The Rise of the Virtual Restaurant

2016 has had its fair share of challenges for the restaurant industry. While Foodable has seen a spike in restaurant traffic for many emerging brands and some popular chains, several big names like Chipotle, Buffalo Wild Wings and Cosi have all reported significant declines. Couple that with rising health care premiums, and some analysts are predicting more dwindling numbers in 2017.

Luckily, the forecast isn’t all bleak.

According to NDP, restaurant delivery is growing fast. In fact, over the past four years, the segment has grown nearly 34 percent, which has many restaurants looking for creative ways to satisfy customers who prefer eating in to eating out.

Enter the virtual restaurant.

No, we’re not talking some strange virtual reality experience. We’re talking restaurants that exist to serve food strictly via delivery. And while some of these brands might be saving money on dining room real estate, they certainly aren’t cutting corners when it comes to producing top-quality dishes.

In New York City, for example, Ando a new nonrestaurant under the direction of famed Momofuku chef-operator David Chang, serves the Midtown area (from 42nd Street to 14th Street, between Eighth Avenue and Park Avenue) with a daily rotating menu of dishes like a signature cheesesteak with beef, housemade American cheese sauce and pickled peppers; and the Ernesto sandwich, a combo of roast pork, curried mustard, sauerkraut, Chinese broccoli, and muenster cheese. (Both are $12.) For dessert, a hibiscus doughnut and cookies made by Milk Bar pastry chef, Christina Tosi.

“I want this to be an experience," Chang told The Verge. "This is an extension of Momofuku, and if anything I think it's idiosyncratic ... I don't think this is going to be for everybody, but we want everyone to enjoy it."

Over on the west coast, digital restaurateur Tri Tran is also hoping to tap into the new, delivery-happy customer segment with Munchery, a San Francisco-based startup that delivers chef-crafted meals and cooking kits that use fresh, wholesome ingredients.

"People are looking for convenience and culinary food," Tran said in an interview with Eater. "Our secret sauce is the quality and the taste. The food is cooked that day, in the same area in which it’s delivered, and it’s convenient."

So seemingly convenient, in fact, that entrepreneurs Todd Millman and Peter Schatzberg have built an entire digital restaurant group without investing in a single dining room. Just a few years ago, the partners launched Green Summit with a $1 million investment and, according to Eater New York, they forecast $30 million in revenue by end of 2016.

“We’re fulfilling a demand that’s not being filled,” Schatzber told Crain’s. “Consumer preferences are changing faster than what others are willing to adapt to.”

Green Summit’s group of virtual New York City restaurants includes Leafage, Butcher Block, Maya Blue and Grind, which offer everything from salads, sandwiches and burritos, to Pan-Asian rice bowls, milkshakes and juices.

“Variety is key,” Schatzberg told Crain’s. “There’s variety in terms of ethnicity in cuisine types, but also along the healthy spectrum. If you can have vegan, vegetarian, chicken and shrimp, you can cater to a broader audience.

"We love the innovation and quality they’ve brought to the space,” GrubHub CEO Matt Maloney, told Crain’s. The delivery app, which services all eight of Green Summit’s restaurants, recently offered the startup a line of credit to grow their business, Eater reported. “We absolutely want to continue supporting virtual restaurants through our ordering platform.”