From shopping malls to parking garages, ghost kitchens for both virtual brands and brick and mortar restaurants are popping up practically everywhere. But as this trend continues to shape the industry, what’s the next frontier for virtual restaurants? For Wow Bao, the 14-unit Chicago-based fast-casual Asian-American restaurant company, the next ghost kitchen expansion is in partnership with other restaurants.
In an unprecedented industry move, Wow Bao has begun selling the materials necessary to make a simplified version of their menu of bowls, buns, and potstickers to other restaurants and ghost kitchen facilities, or shared commissary spaces focused on off-premise in a business model that’s similar to a franchisee relationship.
For $2,000, the company will send participating restaurants or kitchens a “starter kit” of onboarding and training materials, and the three pieces of kitchen equipment necessary to steam, cook, and sell the Wow Bao menu out of their kitchen through third-party delivery companies, including Caviar, DoorDash, GrubHub, Postmates, and Uber Eats.
“Our menu is made frozen for us and we have national distribution set up, so we were thinking to ourselves, ‘Why can’t we have someone sell our product out their back door and [have them] grow our brand for us?’” Wow Bao president Geoff Alexander said. “This spawned the idea that every restaurant kitchen can be a ghost kitchen with the right resources. A kid could even do it out of their college dorm.”
Although Alexander clarified that the college student signing up to be a Wow Bao distributor is a joke, he emphasized how easy the process is for restaurants that want to make a secondary income out of their kitchens.
Wow Bao was formerly a part of the Lettuce Entertain You restaurant group. But as of Nov. 2017, they became an independent entity (although they still partner with the 120+-unit, Chicago-based restaurant group), and wanted to expand their brand nationally without necessarily opening physical brick and mortar stores across the United States.
In January, Wow Bao launched a six-week test of the concept, partnering with Shaw’s Crab House, a Lettuce Entertain You restaurant in Schaumburg, Ill., to serve a limited version of their menu including four kinds of bao, three rice bowls, and two types of potstickers. The response was “encouraging,” and they only stopped the test because of COVID-19.
“We learned that it’s important to have POS integration which will help make [business owner’s] lives easier,” Alexander said. “Also, if we’re launching in a city where we’ve never been before, we need to create targeted Instagram and Facebook ads to get the word out there to similar demographics as our customer base in Chicago.”
The latest ghost kitchen market Wow Bao has tackled is San Francisco. Here, they are working with food delivery service A La Couch to launch the brand through third-party delivery. Wow Bao is also partnering with ghost kitchen company Reef Kitchens, which will be launching Wow Bao delivery in Miami, Austin, Los Angeles, Minneapolis, and Portland in the next few weeks.
Although he did not begin this ghost kitchen initiative with coronavirus relief in mind (he began the project before the pandemic) he thinks it provides a perfect solution for struggling restaurants that have been forced to close their doors.
“We did not intend this to be during a pandemic to help restaurants grow their top line and bottom line, but with the state of the world, this fits in perfectly with how customers are ordering food,” Alexander said. “These days, you can only do delivery, but this can be part of your business plan moving forward.”
Here’s how it works on a practical level: when a restaurant signs up, they will receive the $2,000 starter kit with equipment, which includes a steamer, for example. The partnership requires no hood or bulky equipment. Every shipment will come with the frozen potstickers and buns, so a kitchen cook just needs to pull out the ingredients they need for that day and quickly prepare them.
“You just put it in the steamer, push the button, package the items, hand them to the delivery drivers and then move on with the rest of your regular kitchen duties,” Alexander said.
Wow Bao will help provide marketing and social media resources, and the contract with each partner will auto-renew every three months.
If done correctly, he said, a restaurant owner could stand to make around $40,000 annually through selling Wow Bao products. He breaks it down like this: 36% of profits go toward food ingredients and packaging, and 25% commission rate to third party delivery partners. That leaves around 61% profit that brings in the remainder of the bottom line. Although the restaurant owner gets to keep the remaining profits, for Wow Bao, their commission is built into the 36% supply chain fees.
But what kind of restaurant would benefit from this? Alexander suggests that seasonal restaurants or foodservice companies, for example, ice cream shops, rooftop bars, or fine-dining restaurants that have been forced to close during coronavirus might be most interested in partnering with his company during their off-season or time of closure.
“This isn’t going to be for every restaurant,” Alexander said. “If you have tremendous business right now, you don’t want to have another thing going on. But if you’re just breaking even, why wouldn’t you sign up to do this? You can bring a lot of money to your bottom line.”
But what happens if something goes wrong, and the ghost kitchens begin getting poor Yelp reviews or are not prepared properly? Alexander said they are monitoring Yelp and will pride feedback and training to restaurants if there are any concerns.
“Our goal is to be successful and for you to be successful,” Alexander said. “We believe [this food is so easy to produce] that the only reason you would continue to fail or not produce properly is if you don’t care about the product. We know we are doing something no one has ever done.”
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