The rise of virtual restaurant franchises
No one can deny that the global pandemic has had a profound impact on consumer habits and has changed the way we shop, buy and consume. Most companies had no choice but to adapt their offerings and operations to survive and generate alternative income. The strange and difficult times in which we all lived and worked also saw the birth of new concepts, new companies and even new industries.
One industry that has exploded in popularity since the start of the pandemic is the virtual restaurant industry, driven by the demand for home meals and food delivery services. A virtual restaurant does not provide customers with dining options, but works solely by offering delivery or takeout through online ordering and third-party apps, allowing customers to enjoy restaurant-quality food in the comfort of their own home. A virtual restaurant may rely on an already established restaurant business, sharing kitchen space but offering a different (often niche) menu specifically for delivery and as a visible and very distinct brand in its own right. Or they can operate out of a space often known as a “ghost”, “dark” or “cloud” kitchen where the sole purpose of the corporate spaces is as a meal preparation hub for the virtual restaurant and from which orders are shipped.
With the proliferation of the virtual restaurant, virtual restaurant brands are now making waves in the franchise world – either as an offshoot of an existing restaurant franchise chain or as a brand new virtual franchise brand.
Many established restaurant diner franchise brands have quickly recognized the huge potential of the virtual restaurant brand. They and their franchisees already have the physical buildings, kitchen and staff, as well as commercial expertise, but most have experienced a rollercoaster ride in recent years due to the pandemic and other pressures, such as supply chain issues. Having the ability to explore new opportunities to increase sales using their existing premises, team and know-how with relatively little additional capital investment is an attractive proposition for both existing and new franchisees.
An example of this is Dickey’s Barbecue Pit, the fast-casual barbecue franchise brand that began in 1941 in Dallas, Texas. Dickey’s first launched their delivery concept Wing Boss in December 2020 as a strategy to support their existing franchisees during the pandemic and provide them with additional potential revenue stream. This proved so successful that it was followed by the launch virtual brand Big Deal Burger, to which Laura Rea Dickey, CEO, said: “Dickey’s is actively creating innovative opportunities for our owner/operators to generate additional revenue. After seeing success with our first virtual brand, Wing Boss, we started exploring other delivery-only concept ideas. Big Deal Burger makes perfect sense to us. Our franchisees already have the right equipment to run it, so it’s a convenient way to take advantage of the growing supply trend”
Big Deal Burger has since been followed by Trailer Bird, a hot chicken offering. And, when the circle is complete, Wing Boss launched its first physical location in Texas in late summer 2021 and is now available as a virtual franchise offering to new franchisees from outside the Dickey’s network.
Standalone virtual restaurant franchises, also known as “ghost franchises”, are now also hitting the market – often with some force! MrBeast is a famous YouTuber who launched the virtual brand Mr BeastBurger in December 2020 and announced that he was launching three hundred restaurant franchises overnight. The model invites existing independent restauranteurs to take on a Mr BeastBurger franchise to complement their existing kitchen business, giving the new franchisee the advantage of celebrity exposure and strong brokered deals with third-party delivery apps to quickly fulfill orders. let it roll in. And even without celebrity endorsement, the ease and speed with which a partner kitchen can adopt and launch a virtual franchise brand makes it an extremely compelling proposition for the business owner looking to expand quickly and generate additional revenue, often with the freedom to create multiple virtual brands, subject to the terms of the agreement.
The lower startup costs generally associated with a virtual franchise mean that a relatively new brand can enter the franchise market and scale quickly, offering its franchisees a seemingly lower risk investment than a traditional brick-and-mortar franchise. However, as an industry still in its infancy, the jury is still out on whether virtual restaurant franchises have the staying power to be a good long-term investment. Will they prove to be a flash in the pan, or is there room for both virtual and traditional restaurant franchises in these post-pandemic times?
