Virtual restaurants and the real competition in food industry

November 13, 2017

By: Rafael Tonon

There are too many restaurants out there – more than one could possibly go to. Just take a look around to see how many new places have opened in your neighborhood lately… According to Dunkin’ Donuts’ CEO, Nigel Travis, the U.S., for example, is “probably over-restauranted”. For him, there’s an obvious answer to why the restaurant industry is struggling in his country: the number of them— currently estimated at 620,000, according to the Bureau of Labor Statistics – is growing at about twice the rate of the population. “Not many categories are truly growing,” he told Business Insider.

A recent The New York Time’s piece covered this point as well: according to the text, many investors turned from Silicon Valley to the hospitality sector. Wall Street “poured billions into the restaurant industry” in recent years and that made the number of restaurants in the U.S. increase so much in the last decade. So sales began dropping since the beginning of 2016 – especially for individual chain restaurants.

Virtual restaurants

But the point is that competition is becoming increasingly aggressive from other restaurants, of course, but mostly from a growing number of external threats: grocery stores selling prepared food and delivery players, for example, to name some. As sleep became the most important competition for Netflix (as said by company’s CEO, Reed Hastings), the sum of technology and convenience became the principal competition for restaurants industry. And this indicates a scenario that is far away from changing…

People are spending more money on food, but this money is fragmented across restaurants, grocery stores, meal kits, and everything in between. The rise of delivery services, in particular, is a big challenge for the restaurants in the future – at least, for the restaurants as we usually know them. The popularity of online food ordering and delivery services have changed what makes a restaurant. Today, we can even have a totally virtual restaurant – a place without a storefront or a dining room, that is only delivery-driven.

Virtual restaurants

There are many brands that have launched delivery-only kitchens to focus on this market. Deliveroo, an UK-based on-demand delivery service for restaurant food, has now its own kitchen space, majorly to expand the offering of food for residential neighborhoods in London that were underserved in terms of available restaurants via the Deliveroo app.

In the U.S., DoorDash launched its kitchen that can hold four different food concepts that have to pay rent that’s based on a percentage of the business’s gross sales – and, of course, offer delivery via DoorDash. The launch comes in a moment when restaurants are looking for ways to cut costs on labor and rent while adapting to fast-changing consumer tastes and demands in a highly competitive market.

Virtual restaurants

When they notice a specific demand for some kinds of orders (like pizza or vegetarian food, for example) in a certain region, they can use that data to convince and help restaurant owners that want to fill that gap. Superstar chef David Chang was one of the pioneers in this trend since he created  Ando, his first delivery-only year-old restaurant in New York city – which now also includes a to-go option, but without a sitting room.

The fact is that restaurants, both real or virtual, need to fight for their costumers as never before. As competition heats up with more concepts clamoring our attention (since fidelity itself has become something even rarer), they want to stay alive in the great culling that’s to come. They want to make real dollars and attract visitors. How it will end is still unknown – everything depends on how the diners will behave from now on, facing this new scenario – but we already know that we are entering in a competitive area where the real Hunger Games will begin…

Rafael Tonon

+ posts by Rafael

Rafael Tonon is a journalist and food writer. He writes about food, drinks and trends in gastronomy. He contributes to many media outlets, such as Eater, Vice, Slate and more. He maintains the trend food blog What the Fork.

View Comments

Suscribe to our newsletter

Sign up to receive our news and articles about food design.