WSJ Latest Front in Food Delivery · 2020. 2. 19. · Latest Front in Food Delivery: Kitchens in...
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Latest Front in Food Delivery: Kitchens in Empty Malls Delivery wars move to neglected retail space as competition heats up A CloudKitchens location in San Francisco. Developers say ‘ghost’ kitchens can create new interest in vacant retail and warehouse space. PHOTO: JASON HENRY FOR THE WALL STREET JOURNAL By Heather Haddon Feb. 2, 2020 7:00 am ET Property developers are building kitchens in empty mall space and parking lots to fill food-delivery orders, a new approach in the fast-growing business of shuttling meals to customers. The plan to make restaurant food for delivery in former retail space melds two industries that have been upended by e-commerce. Restaurants are struggling to find a cost-effective formula for meeting the growing demand for delivery of online food orders.
Transcript of WSJ Latest Front in Food Delivery · 2020. 2. 19. · Latest Front in Food Delivery: Kitchens in...
LatestFrontinFoodDelivery:KitchensinEmptyMallsDeliverywarsmovetoneglectedretailspaceascompetitionheatsup
ACloudKitchenslocationinSanFrancisco.Developerssay‘ghost’kitchenscancreatenewinterestinvacantretailandwarehousespace. PHOTO:JASONHENRYFORTHEWALLSTREETJOURNAL
ByHeatherHaddon Feb. 2, 2020 7:00 am ET
Propertydevelopersarebuildingkitchensinemptymallspaceandparkinglotstofillfood-deliveryorders,anewapproachinthefast-growingbusinessofshuttlingmealstocustomers.
Theplantomakerestaurantfoodfordeliveryinformerretailspacemeldstwoindustriesthathavebeenupendedbye-commerce.Restaurantsarestrugglingtofindacost-effectiveformulaformeetingthegrowingdemandfordeliveryofonlinefoodorders.
Meanwhile,developerssay“ghost”kitchenscancreatenewinterestinretailandwarehousespacevacatedbymerchantsthathavestruggledtocompetewithe-commerce.RetaildeveloperSimonPropertyGroupSPG+0.20%andhotelierAccorSAAC+0.27%saidSundaythattheyareworkingwithhospitalitycompanySBEEntertainmentGrouptodevelopsome200commissarykitchenstocookuprestaurant-qualityfoodforcustomersatmallsandhotelsaswellasdeliveryforpeoplenearby.ThefirstofthoseareplannedforNewYork,Chicago,SanFrancisco,LosAngelesandMiami,saidSamNazarian,chiefexecutiveofSBE.Thecompaniessaythata5,000-square-footghostkitcheninaBrookfieldPropertiesdevelopmentwillprovidedeliveryforthenearbyHudsonYardsandsurroundingareasinManhattan.Thegroupwillalsodevelopdelivery-onlylocationsinmallparkinglots,storageareasandunusedretailspace.
ThegrouphasalsosignedfourleaseswithCloudKitchens,thedelivery-kitchenventureofformerUberTechnologiesInc.CEOTravisKalanick,toopenadditionaldeliverylocationsatsomeSBEpropertiesinLosAngeles,executivessaid.“It’srelookingatallrealestatethatisobsolete,”Mr.Nazariansaid.SBEisthebiggeststakeholderinaconsortiumthatit,SimonandAccorarecallingCreatingCulinaryCommunities.Accor,ownerof5,000internationalhotels,hasa50%stakeinSBE.
Thecompaniesdeclinedtosayhowmuchtheyareinvestinginthepartnership.
Deliverynowaccountsforroughly9%ofthe$282billionU.S.fast-foodsectorandisgrowingfasterthandine-inanddrive-throughsales,accordingtoarecentBernsteinanalysis.
IntheElevatorWithDoorDashCEOTonyXuWSJ's Joanna Stern ‘bumps into’ Tony Xu, CEO of DoorDash. The two discuss DoorDash's tipping-policy change, the future of app delivery and whether a hangry emoji needs to happen. Photo: Andria Chamberlin for The Wall Street Journal
Restaurantsareexpandingtheirdeliveryofferingstogeneratesalesdespitetheimpactthoseordersoftenhaveontheiroperationalefficiencyandprofits.Theremotekitchenscanreducetheirreal-estatecostswhileexpandingtheirreach.
Wendy’sCo.,Chick-fil-AInc.andSweetgreenareamongchainsturningtoremotekitchensthatdon’tservecustomerstomovedeliveryordersoutsidetheirexistingrestaurants.“It’saboutunlockingadditionaldemand,”SweetgreenCEOJonathanNemansaidinaninterview.
Somepropertydevelopersandstartupsareseizingtheopportunitytobuildandleasethose“ghost”or“dark”kitchens.TheSBE-ledconsortiumplanstobuildkitchensinemptyspaceitownsatpropertiessuchasPennsylvania’sKingofPrussiaMall,oneofthebiggestshoppingcentersintheU.S.,alongwithLenoxSquareinAtlantaandtheSandersonLondonhotel.
SomerestaurantsandchefsthatalreadyoperateatSBEproperties,includingUmamiBurgerandMasaharuMorimoto,willdesignmenusforthekitchens,thecompaniessaid.
Thegroupaimstoopen85kitchensthisyearandatleast100morebytheendof2021.Theyanticipatespendingabout$60,000onupfrontcostsateachlocationandreachingprofitabilityinaboutsixmonthsifakitchenmanagestofillaround125ordersaveraging$30eachaday,Mr.Nazariansaid.
Hesaidthekitchenswillrelyonestablisheddeliverycompaniestocarryfoodtocustomers,suchasUberTechnologies’UberEats,DoorDashInc.andPostmatesInc.
Mr.Kalanick’sCloudKitchens,KitchenUnitedandotherventure-backedcompaniesbuilddeliverykitchensandsubleasethemtorestaurants.Deliverycompanies,particularlyUberandDoorDash,arealsocreatingtheirownleasablekitchensoronline-onlyrestaurants.
A230-square-footCloudKitchenssitecanbebuiltinaslittleastwoweeksatacostofaround$30,000,accordingtoaninvestorpresentationviewedbyTheWallStreetJournal.Atraditional3,500-square-footrestaurantcancost$1milliontooutfit,thepresentationsaid.
Venture-capitalfirmshaveinvestednearly$5billionincompaniesoperatingvirtualkitchenssince2018,accordingtoananalysisbydatafirmPitchBook.InvestorsincludeSequoiaCapitalandSoftBankGroupCorp.,bothofwhicharealsoinvestedinfood-deliverycompanies.Someintherestaurantindustryareskepticalofghostkitchens.KitchenFund,arestaurantinvestorgroup,predictedrecentlythatthemodelwillonlybeprofitableforbigbrandsthatcangeneratehighordervolumesatmorethanonemealtime.
Somerestaurants,suchasFatBrandsInc.,aretestingseparatedelivery-onlyoperationsatexistingrestaurants.
ThecompanyispreparinganddeliveringfoodforitsHurricaneGrill&WingsbrandoutofsomeexistingFatburgerlocations.Thatisgeneratinganaverageof$1,000inadditionalsalesatthosestoreseachweek,addingaround5%tooverallstorerevenue,FatBrandsCEOAndyWiederhornsaidinaninterview.
Thosedeliveriesarehelpinggeneratesalesoutsidethestandardlunchanddinnerrushes,hesaid.“Weneedtogeneratemoneyallday.Youcan’tjustsellburgersatlunch,”Mr.Wiederhornsaid.
