Large Food Delivery Company Piloting Ghost Kitchens

Jennifer Marston wrote . . . . . . . . .

A Bloomberg article from yesterday reported that Uber has a pilot program underway in Paris where it rents out commercial-grade kitchen space to restaurants selling food through the company’s Uber Eats app.

An anonymous source who spoke to Blooomberg said Uber has been leasing space in Paris on the down low since 2018 and stocking it with kitchen equipment. Uber then rents those spaces out to “restauranteurs planning eateries that cater exclusively to delivery customers.” According to the source, Uber has not publicly announced this pilot program.

Setting aside the potential conflict this could ignite with Uber co-founder and ex-CEO Travis Kalanick — who operates his own ghost kitchen concept in Los Angeles — a heavyweight company like Uber/Uber Eats getting involved in ghost kitchens could majorly impact the rest of the food delivery space.

As more software, apps, sales channels, and companies enter the restaurant food delivery space, fulfilling the influx of orders remains an operational headache for most restaurants. One food industry player, ClusterTruck CEO Chris Baggot, noted ealier this year, part of the problem is that restaurants treat delivery as an add-on business rather than the business. But delivery is projected to grow 12 percent per year for the next five years, and does create financial and operational issues for restaurants as they try and accommodate this growth. And lately, both established brands wanting to try new concepts and independent operators who lack the capital for a full-service restaurant are turning to ghost kitchens as a solution.

If Uber were to operate its own ghost kitchens on a widespread basis, it could save many a restaurant some of the hassles listed above. To be clear: we don’t yet know a whole lot about Uber’s kitchens in Paris right now, and the company isn’t publicly discussing the pilot program yet.

At the same time, it’s not hard to imagine a third-party delivery service taking over more of the operations up and down the operational stack. Uber suggested that much last year when it acquired Ando, David Chang’s delivery-only ghost kitchen restaurant. As Allan Weiner wrote at the time, the acquisition suggested food delivery companies like Uber Eats were on their way to becoming suppliers of “vertical consolidation.”

There’s another phrase for that: “walled garden.” It’s a controversial business concept, chiefly because of the amount of power it gives to the company, who controls the information or product available to a consumer (think Facebook Messenger not chatting with Apple Messages). Translated to the restaurant world, that would mean Uber controlling the choices that pop up when you search “Mexican Food” on their app, thereby limiting the restaurants you see to the ones who work directly with Uber.

But if we go by the Bloomberg article, Uber’s Paris kitchens are aimed at restaurant operators planning delivery-only concepts, which means those “restaurants” aren’t yet on the market. There’s no consumer choice to limit (which is the main objection to walled gardens), because these new restaurants wouldn’t be available without Uber.

For consumers, then, a vertically integrated Uber delivery stack could actually mean more choice, as they would get a chance to discover new restaurant choices they wouldn’t have otherwise had access to.

The other side of that coin is that it could “uberize” the restaurant industry. It might make financial sense for an independent restaurant to team with Uber and in the process save on costs, but doing so triggers the question of how much control Uber would then get over the restaurant brand. Would the Uber logo have to appear on all promotional materials? On packaging? Would Uber demand a say in the menu? Would it be the one to decide when to pull the plug if business wasn’t up to snuff?

We can’t get the exact the answers based on one lone article. But there’s no denying the presence of third-party delivery services with ghost kitchens. Both DoorDash and Postmates have dabbled in renting out kitchen space to restaurants. Grubhub invested $1 million in 2018 in Green Summit Group, one of the old guard of ghost kitchens. And Deliveroo operates not just its own kitchens in Europe but also a food hall.

If Uber’s really serious about this walled-garden approach to delivery, we can expect to see the other major players trying out their own vertically integrated restaurants, starting with the ghost kitchen.

Source: The Spoon