How Much Have Restaurants Evolved?

Oh my, how restaurants have evolved in the last several decades. I still remember my local pizza joint and the lunch counters at F.W. Woolworth’s & Co. Nowadays, consumers have so many types of restaurants from which to choose. Their options keep growing and now include delivery-only restaurants with no visual presence to guests.

You could make an argument that the first virtual restaurants were pizza delivery companies that began to spring up in large quantities in the late 70s to early 80s: think Domino’s, Little Cesar’s, etc.

Recently, I visited a restaurant — Eatsa — that has no employees to take orders. Instead, customers order through a self-serve kiosk. The kitchen is completely hidden and the food is delivered into a box. Customers access their orders by using a code to open the specific box that houses their food.eatsa interiorAt Eatsa, customers receive orders with a code that opens their specific box.

This process generated lots of questions on my end: Where is the kitchen? What cooking methods does the restaurant use? Are robots cooking or serving my food?

The main way I gauge the performance of any restaurant is by menu type and the taste of the food. I don’t have a problem ordering through a kiosk, or not seeing a kitchen. How about you?

Virtual Eateries

Another type of restaurant, or shall I say food provider, that intrigues me are the virtual ones; the ones that have no visual presence for me to experience. Oftentimes, operators of this emerging brand of restaurant borrow somebody else’s kitchen to produce their menus and then deliver the food to the customer. ChurriNaan offers a glimpse into this kind of operation, which requires ordering through a delivery vehicle to taste the food.

In our industrial engineering in foodservice practice, we get to work with many concepts, and as we do the work we get to understand the “unit economics” that define the success of each concept. Delivery-only restaurants introduce some new dynamics to the concept of unit economics. What do they pay for the location? For labor? For food? Utilities? And what do they pay to deliver food to the customers? How do they market their businesses? How do customers order? When you think about it, all of these cost parameters and sales challenges have different dynamics than those associated with traditional restaurants.

How much do they pay for the location? Well, a couple of models strike me. One is a fixed-fee approach that includes loaded costs (rent, utilities, cleaning, etc.). Another option has the operator kicking up a percent of the sales to the landlord. This would be similar to the way some franchised concepts function. In either case, I would think that the location cost line is more favorable and much less risky than if the concept was to build a brick-and-mortar location.

I suppose labor can be one expense the operator directly assumes. If the virtual restaurant rents space from another operator, perhaps they could borrow labor from the owners of the location. Depending on the specifics surrounding each business, this approach could favor both businesses. For example, if one operator does a heavy lunch business and the virtual restaurant focuses on catering, a shared labor arrangement could work very well for both. Same can be said if the virtual restaurant focuses mainly on lunch and the physical restaurant does a strong dinner business. Many combinations can work.

Sorting Through Virtual

Food cost is an easy one to sort out. The virtual restaurant can order its own food and just keep its inventory in a specific location. Theft may be a concern, but lockable shelving could address this issue, or the virtual restaurant could even use its own separate storage space.

With the advent of so many delivery companies, the virtual restaurant does not have to worry about getting the food to the guests that order it. At the moment, the cost of delivery some large delivery concepts charges can be rather high, but I would predict that the marketplace will eventually force a correction. This process has started with the advent of competition. The consumer will have a big say in this by balancing the supply (cost of delivery) and the demand (how much are they willing to pay for the convenience).

In the olden days, marketing and ordering would have been a challenge. It used to be that this was all a visual and physical exercise, where you had to see the sign and order your food from a person. Nowadays consumers can learn about a restaurant via the internet and social media. They can place an order using a smartphone that fits in the palm of their hand.

Think about it; of the total 3 to 4 minutes of employee time necessary to serve a guest, the customer completes around 20 percent to 25 percent of the work by ordering and paying from their cell phones. I consider this application like having an infinite number of remote self-serve kiosks. Automation at its best!

Flexiblity to move the business to the right location is another huge benefit these pop-up/virtual locations. If it does not work in one place, then move it to another. Similar to food trucks, but without the hassle of dealing with licenses and permits to be in a specific place.

So think about this scenario: You develop a concept that drives enough sales Monday to Friday serving only breakfast and lunch. You run this restaurant in a virtual kitchen, set up a delivery company to run orders to customers and market the business online using social media and other means. I would venture to say that such a concept has the potential to drive great “unit economics,” while minimizing investment risk.

Sign me up!

 

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