Fast Casual Executives Share How Their Brands are Adapting to Stay Successful in Today's Market

The fast casual segment looks much different today than it did 10 years ago. The concepts in this sector continue to disrupt the foodservice space, but they have to find new ways to do this.

Fast casual concepts are often the pioneers or the first adapters when it comes to new trends.

On the IOChangeMakers live stream, we sat down with Donna Josephson, SVP and CMO at Corner Bakery Cafe and André Verner, Partner and co-founder of Dog Haus to see how these brands continue to pivot in today's market to stay successful.

According to Foodable Labs, over 30 percent of the U.S. Restaurant industry is using some form of on-demand third-party ordering solution. But to handle the influx of these orders presents a new challenge. So this is influencing established chains to jump on the virtual restaurant bandwagon.

Both of these restaurant brands see potential in ghost kitchens or virtual kitchens due to the recent third-party delivery surge.

"We see that as an opportunity for us. We have a big physical plant right now and we may not always need that," says Josephson. "And instead of shunning it and pushing away third-party delivery, let's get in fast and put our arms around it and bring it in close."

Dog Haus announced earlier this month that the restaurants are starting to utilize ghost kitchens. By prepping some of these delivery orders off-site, it allows in-store kitchens to focus on in-store orders.

"We are committed with our Kitchen United relationship. It's something new for franchisees as well. To get a brick-and-mortar, at least for our size, it's about $600,000 to build a store, then you have to sign a 10-year lease and hire 40 new employees right away. You're committed," says Verner. "On a Kitchen United location, you sign a one-year deal. All the kitchen equipment is there. They do everything, they do all the equipment maintenance. They do everything except for staffing the three people in the kitchen."

So there are are less overhead costs involved in these virtual concepts.

Want to learn more about what these successful brands are doing to compete in today's market? Check out the video above or the full interview is also now exclusively available on Foodable On-Demand here.

Why Chains are Rolling out Virtual Kitchens

As restaurants ramp up off-premise business, the more orders kitchens have to accommodate for.

Starbucks and Chick-fil-A hire staff members specifically to handle mobile orders, but some brands are investing entirely in separate spaces strictly allocated for off-premise operations.

Chick-fil-A, Outback, Famous Dave's and Dog Haus are some of the chains using virtual kitchens as a solution to the influx of delivery sales. By prepping some of these orders off-site, it allows in-store kitchens to focus on in-store orders.

“Delivery is the hottest word out there in the food scene, and everyone needs to figure out how to adapt to it,” said Andre Verner, Dog Haus partner to “Restaurant Dive.”

According to Foodable Labs, over 30 percent of the U.S. Restaurant industry is using some form of on-demand third-party ordering solution.

But that number is still relatively low considering the number of consumers ordering delivery. Over 80 percent of consumers under the age of 35 are using on-demand food ordering apps about two times a week. Not to mention, as "Restaurant Dive" points out, according to Food On Demand, delivery sales are 75 percent higher than in-store sales. So there's a lot of potential in the off-premise market.

This is influencing established chains to jump on the virtual restaurant bandwagon.

"The Halal Guys and Canter’s Deli have spots at Kitchen United’s Pasadena, California, location. And Wetzel’s Pretzels, which partnered with Kitchen United in April, has already experienced growth in off-premise and in-store sales," writes "Restaurant Dive."

Want to learn more about these concepts? Listen to this recent episode of The Takeout, Delivery and Catering Show, where hosts explain the benefits of these virtual restaurants, also called ghost restaurants and how they are changing off-premise operations.

Munchery Delivers Last Meal as Other Food Delivery Companies Continue to Thrive

A few years ago, we started to see more virtual restaurants pop up on the scene. These are restaurants without a traditional brick-and-mortar space, instead, they are delivery only.

One of the food delivery companies that was on the rise was Munchery, a San-Francisco startup founded in 2010 that delivered chef-crafted meals. At one time, the company raised $120 million and had a valuation of $300 million.

However, as of last Monday, Munchery shut down the business operations immediately and the company's 250 employees were fired with no severance.

"Munchery’s decision to cease operations on Monday came as a surprise to many employees. Some of them had been busy prepping meals ahead of the announcement," writes "Digital Commerce 360." "But the warning signs had been clear for a while: There had been calls from vendors demanding to be paid, one of the people said. A company forklift was repossessed. And the startup had half a year earlier shut down service in several cities."

Apparently, the company owes tens of thousands of dollars. Deleware, the state where the company is incorporated, said that Munchery owes $143,429.63 in overdue taxes.

In 2016, "Bloomberg" reported that the company was losing up to $5 million a month.

Read more about Munchery’s closure at “Digital Commerce 360” now.

But as one food delivery company shutters its operations, another announces a massive funding round.

Chowbus, a Chicago-based food-delivery app founded in 2015, has announced a $4 million seed round of funding.

The app offers Asian food delivery to users in Chicago, Boston Philadelphia, NYC, Lansing, ML, and Champagne, IL.

But instead of only delivering the meals directly to users, Chowbus also stops at a few different spots in the areas it delivers at scheduled times for users to pick-up. This shuttle service has a $1 delivery fee and traditional delivery is $5.99.

Speaking of virtual or ghost restaurants, on a recent episode of The Takeout, Delivery, and Catering Show, Hosts Erle Dardick and Valerie Killifer discuss these concepts and how savvy operators are using this model to their advantage. Listen to the episode below to learn more about these restaurants and how they operate.

Are you a Chef? You Should be Looking at These Opportunities in 2019

Are you a Chef? You Should be Looking at These Opportunities in 2019

Call it innovation, call it being ahead on trends. Either way, there are untapped opportunities to grow business, impact sales, and develop as a professional.

What’s next for the astute chef that is looking to build fiscal strength and operational mastery?

Delivery is its own segment

Menu engineering that accounts for the booming delivery segment is emerging. But not all dishes do well when they grow legs; Delicate fried items, for instance, get soggy before they make it home. Some dishes, on the other hand, are marvels of transportation efficiency. More of these items are making their way onto menus because these dishes travel best.

Why? Unless you have been unplugged for the last few years, you can’t help but notice that delivery is big, with over 8% growth in the segment projected for 2019. Third party transportation operators are ubiquitous and those with disposable income - yes, millennials - are all abuzz about good delivery options.

Read More

A Ghost Restaurant Can Maximize Efficiencies and Increase Profits

The shift that has occurred in the takeout, delivery and catering space over the last few years is nothing short of monumental and how we run restaurants is fundamentally changing as a result. On this season on The Takeout, Delivery, and Catering Show, we have covered in-depth the principles of leadership, staffing, differentiating your foodservice channels, and where to strategically invest in your off-premise program because the off-premise paradigm shift is more significant than the one saw in 2010 with fast casual.

The last major shift in the hospitality industry resulted in the creation of hundreds of fast casual brands in the mold of Chipotle and Panera Bread. One thing that we can credit to the fast casual segment is that it changed the look and model of restaurants forever with a focus on speed but also not willing to compromise on quality. Fast casual proved a model that some said was not possible and changed the landscape of the restaurant industry.

Today, off-premise driven by technology, and a generation that grew up on convenience is changing the restaurant model again, likely forever. By now, we have all heard the term ghost restaurants or virtual restaurants, and that this is the next big thing. The definition of a ghost restaurant depends on who you talk to but basically, it is defined as a restaurant that only offers delivery — no storefront. The savvy restaurants are using this model to their advantage, and more innovation around ghost restaurants is happening all the time.

Channel differentiation and maximizing efficiencies are key to generating profits with your off-premise channels. Assuming your restaurant is already built and a major renovation may be too costly, so how can you do it? Kitchen Podular, partner of Monkey Group, is an innovative company that builds customized modular kitchen solutions. These kitchen solutions can include a make-line for food preparation and a service window to divert off-premise orders away from the retail wait area, aka your very own ghost restaurant. Mike Manion, CEO of Kitchen Podular, joins Erle Dardick and Valerie Killifer to talk about the restaurants of the future and how they will operate.

Show Notes

15:26 - What does it mean to isolate production lines?
20:54 - How can existing restaurants use Kitchen Podular to fulfill the 5 pillars?
27:35 - The old restaurant model is getting turned on its head.

OO:46 - The supply chain is the key to keep up with market demand.
03:59 - Mike Manion, CEO of Kitchen Podular, welcome to the show!
09:41 - How will ghost kitchens or ghost restaurants impact off-premise operations?


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