In the age of on-demand food, is a restaurant more than a brand?
Most nights at Oyster Bah, a small restaurant in Chicago’s tony Lincoln Park neighborhood, you can count on two things: serious seafood offerings (up to 12 different oyster varieties) and a packed house. The latter led Bill Nevruz, managing partner with Lettuce Entertain You Restaurants—a business that owns, licenses, or manages more than 100 restaurants across the country, including Oyster Bah—to look around the nautical-themed room, decorated with oars and lobster traps, and wonder: “Now what?”
In order to increase sales at the restaurant, Nevruz knew he needed to think outside its walls. “All of our seats are taken. But we weren’t necessarily pushing our throttle down for what we could execute out of our kitchen, because it’s a small restaurant. I thought to myself, how can we challenge our efficiency without adding more seats?”
The answer: delivery. But not just Oyster Bah delivery—that was already happening. Rather, Nevruz wanted to create a restaurant-within-a-restaurant that would offer items customers couldn’t get at Oyster Bah. With that, Seaside’s was born. The carryout/delivery-only outfit serves ribs, fried chicken, lobster, and sides, which are delivered by the restaurant delivery service DoorDash and Grubhub. “The real trick when you open a business, either beside or in the same market as an existing business, is you don’t want to cannibalize your own consumer,” says Nevruz. “It’s never more evident than when the two businesses share a spot.”
Since Seaside’s opened this March, Nevruz says total sales at the restaurant have increased by up to 10 percent each day. A second Seaside’s opening was recently announced for late May at Shaw’s Crab House, another Lettuce Entertain Your Restaurant managed by Nevruz and located in the Chicago suburb of Schaumburg. It’s a concept that could expand to other restaurant groups with many kitchens.
Tech-backed delivery, in the form of Caviar, Postmates, UberEATS, Amazon, DoorDash, Grubhub, and other on-demand services, has long been changing diners’ access to restaurant fare. Now, restaurant owners across the country are tweaking the industry business model, moving away from brick-and-mortar dining rooms and trying their hand at delivery-only services, known as virtual restaurants.
Green Summit Group, a New York startup, is the food-hall of delivery options. Launched as a single delivery-only restaurant in 2013, the portfolio now includes four kitchens (three in New York City, one in Chicago) that are home to a total of 16 brands. Each kitchen is led by an executive chef and employs up to 30 line and prep cooks. CEO Peter Schatzberg, who co-founded the business with COO Todd Millman, says the expansive number of brands allows for greater variety, because they all use similar ingredients but combine them in different ways. “I look at the universe of ingredients as being finite. At some point in time you have enough ingredients that you can just about make any kind of cuisine,” he says. Rice is a staple of dishes across cuisines, he says. If you have some on hand, why not make it do as much work as possible?
The Green Summit Group kitchen in Chicago produces food for nine brands, all of which appear as different restaurants on Grubhub (their names are Authentic, Bloodshot Nights, Blue Crown Wings, Butcher Block, F.I.S.H. Poke Bar, Leafage, Mac Royale, Melt 350, and Milk Money). These not-quite-restaurants serve an enormous array of options, including sushi, salads, quinoa bowls, grilled cheese, burgers, and wings, with some of the menus overlapping more than others. Some of the brands carry trendy items, like avocado toast—but Schatzberg says it’s important to avoid too much redundancy. “That defeats the purpose of having brands that people associate with particular cuisines,” he says. So far, across its brands, the business has raised $3.6 million in equity and Schatzberg anticipates doing $18 million in sales this year, catering to a largely Millennial clientele.
Each of Green Summit Group’s enterprises has its own distinct logo and is delivered in its own branded bag. Unless you note the physical addresses and the menu similarities, you might not know they’re coming from the same place. My husband and I intentionally ordered from two different brands one night, wondering how they’d handle delivery to the same address. We ended up ordering—by coincidence—two almost identical meals from two different brands and they were delivered by two different drivers about two minutes apart. There was no acknowledgement that they originated from the same kitchen.
In Austin, Fernando Saralegui saw a virtual restaurant as an opportunity to test out his Cuban recipes in the market. Saralegui, who hails from a family of Cuban immigrants, has a deep history in the restaurant business. He got his start working under Alice Waters at Chez Panisse when he was in college, and went on to run two restaurants in New York (Alva and L-Ray, both since closed). He moved to Austin in 2001, where he ran the Texas Hill Country Wine & Food Festival and watched as Austin’s culinary scene flourished with microbreweries, food trucks, and urban gardens. “There’s this lather of culinary craftsmanship happening across the board. I sort of felt the bug. I wanted to be in it,” he says.
Earlier this year, he found a space at a catering company’s kitchen that was unused at dinner time, and created Papi’s Kitchen, a delivery-only concept serving burritos and Cuban sandwiches—piled with pork carnitas, ham, Swiss, and mustard—delivered by a number of on-demand delivery services. After a couple of months, he found that his business wasn’t growing as quickly as he wanted, so he switched from on-demand delivery to a different delivery platform: Cater2.me, which acts as the middleman connecting chefs like Saralegui to offices seeking catered meals. Rather than selling one or two Cuban sandwiches at a time via Grubhub, now Papi’s Kitchen can sell 10 times that or more in a corporate lunch order.
That ability to change is the beauty of the virtual restaurant, says Saralegui. “If something doesn’t work you can pivot on it a lot easier. It’s not like ‘oh, I’ve got to close the restaurant and redesign the whole thing.’ I’ve gone through that. It’s not easy and it’s expensive. This, you can literally do overnight,” he says.
As he creates catering orders, he can continue to get a feel for the market as he plots out his next step, which he says could be a food truck, pop-ups and perhaps, eventually, a permanent brick-and-mortar home.
Whatever direction he chooses, the virtual restaurant is the taste test that got Saralegui back into the business. He’s grateful that such a low-cost opportunity exists, and expects it to help future chefs and restaurateurs find their path. “I don’t think there’s any stopping virtual restaurants,” he says. “I think they’re here to stay.”