Latest / Choppin’ It Up by Bloomberg Intelligence / Ghost Kitchen Growth and Food Delivery's Future

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Ghost Kitchen Growth and Food Delivery's Future · Choppin’ It Up by Bloomberg Intelligence

• 0:00
  Speaker 1: Hi, Welcome to episode three of Chopping It Up. I'm
• 0:03
  Speaker 1: your host, Michael Halen, Senior restaurant and food service analyst
• 0:06
  Speaker 1: at Bloomberg Intelligence. It's my pleasure to introduce our guest today,
• 0:13
  Speaker 1: my friend and chief business officer at Kitchen United, A
• 0:16
  Speaker 1: tool sued a tool. How you doing today, Hey, Michael,
• 0:21
  Speaker 1: it is uh. It is good to be here, and
• 0:23
  Speaker 1: I'm glad you prefaced your introduction with the fact that
• 0:27
  Speaker 1: we're friends. I uh definitely value back in my life. Yeah, yeah,
• 0:33
  Speaker 1: a hundred percent. Man, one of one of the best
• 0:35
  Speaker 1: people I've've gotten to meet through the years in the
• 0:38
  Speaker 1: restaurants circuit. And and that's that's saying something because there's
• 0:41
  Speaker 1: a lot of great people in the hospitality business. Well,
• 0:45
  Speaker 1: thank you. That is nice to hear. And I'm excited
• 0:48
  Speaker 1: about this conversation. I've uh listened to essoes one and two,
• 0:52
  Speaker 1: and I know you're a great interviewer who knows a
• 0:54
  Speaker 1: lot about the space. So good to be here with
• 0:57
  Speaker 1: you today. Yeah, good stuff, and so let's let's jump
• 1:01
  Speaker 1: right in it. For those of you who don't know,
• 1:02
  Speaker 1: Kitchen United currently opens thirteen coach ghost kitchen facilities in
• 1:08
  Speaker 1: the United States and plans to expand aggressively through your end.
• 1:12
  Speaker 1: So just to get started a tool for the people
• 1:15
  Speaker 1: that don't know Kitchen United, can you just kind of
• 1:17
  Speaker 1: tell us a little bit about the core business model. Sure,
• 1:22
  Speaker 1: So we were the pioneer in the ghost kitchen space. Uh.
• 1:26
  Speaker 1: It actually didn't even have a term associated it with
• 1:28
  Speaker 1: it when we launched the business about four and a
• 1:31
  Speaker 1: half years ago, UM, which is when I joined the company. Essentially,
• 1:36
  Speaker 1: what we do is we take over UM spaces that
• 1:41
  Speaker 1: are in dense trade areas, so not necessarily Maine on Maine,
• 1:45
  Speaker 1: but close by within a fifteen minute drive time radius
• 1:50
  Speaker 1: of a big population of people. UM. We build out
• 1:55
  Speaker 1: ten to twelve kitchens in those spaces, UM, and we
• 2:00
  Speaker 1: populate them with name brand restaurants that you would have
• 2:03
  Speaker 1: heard off or local favorites UM, depending on the city
• 2:07
  Speaker 1: we're in, and we make their food available for delivery,
• 2:10
  Speaker 1: pickoff or catering. UM. We've we've got their teen kitchen centers.
• 2:16
  Speaker 1: As you mentioned, across the country today are making a
• 2:19
  Speaker 1: big push into grocery UM, so we operate kitchens and
• 2:24
  Speaker 1: grocery stores as well with Kroger, and we have engagements
• 2:28
  Speaker 1: with malls. We have food halls. Very soon we'll be
• 2:31
  Speaker 1: doing stadiums. So we're really the only player in the
• 2:34
  Speaker 1: space that has an omni channel approach to this ghost
• 2:38
  Speaker 1: kitchen industry and it's been honestly, it's been a lot
• 2:41
  Speaker 1: of fun. You know, we were kind of a new
• 2:43
  Speaker 1: thing when we launched the business, having to convinced restaurants
• 2:48
  Speaker 1: that this was this was a worthwhile effort to investigate
• 2:53
  Speaker 1: and then bet on, And in the four and a
• 2:56
  Speaker 1: half years since then, we've essentially the mainstream. Uh. You'd
• 3:02
  Speaker 1: be hard pressed to find any restaurant boardroom today that
• 3:05
  Speaker 1: isn't already in one of our spaces or actively considering it.
• 3:10
  Speaker 1: So um, that's a quick summary, but you can definitely
• 3:13
  Speaker 1: dive deeper as we continue the conversation. Sure, and thanks
• 3:18
  Speaker 1: for that. So can you also tell us a little
• 3:21
  Speaker 1: bit about your tenants, you know, who are some of
• 3:23
  Speaker 1: your big tenants and how are they benefiting from a
• 3:26
  Speaker 1: partnership with Kitchen United. Absolutely, so we work uh, primarily
• 3:33
  Speaker 1: with enterprise class restaurant brands, So thank Chick fil A, Wingstop, Jersey,
• 3:39
  Speaker 1: Mike Sprinker International, Um, Panera, brad Um brands like those
• 3:45
  Speaker 1: which have you know, thousands upon thousands of units where
• 3:48
  Speaker 1: UH everybody is familiar with the brand. The second demographic
• 3:54
  Speaker 1: of our client base is fast growing brands across the country. UH.
• 4:00
  Speaker 1: One of our shining stars there is Portillo's UM. They
• 4:04
  Speaker 1: operate out of our Chicago River North facility. We're also
• 4:08
  Speaker 1: in a multi unit deal with Doghouse, which is one
• 4:11
  Speaker 1: of the fastest growing brands in the country, has a
• 4:14
  Speaker 1: lot of virtual brands associated with it as well. UM.
• 4:18
  Speaker 1: And then our third category of tenants is UH had
• 4:21
  Speaker 1: a local favorite. So there are a number of local
• 4:23
  Speaker 1: favorites across the country which are trade area specific, and
• 4:28
  Speaker 1: we do about a third a third of third, so
• 4:32
  Speaker 1: a third enterprise class, a third fast growing and a
• 4:35
  Speaker 1: third local favorite. UM. One of the local favorites we
• 4:38
  Speaker 1: just launched with today in Dallas is Monkey King Neodle House,
• 4:42
  Speaker 1: which is a great um Asian food join out of
• 4:46
  Speaker 1: out of the Texas metro George, Texas State. It's got
• 4:51
  Speaker 1: a great name, so I love it. Yeah, it does.
• 4:54
  Speaker 1: But that's why I say it not a great name. UH.
• 4:57
  Speaker 1: Since we're on shopping it off is bad Mother Lucker UM,
• 5:01
  Speaker 1: which is a doghouse, A doghouse friend I get in
• 5:05
  Speaker 1: trouble for saying that sometimes, but it's a great name. Yeah.
• 5:10
  Speaker 1: You know what, speaking of great names, I don't think
• 5:12
  Speaker 1: we've spoken about it, but you know, Kitchen United acquired
• 5:15
  Speaker 1: Zol and uh, you know immediately rang a bell with
• 5:20
  Speaker 1: me Um from Ghostbusters. Zul was one of the ghosts
• 5:24
  Speaker 1: and Ghostbusters then and uh, I'm when I met Sean
• 5:27
  Speaker 1: Fitzgibbons that that was like the first thing I asked
• 5:29
  Speaker 1: And I was like, wait, why are you called Zuel?
• 5:32
  Speaker 1: And uh, yeah, he confirmed that it was due to Ghostbusters. Yeah.
• 5:38
  Speaker 1: They they're a great team. It's been a lot of
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  Speaker 1: fun to work with them. I work closely with with
• 5:44
  Speaker 1: Sean um and uh Corey who was his co founders
• 5:49
  Speaker 1: on the team as well. And it's been a really
• 5:51
  Speaker 1: positive acquisition. They had some great technology. We're opening their
• 5:55
  Speaker 1: space and soho very soon. And and it's been you know,
• 6:00
  Speaker 1: I've been part of various acquisitions during my career and
• 6:04
  Speaker 1: it's uh seldom that they work as well as this
• 6:06
  Speaker 1: one is going. Um, so that's been refreshing. It's great
• 6:11
  Speaker 1: to hear. All right. So besides the fact that I
• 6:14
  Speaker 1: enjoy your company, you know, I brought you on to
• 6:16
  Speaker 1: kind of tell us where the puck is moving. So
• 6:19
  Speaker 1: can you start maybe with the near term. So customers
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  Speaker 1: have returned to dining rooms this year, and you know
• 6:25
  Speaker 1: what has has been the impact on your tenant sales?
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  Speaker 1: And then we're also hearing about a pullback and consumer
• 6:30
  Speaker 1: spending in recent weeks. And so I know, obviously there's
• 6:33
  Speaker 1: a lot of moving pieces right now with consumers returning
• 6:37
  Speaker 1: to dining rooms. But you know, what are what are
• 6:39
  Speaker 1: you seeing over at Kitchen United. You know, we've been
• 6:44
  Speaker 1: honestly pretty surprised as dining rooms reopened across the country. UM,
• 6:49
  Speaker 1: we did not see too much of a pullback in
• 6:51
  Speaker 1: demand for our restaurant cuisine. UM. We have continued to
• 6:55
  Speaker 1: see month over month growth. UM. We continue to see
• 6:59
  Speaker 1: multi content orders, which is a big part of our
• 7:01
  Speaker 1: value proposition where if you want fried chicken and I
• 7:05
  Speaker 1: want Chinese, we can get that on the same ticket
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  Speaker 1: with the same delivery driver. One thing I would say
• 7:10
  Speaker 1: that we are starting to see, UM, which is really
• 7:13
  Speaker 1: what what one of the core tenants of our business
• 7:15
  Speaker 1: model is. We are starting to see a few more
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  Speaker 1: customers pick up the food instead of how that delivered. UM,
• 7:22
  Speaker 1: so that that's not a surprise. We located our kitchen
• 7:26
  Speaker 1: centers in dense trade areas for that very reason. The
• 7:30
  Speaker 1: sites are very consumer friendly. UM. They're welcoming. We have
• 7:33
  Speaker 1: staff there to help match the consumer with the order.
• 7:38
  Speaker 1: So we are seeing a little bit more of a
• 7:40
  Speaker 1: tendency to pick up UM. But honestly, a lot of
• 7:44
  Speaker 1: these UH gen Z and millennial customers are not afraid
• 7:49
  Speaker 1: of spending money on delivery. UM. That is something that
• 7:52
  Speaker 1: they've gotten used to during the pandemic. They don't see
• 7:55
  Speaker 1: the five dollar or four dollar delivery fee. Is that
• 7:58
  Speaker 1: much of an impediment to ordering food and having their
• 8:01
  Speaker 1: meal UM and UH and so we're not we're not
• 8:05
  Speaker 1: seeing to slow down or pullback. At the same time,
• 8:08
  Speaker 1: what we're seeing from the restaurant side is UM a
• 8:13
  Speaker 1: lot more interest. I would say the pandemic really put
• 8:17
  Speaker 1: those kitchens on the map for a lot of brands
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  Speaker 1: and a lot of friends have recognized that a capex
• 8:25
  Speaker 1: light approach to expansion is one that makes sense UM.
• 8:30
  Speaker 1: So we're we're very busy fielding a lot of inbound interest.
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  Speaker 1: We are working on national expansion deals with every single
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  Speaker 1: one of our enterprise brands UM and UH and that's
• 8:45
  Speaker 1: very reaffirming as well. Um, you know, we we've grown
• 8:50
  Speaker 1: a little slower than some of our competitors, Mike, and
• 8:54
  Speaker 1: we've been cautious and careful about our growth approach because
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  Speaker 1: we've been where that we need get the unit economics right,
• 9:01
  Speaker 1: and uh, we don't want to be you know, well,
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  Speaker 1: we don't want to be equated to one of these
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  Speaker 1: ultra facts delivery players that raised a whole ton of
• 9:12
  Speaker 1: money and then went out of business. Um, So we
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  Speaker 1: focused a lot on unit economics and those have those
• 9:20
  Speaker 1: have been fine tuned over the last few years, and
• 9:22
  Speaker 1: we're now ready to stale pretty aggressively. Yeah. I think
• 9:27
  Speaker 1: that's a smart play. You know, the restaurant business, they
• 9:29
  Speaker 1: they call a bad location. The gift that keeps on
• 9:32
  Speaker 1: giving right because of the ham is that it does
• 9:36
  Speaker 1: right and the problem getting it off the book. So
• 9:38
  Speaker 1: how important is site selection to to you know, your
• 9:42
  Speaker 1: process and figuring out the unit economics Very important. I
• 9:47
  Speaker 1: would say we have a entire team of data analysts
• 9:52
  Speaker 1: that reviews every site that is UH on the radar
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  Speaker 1: for from our real estate team. We do our evaluation
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  Speaker 1: off um the site demographics. We have calculated our own
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  Speaker 1: proprietary metric which is called the Ai delivery Affinity Index,
• 10:13
  Speaker 1: and that is the index of people in the area
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  Speaker 1: who order delivery cross referenced with the national average. So
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  Speaker 1: when that delivery affinity index is three times the national average,
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  Speaker 1: that's kind of our flag to pick a site, UM,
• 10:30
  Speaker 1: and we then do a pretty thorough analysis of cuisine
• 10:35
  Speaker 1: selection and diversity in that trade area. So picking the
• 10:40
  Speaker 1: site is really important than picking the right plants to
• 10:42
  Speaker 1: populate that site is equally important. So if there's a
• 10:46
  Speaker 1: preponderance of Thai cuisine in the area, we will probably
• 10:49
  Speaker 1: not have tie in that site. We want to give
• 10:52
  Speaker 1: consumers in the area a diversity selection UM. So we've
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  Speaker 1: been fortunate in that we mostly picked sites the work UM.
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  Speaker 1: In a couple of more instances, we particularly or we
• 11:05
  Speaker 1: on we picked sites that were a little less um,
• 11:10
  Speaker 1: a little less busy. So we've learned from our mistakes there.
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  Speaker 1: But you know, we're a startup. Everybody everybody has got
• 11:17
  Speaker 1: to make a mistake or two for sure. And uh,
• 11:22
  Speaker 1: you know, I know that as you mentioned, data is
• 11:24
  Speaker 1: such a integral part of everything that you do at
• 11:28
  Speaker 1: Kitchen United and technology and one of the cooler things
• 11:31
  Speaker 1: that I think you do. Is that the software that
• 11:34
  Speaker 1: helps your tenants figure out fire times when you have
• 11:39
  Speaker 1: customers that want to order from multiple brands at once.
• 11:42
  Speaker 1: Can you talk a little bit about that. Absolutely, we
• 11:46
  Speaker 1: when we launched the business cobbled together third party technology
• 11:50
  Speaker 1: because there was nothing available on the market UM that
• 11:53
  Speaker 1: could handle our needs specific to a ghost kitchen environment.
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  Speaker 1: And one of the things we realized is stomers really
• 12:01
  Speaker 1: um appreciated the ability to order multiple cuisines from us
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  Speaker 1: back to the Chinese and fried chicken examples. So to
• 12:11
  Speaker 1: get into a little bit more detail, UM, if you
• 12:14
  Speaker 1: order a chicken sandwich that takes five minutes to fire,
• 12:18
  Speaker 1: and I order a rackup ribs from Lucile's Barbecue, which
• 12:22
  Speaker 1: takes twenty minutes to fire, um, we will actually get
• 12:26
  Speaker 1: the chicken sandwich ordered by fifteen minutes, so both dishes
• 12:30
  Speaker 1: come out at the same time and are hot, ready
• 12:32
  Speaker 1: for delivery or pick up. And UM, that's not as
• 12:36
  Speaker 1: simple as it sounds. You know, the technology there is
• 12:39
  Speaker 1: not simply a clock. Um. The technology there also takes
• 12:45
  Speaker 1: into account how busy the line is. So if there
• 12:48
  Speaker 1: are a lot of orders backed up, we know that.
• 12:50
  Speaker 1: And uh, if there's a staff shortage, So somebody's off
• 12:55
  Speaker 1: the line, we know that UM. So if there's an
• 12:59
  Speaker 1: ingredient out of stock, we know that UM, and we
• 13:02
  Speaker 1: will eighty six the item from the menu. So there's
• 13:06
  Speaker 1: a lot of moving parts to that technology. And one
• 13:09
  Speaker 1: of the things we're finding, Mike, is if the consumer
• 13:13
  Speaker 1: has given a choice to order across concept, they will
• 13:16
  Speaker 1: generally take it. And one of the great results of
• 13:20
  Speaker 1: that is our ticket sizes are pretty dramatically higher than
• 13:25
  Speaker 1: the third party delivery players. So UM we make on
• 13:29
  Speaker 1: average about fifty eight bucks for a multi concept order.
• 13:33
  Speaker 1: It's really a family of three or four that are
• 13:35
  Speaker 1: ordering UM, or three or four friends watching Netflix, whereas
• 13:40
  Speaker 1: the delivery service providers tend to make around dirty bucks
• 13:46
  Speaker 1: and a ticket UM. So when you take that into account, UM,
• 13:50
  Speaker 1: what that does, really, and I'm sure you're curious about this,
• 13:54
  Speaker 1: is it makes the unit economics of delivery UM better
• 13:58
  Speaker 1: as well, because there's more there if if you're ordering
• 14:02
  Speaker 1: a bigger ticket size UM to cover the costable delivery.
• 14:06
  Speaker 1: So we're seeing very positive results from that. Yeah, that's great.
• 14:10
  Speaker 1: It makes you an attractive partner, and it makes delivery
• 14:13
  Speaker 1: drivers more eager to pick up deliveries from Kitchen United.
• 14:17
  Speaker 1: It sounds like a win for everybody. It is, and
• 14:21
  Speaker 1: ultimately it's a we're in for the restaurants as well,
• 14:24
  Speaker 1: because what we do is we charge less than the
• 14:29
  Speaker 1: than the third parties. We charge a fifteen percent commission,
• 14:34
  Speaker 1: whereas as you know, the third parties, um So, the
• 14:39
  Speaker 1: restaurant pays lesson pees um, the driver makes more in tips,
• 14:44
  Speaker 1: and the consumer gets a variety of selection at a
• 14:47
  Speaker 1: flat board all our feet um so. So it works,
• 14:52
  Speaker 1: it works well across the ecosystem. Great, and it's you know,
• 14:57
  Speaker 1: I think it's it's a big reason why you're seeing
• 15:00
  Speaker 1: you know, aggressive growth in the industry on top of
• 15:02
  Speaker 1: the impacts of the pandemic. Right. Absolutely, we've been, uh
• 15:10
  Speaker 1: we've been very bullish on the industry from the beginning.
• 15:12
  Speaker 1: When g V Google Ventures invested in us UM, they
• 15:16
  Speaker 1: thought we could have hundreds two thousand plots fights all
• 15:20
  Speaker 1: over the country. We still believe that, particularly with our
• 15:23
  Speaker 1: growth and grocery um and in second gen spaces. So
• 15:28
  Speaker 1: we really believe that our model is the new approach
• 15:32
  Speaker 1: to food halls or food courts in the country. UM
• 15:35
  Speaker 1: and if some of them are entirely virtual, that's Uh,
• 15:38
  Speaker 1: that's just cheaper for everybody involved. Love it alright. So
• 15:44
  Speaker 1: since we're talking about the third party delivery UH providers
• 15:48
  Speaker 1: a little bit. You know, as as we know, last
• 15:51
  Speaker 1: mile delivery is is a very very difficult business. So
• 15:55
  Speaker 1: outside of autonomous vehicles, what what can the providers do
• 15:58
  Speaker 1: to reduce their costs? Outside of autonomous vehicles and partnering
• 16:02
  Speaker 1: with Kitchen United and other ghost kitchens, I should say?
• 16:06
  Speaker 1: And then, um, what else are are you doing to
• 16:09
  Speaker 1: be a better partner to those third parties delivery partners? Sure?
• 16:13
  Speaker 1: So a lot of the ways that they can reduce
• 16:16
  Speaker 1: their cost is actually by increasing their revenue UM. So
• 16:21
  Speaker 1: batching orders is an important part of it. UM. When
• 16:25
  Speaker 1: you batch orders, you need to be conscious off the
• 16:29
  Speaker 1: UM quality and food decordations. So you need to make
• 16:33
  Speaker 1: sure you have a volume of orders that is great
• 16:37
  Speaker 1: enough that there are concentrated orders from the same UM
• 16:43
  Speaker 1: you know, three four or five block radius. Does it work? Um?
• 16:47
  Speaker 1: Where we play into that is because we have so
• 16:49
  Speaker 1: many restaurants UM, the volume of orders is greater UM
• 16:55
  Speaker 1: and the number of deliveries UM a driver and make
• 17:00
  Speaker 1: per hour increases. So I don't know about you I've
• 17:04
  Speaker 1: I've been a door to ask driver before. Uh. Definitely
• 17:07
  Speaker 1: a tough job, you know. Uh. It requires a lot
• 17:11
  Speaker 1: of parking, a lot of getting out of the car,
• 17:14
  Speaker 1: a lot of hunting for the consumer. UM. Where we
• 17:17
  Speaker 1: provide value to the third parties there is we make
• 17:22
  Speaker 1: parking very easy for the driver. We have very clear signage.
• 17:27
  Speaker 1: The driver is in and out in under UM about
• 17:30
  Speaker 1: ninety seconds back to the parking spot. UM. And the
• 17:35
  Speaker 1: cause of the order frequency. One of the challenges in
• 17:40
  Speaker 1: being a driver is once you drop off in order,
• 17:43
  Speaker 1: you don't know where you're gonna go to pick up
• 17:45
  Speaker 1: your next order. UM, so you kind of drive around
• 17:47
  Speaker 1: and the act gives you little hot spots where there
• 17:50
  Speaker 1: might be workers coming U. In our situation, once a
• 17:53
  Speaker 1: driver drops off one order two UM, they basically just
• 17:57
  Speaker 1: circle back to kitchen United because there's probably another order
• 18:01
  Speaker 1: waiting there. UM are customer service people know that driver
• 18:06
  Speaker 1: by name, so we make it very easy for the driver.
• 18:08
  Speaker 1: And as you know, if you better serve the driver,
• 18:11
  Speaker 1: you better serve the delivery service provider. So that's one
• 18:14
  Speaker 1: of the things. UM. Just order volume and dashing another
• 18:19
  Speaker 1: area UM, which is which is beneficial to the third parties.
• 18:25
  Speaker 1: Is we UM or or beneficial to beneficial to us
• 18:31
  Speaker 1: as we have in our restaurants, is we have teams
• 18:37
  Speaker 1: that do UH deals with nearby offices and residences, so
• 18:44
  Speaker 1: UM for our restaurants, they set up catering deals with
• 18:48
  Speaker 1: offices which increase the predictability of restaurant revenue for launch
• 18:54
  Speaker 1: day parts for example. And UH and that's been going
• 18:58
  Speaker 1: really well. That's kind of our mixed initiative we call
• 19:01
  Speaker 1: it UM starting to work with hospitals, university campuses, uh, UM,
• 19:07
  Speaker 1: other other businesses or big residential buildings where people can
• 19:12
  Speaker 1: order catering from a bunch of different options instead of
• 19:15
  Speaker 1: just one. UM. That's very beneficial to the restaurants as well. UM.
• 19:20
  Speaker 1: But what we're seeing in the third party delivery space
• 19:22
  Speaker 1: outside of kind of the advent of autonomous delivery sometimes
• 19:26
  Speaker 1: in the next few years is UM. You know, restaurants
• 19:30
  Speaker 1: are just are pushing back against these uh these missions.
• 19:33
  Speaker 1: They've been doing it for a while UM and UH
• 19:37
  Speaker 1: and UH and I think there will continue to be
• 19:41
  Speaker 1: margin pressure on the delivery companies to give restaurants a
• 19:46
  Speaker 1: better deal, and in order to do that just about
• 19:49
  Speaker 1: to increase their chicket sases. So um, that's one thing
• 19:52
  Speaker 1: that we are confidently figured out. Very cool and I
• 19:57
  Speaker 1: love that you worked as a every driver to help
• 20:01
  Speaker 1: you understand the business. It's great. I Uh, Domino's has
• 20:04
  Speaker 1: something similar. They have a working store in the basement
• 20:08
  Speaker 1: of their headquarters in Michigan, and everyone, whether you're a
• 20:12
  Speaker 1: software engineer, the CEO, every new employee has to has
• 20:16
  Speaker 1: to work down there for a couple of weeks. And
• 20:17
  Speaker 1: I think it's it's critical to understand your employees and
• 20:22
  Speaker 1: the difficulties that your employees and your UM partners might
• 20:26
  Speaker 1: face on during the day to day. Absolutely. You know,
• 20:31
  Speaker 1: I've worked at McDonald's in my prior job, and McDonald's
• 20:36
  Speaker 1: suggests pretty pretty firmly that you do two days in
• 20:40
  Speaker 1: a store UM when your employee there and uh, and
• 20:44
  Speaker 1: I kind of learned from that, and everybody on our
• 20:47
  Speaker 1: team's works in our in our sites every so often
• 20:51
  Speaker 1: we actually give the gms or other staff members of
• 20:54
  Speaker 1: break um. It's called given day, take a day, UM
• 20:58
  Speaker 1: or take a day, give a day and duh. And
• 21:01
  Speaker 1: every employee kind of cycled through that which has been
• 21:04
  Speaker 1: which has been great for all involved. So how did
• 21:09
  Speaker 1: the anytime you want to work any time you want
• 21:11
  Speaker 1: to work in a anytime you want to work in
• 21:13
  Speaker 1: the center, might you're You're welcome to come work for US.
• 21:16
  Speaker 1: Thirty eight and eighth in New York is a great
• 21:17
  Speaker 1: center to work in. All right, I'll let you know.
• 21:20
  Speaker 1: That's Uh, that's a little shorter commute than my typical
• 21:25
  Speaker 1: trip up to fifty nine and lexs So I may
• 21:26
  Speaker 1: have to take you up on that. I'll buy you lunch.
• 21:32
  Speaker 1: Sounds great, man. So, how did the automous delivery tests
• 21:35
  Speaker 1: with Westfield go? And and are you planning anymore? Uh?
• 21:40
  Speaker 1: It went well. We worked with Serve Robotics UM, which
• 21:44
  Speaker 1: is a Silicon Valley based company that's spun out of
• 21:47
  Speaker 1: Postmates maneuver um and UH, and it went well. There
• 21:51
  Speaker 1: was great consumer feedback, lots of consumer interest in seeing
• 21:55
  Speaker 1: little robots run around on their four wheels. UM, goodustomer
• 22:00
  Speaker 1: satisfaction ratings. We will probably do more tests UM in
• 22:05
  Speaker 1: the near future. UM. These UH Serve Robotics vehicles are
• 22:12
  Speaker 1: able to do street deliveries as well. You don't need
• 22:15
  Speaker 1: to be in a closed loop environment like like them
• 22:18
  Speaker 1: all UM, so likely to likely to expand our partnership
• 22:24
  Speaker 1: of them. UM and UH very happy with their sults.
• 22:29
  Speaker 1: I do see, you know, I see autonomous delivery as
• 22:33
  Speaker 1: being a big game changer for delivery. I see that,
• 22:36
  Speaker 1: um being more and more utilized in the next couple
• 22:40
  Speaker 1: of years. The drone thing that we've all talked about,
• 22:44
  Speaker 1: I just I don't necessarily see that anytime soon. I
• 22:47
  Speaker 1: worked on a drone initiative at McDonald's when I was
• 22:51
  Speaker 1: there seven years ago. Um and I'd say the advancement
• 22:55
  Speaker 1: in drone delivery is minuscule in that seven year gap.
• 23:00
  Speaker 1: Um so Uh. You know, the f A needs to
• 23:03
  Speaker 1: regulate things, and um the economics need to work for
• 23:08
  Speaker 1: a pilot right now flying a drone to delivery drop
• 23:12
  Speaker 1: off spot if you're getting a fifteen dollar meal delivered,
• 23:16
  Speaker 1: um it. I don't know. The complexities are great, the
• 23:21
  Speaker 1: return is questionable, um and uh and the regulatory environment
• 23:26
  Speaker 1: is tough. Yeah. Um so how long do you think
• 23:30
  Speaker 1: it will be before food is delivered via a little
• 23:34
  Speaker 1: you know we four wheeled robots? I think, well, it's
• 23:39
  Speaker 1: already being delivered via four wheel robots in places like
• 23:43
  Speaker 1: l A, Santa Monica, um and a couple of other
• 23:47
  Speaker 1: computees across the country. UM So I think I think
• 23:51
  Speaker 1: we're there. When when it gets to scale, UM, I
• 23:55
  Speaker 1: think it will mirror but be a little faster than
• 23:59
  Speaker 1: UM than autonomous vehicles in terms of cars. Uh. So
• 24:04
  Speaker 1: I would I would suggest it will grow slowly UM
• 24:08
  Speaker 1: over the next couple of years, three years, and then
• 24:10
  Speaker 1: there will be a tipping point where UM it's all
• 24:13
  Speaker 1: over the place three three plus years from now. Very cool. Uh.
• 24:20
  Speaker 1: And you know in our discussions in the past, that
• 24:21
  Speaker 1: you've mentioned before that virtual brands are overpopulated. You know,
• 24:25
  Speaker 1: I know a lot of the publicly traded chains that
• 24:28
  Speaker 1: I cover have invested UM pretty aggressively since the beginning
• 24:32
  Speaker 1: of the pandemic and virtual brands. So when I'm analyzing
• 24:37
  Speaker 1: these brands that have been created, how can I figure
• 24:40
  Speaker 1: out which ones are going to be successful? You know,
• 24:44
  Speaker 1: I have been off the opinion that UM, but there's
• 24:49
  Speaker 1: an overpopulation of virtual brands. If you UM you know,
• 24:54
  Speaker 1: if you I live out in the suburbs of San
• 24:57
  Speaker 1: Francisco and Oakland, and if you look on my apps
• 25:02
  Speaker 1: or door to Ashue Reeds grub UM. I'm using group
• 25:06
  Speaker 1: a lot more now that that Amazon has their partnership
• 25:09
  Speaker 1: with it UM. There there are a lot of restaurants
• 25:14
  Speaker 1: that UM I cannot I cannot go to. I know
• 25:18
  Speaker 1: one of my local high places has three virtual brands
• 25:21
  Speaker 1: for example, UM, and I think that is UH. I
• 25:24
  Speaker 1: think that's just going to die down. I don't think
• 25:26
  Speaker 1: they're going to be able to sustain the value UM.
• 25:29
  Speaker 1: I think the third party guys are gonna are going
• 25:33
  Speaker 1: to decommission as a were brands that don't have a
• 25:36
  Speaker 1: certain volume because it's just taking up real estate on
• 25:39
  Speaker 1: their site. What I do think it's gonna continue to
• 25:42
  Speaker 1: work UH is virtual brands from UM from big restaurant chains,
• 25:48
  Speaker 1: so everybody knows that it's just Wings is killing it
• 25:51
  Speaker 1: for for Brinker UM, I think I think they're gonna
• 25:56
  Speaker 1: be other brands like that UM that are are associated
• 26:03
  Speaker 1: with with the bigger chains. I would guess that the
• 26:08
  Speaker 1: big chains will UM develop one or two. I know
• 26:13
  Speaker 1: it's under NBA, but I know they're a couple of
• 26:16
  Speaker 1: h large class casual restaurants that are thinking UM thinking
• 26:20
  Speaker 1: about virtual brands as well, So I think those will
• 26:22
  Speaker 1: continue to go well. And then I think the other
• 26:25
  Speaker 1: area the virtual brand space that will go well is
• 26:28
  Speaker 1: digital first restaurants that really understand branding, cross sabilization of
• 26:32
  Speaker 1: many ingredients digital marketing and UM and delivery, food quality,
• 26:40
  Speaker 1: because you've got to pay attention to all of that
• 26:42
  Speaker 1: in order to run a successful virtual brand. And the
• 26:45
  Speaker 1: guys at Doghouse have been really really good at that. Um.
• 26:49
  Speaker 1: And in fact, that's I think gonna go a little
• 26:53
  Speaker 1: bit in the reverse direction to I think, um, you know,
• 26:56
  Speaker 1: brands like Doghouse will spin out virtual brands and then
• 27:00
  Speaker 1: eventually have a brick and mortar of a virtual brand
• 27:02
  Speaker 1: that goes goes physical. Um. So yeah, that's that's my
• 27:08
  Speaker 1: general take on it. Very cool. Yeah. Digital stores, um,
• 27:13
  Speaker 1: you know, it's a movement we've seen now for the
• 27:15
  Speaker 1: last couple of years, and Starbucks has been investing heavily
• 27:18
  Speaker 1: and and really shifting their store base in urban locations
• 27:22
  Speaker 1: to to you know, smaller um digital only stores that
• 27:27
  Speaker 1: are you know, have may have smaller sales, but return
• 27:31
  Speaker 1: on investments just as good because the real estate costs
• 27:33
  Speaker 1: are down. Absolutely. Yeah, it's all about square foot utilization. Yeah, alright,
• 27:41
  Speaker 1: So can you talk a little bit about how Continua
• 27:43
  Speaker 1: it's expanding It's reached through its partnerships with Assignment Property
• 27:46
  Speaker 1: Group in Kroger. Yeah, one of the things we found
• 27:51
  Speaker 1: in our investigation of especially the way malls work and
• 27:57
  Speaker 1: what's been happening to large form malls during the pandemic
• 28:02
  Speaker 1: and really since the UM, since the growth of Amazon
• 28:07
  Speaker 1: really took off, is people are obviously going into the
• 28:10
  Speaker 1: mall a little less. The traffic is down h soore
• 28:14
  Speaker 1: sales are down, and then the pandemic came about and
• 28:18
  Speaker 1: really hit it hard. UM. What we wanted to do
• 28:21
  Speaker 1: was allow restaurants in the mall to better leverage their
• 28:26
  Speaker 1: existing space and make their food available for off pinnis.
• 28:30
  Speaker 1: And what we found was UM delivery drivers who were
• 28:34
  Speaker 1: avoiding mall restaurant pickups because they have to park, they'd
• 28:38
  Speaker 1: have to go into the mall, they'd have to find
• 28:40
  Speaker 1: the food court or the restaurant that have to walk
• 28:43
  Speaker 1: back out, get in their car, and then delivery the food.
• 28:47
  Speaker 1: So uh food decordation happened during that time and the
• 28:51
  Speaker 1: delivery driver wasted a lot of time and UH. And
• 28:55
  Speaker 1: what we wanted to do was create a platform where
• 29:00
  Speaker 1: the consumer who lived in a fifteen minute drivetime radius
• 29:03
  Speaker 1: from them all could get all of that too delivered
• 29:05
  Speaker 1: to them. And what we've done essentially is created a
• 29:11
  Speaker 1: system where we have labor that um, canvas is them
• 29:16
  Speaker 1: all and some of these malls are big. You know,
• 29:17
  Speaker 1: the Westfield one we have in the Bay Area spams
• 29:21
  Speaker 1: to zip codes, um, and that is uh that is
• 29:24
  Speaker 1: just big. Um. So we have labor that canvas is
• 29:30
  Speaker 1: them all, picks up food and essentially we operate it
• 29:34
  Speaker 1: as a drive proof for the consumer sorry for the
• 29:38
  Speaker 1: pickup driver, um, where we hand off the food to
• 29:41
  Speaker 1: the pickup driver and a drive through format. Yeah, that
• 29:47
  Speaker 1: makes so much sense, very cool. I love how you
• 29:49
  Speaker 1: guys are thinking outside the box. So, speaking of that,
• 29:52
  Speaker 1: what's what's the next step in the evolution of ghost kitchens.
• 29:58
  Speaker 1: I'm really excited about that. So I think there's gonna
• 30:00
  Speaker 1: be a lot of uh um, a lot of investment
• 30:04
  Speaker 1: from our side in these what we call on the
• 30:07
  Speaker 1: channel offerings. So um more grocery. Grocery does really well
• 30:12
  Speaker 1: for us UM and really well for the grocer more UM.
• 30:18
  Speaker 1: Things like football stadiums, university campuses help. We've even had
• 30:22
  Speaker 1: a conversation with the p g A about about using
• 30:26
  Speaker 1: some golf course kitchens for for delivery and condense straight areas. UM. Honestly,
• 30:32
  Speaker 1: that's as much because we want to work with the
• 30:34
  Speaker 1: PGA as because I want to get a invite to
• 30:37
  Speaker 1: the Masters. But UM, I think more formats, more stores,
• 30:45
  Speaker 1: more more variability of cuisine types, and then UM, I
• 30:50
  Speaker 1: think will broaden into into secondary and tertiary cities. UM.
• 30:56
  Speaker 1: Ghost kitchens, as much as we talk about them, UM,
• 31:00
  Speaker 1: they're really a here one city phenomenon today. UM, there
• 31:06
  Speaker 1: are a couple of independent operators who operate in cities
• 31:09
  Speaker 1: like Nashville or Knoxville. UM. But I think you'll see
• 31:14
  Speaker 1: more growth in those secondary in tertiary cities in the
• 31:17
  Speaker 1: next year to two UM. And that's where I see
• 31:21
  Speaker 1: this UH see this market growing. I also think you'll
• 31:24
  Speaker 1: have more formats that are smaller equipments. UM. We you know,
• 31:30
  Speaker 1: when we started this business, we were building stores that
• 31:33
  Speaker 1: had fourteen thousand square feet and we got down to
• 31:35
  Speaker 1: twelve thousand than we did ten. We can five ten
• 31:38
  Speaker 1: kitchens into square foot store. Now, UM, we can fit
• 31:43
  Speaker 1: six into two thousand square foot space. UM. So we're
• 31:48
  Speaker 1: getting better at space utilization and we're gonna be able
• 31:51
  Speaker 1: to pop these off in smaller spaces more quickly built
• 31:54
  Speaker 1: times for shrinking. UM. It took us a year to
• 31:57
  Speaker 1: build our first couple nine months now down to six months.
• 32:02
  Speaker 1: Um So I think that's that's the reason you can
• 32:05
  Speaker 1: see our growth targets are getting more aggressive, is uh,
• 32:09
  Speaker 1: we're just getting better at doing this. Yeah, if smaller
• 32:13
  Speaker 1: footprints are gonna work in more markets, right, It's it's
• 32:16
  Speaker 1: like just this works the same way with with the
• 32:18
  Speaker 1: restaurant companies that we cover. Man, Well, listen, I think
• 32:22
  Speaker 1: we're gonna wrap it up there, but I cannot wait
• 32:24
  Speaker 1: to see what innovations you know, you, Mike and the
• 32:27
  Speaker 1: team at Kitchen United continue to come up with in
• 32:30
  Speaker 1: this space. You know, you're doing very exciting things over there,
• 32:33
  Speaker 1: and you know I love following the story and hopefully
• 32:36
  Speaker 1: we get to see each other on the you know,
• 32:38
  Speaker 1: conference circuit sometimes soon. Man, it's been too long. I'll
• 32:43
  Speaker 1: fly to New York just to visit you, Mike. That's
• 32:46
  Speaker 1: how much I love you. I love you too, Man,
• 32:49
  Speaker 1: Thanks again for joining, and uh, you know we'll catch
• 32:52
  Speaker 1: up again on the podcast sometime soon.