In recent years, the line between online and offline has started to blur in the hospitality industry. Virtual restaurants are a great example of how new services have gained traction in the new era of dining. New services that will likely keep a permanent place in the restaurant mix.
Customers have become accustomed to a higher degree of flexibility and options when it comes to placing orders and restaurants have had to make sharp pivots to meet these changing needs.
Restaurants around the world are now offering a mix of in-house dining, online ordering, contactless pickup, curbside pickup and everything in between.
Virtual restaurants are a growing trend, and one that any hospitality business should consider when looking to cross the gap into the online world, without the costs of opening a new restaurant. First, let’s get down to basics and really understand what it is and what it takes to bring a virtual restaurant from paper to virtual reality.
In this blog we’ll cover:
- What is a virtual restaurant?
- Benefits of going virtual
- Examples of virtual restaurants
- How to start your own virtual restaurant
Go the distance with delivery
Open up new sales channels and future-proof your restaurant with our comprehensive guide.
What is a virtual restaurant?
Virtual restaurants are, by definition, exclusively available online. These brands might coexist in the same location as another restaurant that offers dine-in, but functions as a separate brand that might use similar ingredients and only offers services like online ordering, delivery or takeout. Virtual restaurants are mostly known to offer delivery by either using their own delivery fleet, third-party delivery platforms or both.
Ghost kitchen versus virtual restaurant
While there are a lot of similarities, there are some particular differences between a ghost kitchen and a virtual restaurant. A virtual restaurant can have its own specific brick-and-mortar location and kitchen where they produce the foods for a separate brand. In contrast, a ghost kitchen or dark kitchen is typically a rented kitchen space that is often run by a third party or shared between several restaurants. Both ghost kitchens and virtual restaurants run exclusively on delivery and takeout models.
Benefits of going virtual
In recent years, the hospitality industry has seen a consistent increase in demand for delivery and takeout options. Since 2014, delivery has grown 300% faster than dine-in. Services like online ordering, delivery and contactless options have become a growing trend and an essential service in any restaurant’s arsenal.
Embarking on a virtual brand provides many benefits for restaurants starting out or looking to test out new ideas.
If you already have a dine-in restaurant and are looking to kickstart a virtual brand right out of your kitchen, you’ll be able to split a lot of the costs, ingredients and labor between the two brands. With a virtual restaurant you’ll have lower overhead costs since you won’t have to add on the costs of a new location.
Since you’re using an existing location and not taking on a new lease, or even renting a new kitchen space, you’re not really incurring a high level of risk besides the investments already made in setting up your online ordering platform and website. Your virtual brand will likely run in parallel with your existing restaurant and that means the risk, along with costs will also be shared with your dine-in establishment.
Opening up a virtual brand gives restaurant owners the possibility and flexibility to test out different concepts that might be unrelated to their current operation. Having a virtual restaurant creates a separate branded space for them to test out a concept, menu ideas and services all while using the same operations, staff and even ingredients.
Examples of virtual restaurants
American casual dining chain, Smokey Bones Bar & Fire Grill, stepped into the virtual brand landscape after getting a deeper understanding of their menu performance in regards to dine-in and delivery.
In Restaurant Business’s webinar, James O’Reilly, CEO, of Smokey Bones Bar & Fire Grill, explained how off premise became a growing component of their operations. “In 2019 when we built our growth plan we committed ourselves to the off premise side of the business as a major growth opportunity for the company. A consequence of that was growing with partnerships with third-party marketplaces like DoorDash and Uber Eats. With them we came upon the virtual restaurant opportunity,” says O’Reilly.
By working with third-party platforms they were able to discover how their menu’s performance was signaling different avenues for specific menu items. “This gave us the opportunity to profile parts of our menu that were very much in demand in third-party marketplaces, but they were not items that Smokey Bones is as well known for, such as burgers and wings. We saw a high demand opportunity in a piece of the business that we had made a priority out of and that led us to the creation of these two virtual brands,” adds O’Reilly. This brought the beginning of two virtual restaurants: The Wings Experience and The Burger Experience. These separate brands operate out of their current Smokey Bones brick-and-mortar locations, and are offered through delivery, takeout or curbside pickup. Each virtual restaurant has a very clear offering with its own unique spin.The Wing Experience, for example, focuses primarily in selling jumbo wings with the wow factor of offering 50 flavors.
How to start your own virtual hospitality business
Restaurants branching out into the virtual brand sphere need to first take a look at their existing concept and analyze what opportunities might lie within their concept that could be extracted into a new concept.
Analyze your current operations
First things first: do you have room in your operations to contemplate adding another brand to your roster? While virtual brands aren’t meant to take up your entire operation, you might need to have some room to adapt to add new processes and menus. Take a look at your current operations to find out if you can accommodate another brand and to what capacity.
Take a look at your menu’s performance
Now it’s time to decide what your virtual brand will offer. A great place to start is your menu’s current performance. Are there certain items that perform really well in a delivery and takeout setting, but aren’t really well linked to your current brand, or don’t see a lot of demand in your dine-in restaurant? If so, this might be a good place to start. By choosing a concept that’s linked in some way with your current menu you’ll be able to ensure a smoother transition. Choose menu categories that you have experience in and aim to find something unique that has some form of overlap with your existing operations.
Train restaurant staff
Once you’ve analyzed your operations and decided on a menu, you need to dedicate the right amount of time and resources to train your staff and ensure they’re able to see your new virtual brand and take care of your current operations. While you are still running everything in the same location you will be operating two different brands, which means your staff needs to be well versed in both concepts.
Focus on naming and branding
Deciding on branding is critical to your success. Since you won’t have a physical location for people to rely on or walk past, having a clear and original concept matched with great marketing and eye-catching names will help you push out your virtual brand and break through the noise of online ordering. When choosing names for virtual brands, O’Reilly went for simplicity and performance. “When you think about the off-premise world of the third-party marketplace, the names that we chose are very straight forward so we could help our search performance and to communicate the burger and wing experience. We also developed very cool logos and color schemes. It wasn’t very difficult to do, but it was very important since these are brands in their own right,” adds O’Reilly.
André Vener, a Partner at Dog Haus, went a different route and chose names that went with their creative style: “We love naming items in our brands. It’s done by the entire team, not only the marketing department. We even let our vendors participate. We look at trademarking and we look at domains. Every menu item has some creative name. Having too creative a name on search isn’t the best thing, but in general, we like to have fun,” explained Vener.
Choose the right technology partner
Now that you’ll be running two brands under one roof, efficiency and ease of use is everything when it comes to choosing your restaurant platform or point of sale. If you already have a system in your current location, you need to make sure you’ll be able to manage separate brands and get orders out the door efficiently. When choosing a restaurant POS for your virtual brand and physical location make sure to look for a system that offers the following:
- Ease of use
- Works seamlessly with a restaurant eCommerce website
- Offers online ordering capabilities
- Syncs your menu with major food delivery apps
- Consolidates online orders on one single screen
- Manages all your locations in one system
- Great support
Figure out delivery logistics
In 2020, the pandemic solidified delivery and takeout as an essential part of any restaurant as restrictions and customer preferences shifted completely towards contactless alternatives. So much so that it has become a part of diners’ weekly habits. Approximately 1 in 3 Americans use food delivery on a weekly basis or more.
Without a physical location, virtual restaurants rely exclusively on delivery and takeout to serve customers. If your existing restaurant already has a delivery system, you might be familiar with dealing with your own delivery fleet, or using third-party platforms. For your virtual restaurant, make sure you craft out a plan defining how you will be delivering meals to your customers.
Ask yourself the following questions when deciding your delivery strategy:
- Will you be using your existing delivery fleet?
- Do you need to hire more delivery drivers?
- Will you be using a third-party delivery service?
- Have you considered a hybrid model?
Think about how you’ll be able to manage these delivery partners and orders from your virtual restaurant and your existing dine-in establishment.
Creating a virtual space for hospitality
The world of hospitality is expanding beyond the confines of the dine-in world. And with expansion comes new opportunities for restaurateurs everywhere. Now is the time to take a look at your restaurant, explore new avenues and start making your way in the changing hospitality landscape.
Looking for a tech partner to help you every step of the way? Talk to one of our experts to find out how Lightspeed can help.