Chicago pizzeria owner Simon Mikhail had been working with UberEats for about a year when the third-party delivery service approached him last year with a proposition.
UberEats users in his neighborhood had been searching for “chicken” through the delivery service’s app, they told him, but there wasn’t much available. Was Mikhail interested in filling that void?
“I said, ‘I can do fried chicken. I have a fryer,’” said Mikhail, owner of Si-Pie Pizzeria.
But rather than adding fried chicken his pizzeria’s menu, UberEats worked with Mikhail to create a new concept, dubbed Si’s Chicken Kitchen, which was available only through the app as a virtual restaurant without any brick-and-mortar presence.
The virtual Si’s Chicken Kitchen has been open for about a year and averages about $1,000 per week in sales of fried chicken, chicken tenders and chicken pizza — all made in the pizzeria’s kitchen. Sales have already surpassed delivery sales of the original pizza concept.
“I’m selling more fried chicken than pizza for delivery,” Mikhail said.
With a second pizzeria location in the works, Mikhail also plans to do separate virtual concepts from that kitchen too, including a possible delivery-only burger restaurant.
The notion of virtual restaurants isn’t new. As delivery has gained momentum, a growing number of operators have launched delivery-only concepts, and not just with UberEats.
But the fact that UberEats is looking to use its data to identify locations where such virtual concepts would work brings a new weapon to the competitive delivery battlefield.
It’s still an experiment for UberEats, but the notion of secondary all-virtual concepts designed specifically to meet a need is one that will likely grow, said Elyse Propis, UberEats’ program manager of restaurant innovation, based in New York.
UberEats is actively testing virtual restaurant opportunities in Chicago, Atlanta, Denver, San Francisco, Philadelphia and Toronto, she said. If it goes well, the program will be expanded, she said.
In the competitive field of “last-mile” delivery services that move food from point A to point B, UberEats came late to the party, but has become a leader.
Starting the year in only 56 cities, UberEats now works with 65,000 restaurants around the world, in 29 countries and 130 cities. By the end of the year, UberEats expects to be in 200 cities.
The move toward virtual restaurants is an extension of the trust UberEats has built with its restaurant partners, Propis said.
“That’s what we’re working to build,” she said. “Not only do we provide them an additional revenue stream, but we’re also providing data insights.”
Fishing for poke
In Chicago, UberEats noticed a lack of poke concepts, although the trend was hot on the East and West Coasts, Propis said. So the company began approaching sushi restaurants, who likely had poke ingredients at the ready, to see if they were interested in becoming virtual delivery-only poke outlets.
Jack Chaiyarat, owner of the sushi restaurant Rice Café, was looking to do something different. In a few days, his team developed a menu of poke bowls, and the virtual Poke Café launched through UberEats about six months ago.
Poke Café now does about 100 orders per week, which he said is more than $2,000 in sales. Customers don’t know that Poke Café’s food comes from Rice Café’s kitchen.
“I don’t think they care,” Chaiyarat said. “We give them food, but they don’t care where you bring the food from.”
Chicken wings take flight
The virtual trend is part of an effort to generate more revenue from within a restaurant’s four walls, said Sean Huggard, director of operations for multiconcept group Concept Restaurants, based in Denver.
Huggard approached UberEats earlier this year with an idea for a virtual concept.
“I realized we had portions of the day when we might not have people working to their fullest production level,” he said. “We were looking for new ways to generate revenue.”
Huggard noticed that a local college bar with a Mediterranean menu was doing astronomical sales during late-night hours through UberEats. He asked UberEats what diners were searching for in the area that wasn’t so available.
The answer: Chicken wings.
“I thought, ‘What an easy item to execute. And we could do something really fun with it,’” Huggard said. “It was also an opportunity to give someone within our group a chance to be an entrepreneur, to launch a business within our business.”
The group launched Denver Wing Shop as a “cyber concept,” as Huggard called it, using the kitchen of one of the group’s existing restaurants.
Offering bone-in and boneless wings with various sauces, celery and carrots, at $10 per half-pound to $27 per 1.5-pound order, the chicken wings flew out the door, particularly after midnight on Fridays and Saturdays, he said.
On average, sales have been around $2,000 per week. But Huggard said sales have reached up to $5,000 per week, including surge days, like the recent Mayweather-McGregor fight.
“I’m really looking forward to Super Bowl,” he said.
But there are additional expenses, Huggard said. Utility bills are higher because fryers are on longer, and the virtual concept has to contribute a percent of sales for rent. Huggard also shifted schedules to have a worker prep in the evening for wing sales.
And, of course, there are fees for delivery, which Huggard noted are higher with UberEats than with other delivery services in Denver. UberEats declined to disclose the commission rate, although it’s the same for a virtual concept as for a brick-and-mortar location.
But the profit margin on the virtual concept sales are much higher, he added.
“It’s not like opening another business, or trying to do offsite catering with an additional labor force and new tools,” Huggard said.
Rolling with lobster
The virtual restaurant worked so well that Concept Restaurants launched a second delivery-only concept in September called Denver Lobster Shop, offering lobster rolls and clam chowder.
Food is prepped in the kitchen of the group’s Blue Island Oyster Bar and Seafood restaurant, which also has lobster rolls and chowder on the menu.
“But that one we just realized we had a unique enough product that would be a standalone on the [UberEats] app,” Huggard said.
The virtual restaurant has slightly lower pricing for the lobster rolls, which are $25, including a side dish, at the brick-and-mortar restaurant, and $19 through the virtual Denver Lobster Shop, without a side dish.
Unlike the chicken-wings concept, Denver Lobster Shop is co-branded as “brought to you by Blue Island Oyster Bar,” Huggard said. The chicken wing concept doesn’t tell customers about the connection to a brick-and-mortar.
“We’re not hiding it, but we’re not promoting it, because I don’t think it needs to be promoted,” he said.
Both concepts also have their own websites, separate from the UberEats platform, where guests can order delivery.
More virtual concepts are coming. Huggard plans to launch a late-night Philly cheesesteak concept from the kitchen of the group’s existing Ignite Kitchen + Cocktails, which is already open late.
Overall, delivery accounts for only about 2.5 percent of sales for the group, Huggard said. Delivery sales have been shrinking as the pool of delivery providers in Denver grows and more restaurant compete for diners who want restaurant meals in the comfort of their home, he said.
But the idea of virtual restaurants allows operators to “take back control” of the delivery disruption, Huggard said.
“We can create our own restaurants that are very specific to things that travel well, that are easier to make and easier to package,” he said.
Contact Lisa Jennings at [email protected]
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