Food & Wine | Mike Pomranz | October 14, 2019
DoorDash, Grubhub, and Uber Eats all made ‘virtual restaurant’ announcements this month.
Online restaurant delivery services are flourishing, in large part, because they fill a void: an easy, one-stop way to order food from a variety of your favorite restaurants and have it brought directly to your door. But as the industry has matured, more and more, those services aren’t just delivering food, but also getting involved with the food they deliver. In the past week, the three largest brands—DoorDash, Grubhub, and Uber Eats—have all further expanded their business into ventures beyond simple delivery.
Last Thursday, Grubhub led the charge by announcing a collaboration with the chain Just Salad to launch a virtual restaurant—available for delivery only exclusively through Grubhub and Just Salad’s website—called Heath Tribes. Billed as a “digital-only concept [featuring] a variety of diet-specific recipes” for those following keto, vegan, gluten-free, and paleo diets, Health Tribes is definitely the culinary work of Just Salad, but that doesn’t mean Grubhub isn’t playing an important role. “By leveraging our data and insights across the platform, we were able to work with Just Salad to help strategically inform new concepts and menus,” Raleigh McClayton, VP & GM of business development/enterprise at Grubhub, said in the announcement, “and we see this as the first phase of innovation around their virtual restaurant concepts.”
Also on Thursday, Uber Eats announced the specifics behind its plan to run a virtual restaurant with Rachael Ray—called Rachael Ray to Go—which will operate in 13 North American cities from mid-October until December 13 to cross-promote her new book.
Then, today, DoorDash announced its own deeper entanglement with four of its restaurant partners. After taking lessons from a 2017 pilot program, America’s largest delivery service has opened DoorDash Kitchens, a DoorDash-run shared kitchen space in Redwood City, California, that “provides the infrastructure, maintenance, marketing, and last-mile logistics, offering an end-to-end solution that enables restaurateurs to focus on creating delicious meals.”
Fuad Hannon, head of new business verticals, said this was likely only the beginning of these kinds of broader ventures. “We’re constantly thinking about ways to innovate on behalf of our merchant partners to deliver a great consumer, merchant, and Dasher experience,” he told me. “With DoorDash Kitchens, we’re excited about the potential of a more cost-efficient way to help our merchants thrive while collaborating with them to grow their businesses in new, bespoke ways.”
Janelle Sallenave, head of Uber Eats U.S. & Canada, stuck a similar tone on future plans speaking with Bloomberg last week. “Combining Rachael’s passion for food with the infrastructure we have is the beginning of a pattern we’re excited to develop. With all kinds of restaurateurs,” she said. “We’re not waiting; we’re having conversations with different chefs and authors and restaurateurs.”
For the record, these recent examples aren’t the first time online delivery services have gotten involved in the world of “virtual restaurants” (also known as “ghost” or “cloud” kitchens) beyond simply bringing meals from point “A” to point “B.”
“Virtual restaurants are an exciting space and one we’ve been active in for years,” Grubhub’s McClayton told me via email. “For our restaurants, whether big or small, creating a virtual restaurant can give them the opportunity to drive more revenue from their existing space and experiment with new concepts. For instance, a restaurant that’s only open for dinner could create a delivery-only lunch concept, leveraging their existing space and food supplies. On our side, we have the ability to help launch and market a new brand concept to our more than 20 million diners—a challenge for restaurants to do on their own. In the end it’s a win-win as the restaurant sees more orders, and our diners have additional restaurant options to choose from.”
But the timing of all these announcements isn’t a coincidence: The restaurant delivery industry is reaching a turning point. What was once a patchwork of companies now appears to have coalesced around three names (with Postmates—the fourth largest service—targeting a slightly different market that includes things like groceries and even e-cigarettes). That simultaneously solidifies these brands’ ability to drive business, but also forces them to find new ways to one up their competition. And with increased presence comes increased scrutiny as places like New York City have put pressure on delivery services to cut down on what many see as excessive fees for restaurants, meaning these companies will surely want to look for new revenue streams and ways to increase margins.
To put it another way, we’re facing a perfect storm for delivery services to get their fingers into the food they’re delivering. (Not literally, of course!) Think of it this way: Amazon was selling you books long before they were selling you Amazon-branded products—but which are you more likely to buy now? Certainly, delivery services will still find a way to bring you the food you want, but if they can get a little vertical integration going along the way, well, for them that’s just good business.