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The Rise of Virtual Restaurant Franchises
Nobody can deny that the global pandemic has had a far-reaching impact on consumer habits, changing the way that we shop, buy and consume. Most businesses had no option but to adjust their offerings and operations in order to survive and to generate alternative revenue. The strange and difficult times under which we were all living and working also saw the birth of new concepts, new businesses, and even new industries.
One sector that has skyrocketed in popularity since the start of the pandemic is the virtual restaurant sector, driven by the demand for at-home dining and food delivery services. A virtual restaurant is one which does not offer a dine-in option for customers, but operates solely by offering delivery or pick up through online orders and third party apps, allowing customers to enjoy restaurant quality food in the comfort of their own homes. A virtual restaurant may take up occupation within an already established restaurant business, sharing the kitchen space but offering a different (often niche) menu specifically for delivery and operating as a visible and very separate brand in its own right. Or they may operate from a space known often as a “ghost”, “dark”, or “cloud” kitchen where the sole purpose of the premises of the business is as a meal preparation hub for the virtual restaurant and from which orders are despatched.
With the boom in popularity of the virtual restaurant, virtual restaurant brands are now making waves in the franchise world – either as an off-shoot of an existing restaurant franchise chain, or as a brand new virtual franchise brand.
Many established dine-in restaurant franchise brands have been quick to recognise the huge potential of the virtual restaurant brand. They and their franchisees already have the physical premises, the kitchen and the staff in place as well as the commercial expertise, but most have experienced a rollercoaster ride over the past few years as a result of the pandemic and other pressures such as supply chain issues. Having the option to explore new opportunities to boost revenue using their existing premises, team and know-how with relatively little additional capital investment is an attractive proposition for both existing and new franchisees.
One example of this is Dickey’s Barbecue Pit, the fast-casual barbecue franchise brand that started life in Dallas, Texas in 1941. Dickey’s first launched their delivery-only concept Wing Boss in December 2020 as a strategy to support their existing franchisees during the pandemic and provide them with an additional potential revenue stream. This proved so successful that it was followed by the launch of virtual brand Big Deal Burger, at which time Laura Rea Dickey, CEO said “Dickey’s is actively creating innovative opportunities for our Owner/Operators to yield 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 for us. Our franchisees already have the right equipment to execute it, so it’s a convenient way to capitalize on the growing delivery trend”
Big Deal Burger has since been followed by Trailer Bird, a hot chicken offering. And, coming full circle, Wing Boss launched its first bricks-and-mortar location in Texas in late summer 2021 and is now available as a virtual franchise offering to new franchisees from outside of the Dickey’s network.
Stand-alone virtual restaurant franchises, also known as “ghost franchises”, are also now emerging into the market – often with some force! MrBeast is a celebrity YouTuber who launched 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 as an add-on to their existing kitchen operations, giving the new franchisee the benefit of the celebrity exposure and strong brokered deals with third-party delivery apps to get the orders quickly rolling in. And even without the celebrity endorsement, the ease and speed in which a partner kitchen can take on and launch a virtual franchise brand makes it an extremely attractive proposition for the business owner looking to expand and generate additional revenue quickly, often with the freedom of being able to take on multiple virtual brands depending on the terms of the agreement.
The lower start up costs generally associated with a virtual franchise means that a relatively new brand can enter the franchise market and scale quickly, and can offer its franchisees a seemingly lower risk investment than a traditional bricks and mortar franchise. However as a sector in its relative infancy, the jury is still out on whether virtual restaurant franchises have the staying power to be a sound long term investment. Will they turn out to be a flash in the pan, or is there space for both virtual and traditional restaurant franchises in these post pandemic times?