Big brand management talks about ghost kitchens and geographic shifts
When COVID-19 hit, it was clear things in the restaurant industry were going to change. Many of these changes, such as increased shipping, were obvious. But other changes and their repercussions would have been harder to predict.
“I never thought I’d see the day when I would see a Chili’s in Manhattan,” Brinker International president and CEO Wyman Roberts said on a recent earnings call “but it’s been up and running for a month , and we are encouraged by his first performances.
Brinker International is the parent company of Chili’s and Maggiano’s Little Italy, two casual dining restaurants.
The first of Brinker’s so-called “urban kitchens,” the New York restaurant is a ghost kitchen, serving dishes from Chili’s and virtual It’s Just Wings brand. The company has two more urban kitchens planned, said CFO Joe Taylor, one in Columbus, Ohio and another in Dallas.
Cracker Barrel also uses ghost kitchens. The company unveiled its first delivery-only multi-brand location, Cracker Barrel Kitchen, in Los Angeles late last year. The restaurant serves dishes from Cracker Barrel and its two virtual brands: Pancake House and Chicken ‘n Biscuits. It is also the company’s first location in Los Angeles.
“We plan to open more ghost kitchens in Los Angeles in the near future,” said Sandra Cochran, CEO of Cracker Barrel. “We are excited about the opportunity to bring Cracker Barrel home cooking to other urban areas. »
Ghost kitchens are well suited to urban markets. Fueled primarily by digital traffic, often from third-party aggregators, they eliminate the need to place restaurants in highly visible and expensive locations. They also eliminate the need for dining rooms, further reducing property costs. In the absence of ghost kitchens, it’s hard to imagine that casual dining stalwarts like Chili’s and Cracker Barrel would consider New York and Los Angeles as promising areas for development.
The rise of off-premises dining inspired Chipotle to move in the opposite direction. The addition of a drive-thru, or “Chipotlane,” helps the business succeed outside of urban centers. “With the added convenience channel in Chipotlane, it’s just more feasible from a financial standpoint and a practical standpoint to go to these smaller towns,” CFO John Hartung said during the interview. appeal to the company’s fourth quarter results.
Dropping a restaurant in a remote location is hard to sustain, so to make the strategy work, Chipotle plans to make a massive push into smaller towns. Hartung outlined a strategy of putting restaurants in small towns in order “where there’s one 50 miles away and another 50 miles away,” to ensure locations are accessible and the business can “keep an eye out” for new restaurants.
“Small Town” is not as small as one might expect. “We’re not talking about 5,000, 10,000, we’re talking about 40,000 and up,” CEO Brian Niccol said. The company’s previous concepts targeting small towns factored lower sales volume into the investment calculation. With the addition of Chipotlanes, there’s “no trade-off in volume,” Niccol said.
The rise of off-premises dining is also allowing brands to grow faster, especially with companies such as Reef capitalizing on this shift to open a slew of small, delivery-focused kitchens.
During a recent earnings call, Wendy’s CEO Todd Penegor said the company plans “to open approximately 150 to 200 Reef kitchens around the world” in 2022. According to a Franchise Times Top 400 study, Wendy’s has, on average, won less than 80 restaurants per year for the past five years.
Wendy’s Chief Financial Officer, Gunther Plosch, estimated that “about half of [Wendy’s] new unit growth will come from non-traditional delivery locations. Like many brands, it sees delivery as an entry point to major cities. “We continue to expect Reef’s delivery kitchens to help us address under-penetrated urban markets,” Penegor said.