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- The internet was outraged after a diner discovered a pizza she thought she ordered from a local pizzeria had actually come from Chuck E. Cheese.
- But virtual, delivery-only restaurants are more common than many people may realize, and the pandemic may be the perfect business landscape for them to take hold.
- Virtual restaurants usually shared kitchens with full-service restaurants, or with other virtual restaurants in a WeWork-like shared kitchen.
- Their lower rent and staffing costs, as well as their emphasis on delivery, make them a competitive business model in a business landscape shaped by the pandemic.
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In the last few weeks, CEC Entertainment, Chuck E. Cheese’s parent company, silently listed countless “Pasqually’s Pizza & Wings” restaurants on delivery platforms across the country, sparking internet outrage after a diner discovered her Pasqually’s pizza order came from the children’s dinnertainment giant. But Chuck E. Cheese isn’t the first chain to operate a delivery-only restaurant out of its kitchens.
Virtual restaurants have been a part of the restaurant landscape for a long time, perhaps longer than many people realize. In fact, you may have ordered from one without knowing. Chick-fil-A has virtual restaurants that serve its primary brand. Gourmet hot dog chain Doghaus launched eight new virtual restaurant brands in April. Even McDonald’s opened one in London last December.
Everyone and their mother is experimenting with virtual kitchens. Here’s why that makes sense:
The rise of delivery apps like Uber Eats has also led to the rise of delivery-only restaurants. And if the pandemic has accelerated existing trends, one of those trends has been the shift to delivery and online ordering. Dining rooms were becoming less relevant to a restaurant’s online presence even before the pandemic. But now that sit-down dining is heavily restricted or banned in most states, the financial success of a restaurant has become dependent on two things: its kitchen and its delivery capabilities.
Delivery-only restaurants are especially well-positioned to battle the woes of the pandemic. Without dining rooms and the staff required to operate them, rent and payroll costs are significantly lower.
Virtual restaurants share kitchen space either with a primary-brand full-service restaurant, or with other virtual restaurants in a WeWork-like shared kitchen space. Since shared kitchen spaces don’t have to be in bustling parts of town, restaurants are able to save money both by sharing rent for and avoiding a location premium.
Business Insider spoke with Jim Collins, the CEO of Kitchen United, a ghost kitchen company headquartered in Pasadena, California. Collins told Business that his company has seen success in its space from both national chains and independent operators. “The size of your restaurant doesn’t matter as much as the vibrance of that digital consumer connection,” Collins said.
That digital consumer connection is largely facilitated by third-party delivery platforms. Among its competitors, Uber Eats has been especially aggressive about experimenting with delivery-only restaurants. The high fees that third-party delivery services charge restaurants may be untenable when high rent and staffing costs are part of the equation. But Uber Eats’ 35% average commission could be easier to swallow for restaurants that only have to worry about making the food.