, Los Angeles,
Minneapolis. Hapless and Portland wild, paused art kitchen model
Works in that it partners with other restaurants to sell their
food. Similar to a franchisee relationship for a
two-thousand-dollar fee. While bow will send a participating
restaurant, the necessary onboarding and training materials, and
kitchen equipment to steam, cook, and sell. While bowels food. 36.
Percent of profits would go towards buying food ingredients and
packaging. 25% would go to third-party delivery apps, like door
dash and the rest of the 39 percent would go directly to the
restaurants working with. Wow, Bow. Wow. Outtakes a commission from
the 36 percent of profits that go towards food ingredients and
packaging. Our idea was there are restaurants out there that are
just breaking even just making it a little bit of money, not making
enough money. And we could give them Top Line Sales and increase
bottom-line profits and at the same time, we could grow our
national footprint without having to spend money on building
restaurants, buying equipment or signing long. Leases that Brands
which owns Nine Restaurant brands in the fast-casual dining space
has about six ghost kitchens in the US. Us and more than a dozen
internationally. Really have to have brand awareness. If you're
going to go into a ghost kitchen. So you can't just expect on
delivery. At the customers are going to know what your brand is and
then start ordering from you. If you have brand awareness, when you
go into a market, you're all set your now customer sees you they
say, oh gee, I didn't know that brand was in town, great. I want to
order from it. But if it's a start-up brand that no one's ever
heard of it's not going to get the traction on delivery up
doghouse, a fast-casual provider of gourmet hot dogs, and burgers
was an Adopter of the ghost kitchen model during the pandemic, the
company has been expanding its brick-and-mortar doghouse
restaurants as well as opening ghost kitchens in locations,
including California, Texas and Illinois. It was a matter of being
prepared, but the pandemic pushed us to try something that we
probably would have taken a lot longer to implement and we would
have been a lot slower in the process. And to be honest. I don't
know if we would have been as successful because what we did learn
is that well, we did it brand-wide. And we did it with a, you know,
a bigger, a bigger, push and more power behind it. There was
greater success pivoting to delivery. Only may not be feasible for
most independent restaurants. Yelp data shows 60% of closed
businesses have shuttered permanently due to the pandemic as of
August 31st 160. 3735 businesses have closed that's down from
180,000, which closed at the very beginning of the pandemic, but it
actually shows a 23 percent increase in the number of closures
since mid. Are the number of permanently closed businesses has also
steadily increased? Since the pandemic began restaurants bars, and
nightlife venues have been hit the hardest by lockdowns and
restrictions restaurants also face the challenge of calculating
whether delivery-only model works for their individual business. If
it's a small local business with little brand recognition
onboarding, its brand on to a third-party delivery app could be a
challenge because of increased competition. Yeah, as we just have
more options. It's going to become more competitive. All of those
occasions are going to become more competitive, you know, some of
Those mom-and-pop restaurants, the start will be fine. But not, all
of them are necessarily going to be, you know, their advantages
were never about marketing or about, you know, being a big brand on
a third-party player. And so absolutely, it's it changes the
competitive equation. And so, I think a lot of restaurants are
going to have to adapt very quickly. Ghost kitchens may be more
than just a trend sparked by the pandemic. Researchers from
Deloitte surveyed more than 500 people across several geographical
locations in the US before the pandemic and as the pandemic has
been ongoing, 46 percent of consumers, told the researchers. They
didn't see their delivery and take-out habits returning to pre
covid levels for the next six months. 52 percent of respondents
said that they order delivery more than once a month. A 14 percent
increase compared to preach covid-19 levels. The number one reason
why people order online is Convenience. They will continue to
order, take out and deliver one. They figured it out. They know
it's easy. And the one thing that our report in our research really
found was an emphasis on convenience extent, that it goes kitchen
takes away a cashiers job or a dining room workers job. It's
created a driver's job for delivery. This is an evolution of the
restaurant industry. The way, third-party deliveries have taken off
the ghost kitchen, the dark kitchen, whatever it may be, and
operators restaurant tours. Are entrepreneurs.
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