Earlier in the week I had $15 in Uber credits that were expiring so I placed an UberEats order. Food came to me from a real restaurant, and it was pretty much the same as I’d have gotten in-store (except that the chips that were delivered with my guacamole were store bought and stale and this place is known for their chips).
What I didn’t realize is that UberEats now delivers from virtual restaurants — from restaurants that don’t actually exist.
It turns out that the food people want delivered isn’t always the same food they want in restaurants, and Uber can leverage excess capacity to produce food at a restaurant by having them make something else they don’t normally offer and branding that food as coming from a different restaurant that isn’t actually a place you can go.
On Aug. 1, Brooklyn Burger Factory began selling gourmet patties in its residential neighborhood of Crown Heights. But even though the restaurant serves a steady stream of jerk burgers, salmon burgers, and veggie burgers, not a single person has shown up to eat one.
That’s because the restaurant exists only in the Uber Eats delivery app. Brooklyn Burger Factory is located in the kitchen of Gerizim Cafe & Ice Cream, a small establishment on Ralph Avenue.
Uber approaches restaurants and suggests offerings based on their data about unmet demand in an area. On restaurant in Montreal found their new items sold through a virtual storefront so successful that they renamed their restaurant to take the fake one’s name.
When the virtual restaurant team notices supply gaps in any given neighborhood—if, say, the data show that the number of brunch places is lower than could be served based on searches—they’ll begin contacting businesses in the area. “We’d say, ‘If you served brunch, that would be good for your delivery business,’ ” Droege says. For restaurateurs, it can be a chance to spread their fixed costs over a higher volume of orders.
Another way to think about it is that rent is expensive and opening a restaurant is risky. If you can lower the cost of a new idea, and reach customers you wouldn’t otherwise be able to reach, it’s possible to experiment more and even be successful.
My favorite restaurants are often found in strip malls and other low rent areas, since those places don’t need to try as hard to match the broadest possible tastes. Being in a strip mall doesn’t make a restaurant good, but being in a high rent area makes it very difficult to serve narrower tastes. The opposite is also true, a home market may call for simpler dishes that stand up to transport.
Currently there are about 1600 virtual restaurants on the UberEats platform. With food delivery growing at a 20% annual clip, and forecasts have it reaching over $75 billion annually within 4 years, I’d expect to see more unusual plays in the market.
I still love the idea of the American Express restaurant that lets you eat takeout from other restaurants and getting airplane meals delivered to your home though.
Yeah, there have been several media articles the past few years about virtual restaurants, which obviously are concentrated in major cities where rents are high. If you think of restaurants that do most of their business in take out or delivery, this concept is the obvious evolution of that.
While we both abhor the USA’s tipping culture, I suspect that virtual restaurants would be even more popular if not for tipping — which allows “real” restaurants to outsource much of their labor cost to customers. Imagine a restaurant that had to actually pay its waitstaff real wages trying to compete against a virtual restaurant. It would be extremely difficult cost-wise, except at the top-end.
@chopsticks, the problem with your suggestion is that suggested tips don’t decrease when waitstaff pay increases. We that at high-end restaurants, where the staff can make a very nice wage and still expect 20% or more on large tabs. And we see that at more modest eateries where there has been a half-again increase in pay due to so-called living wage laws but the tipping culture is unchanged.
Also, a few big-name restaurants have tried incorporating tips into the price of the meal, but diners forced them to retreat.
@Art — What I’m saying is if restaurants had to post menu prices that included a 15% tip, their menu prices would look very high against a virtual restaurant. That $20 entree would now be $26. I guess they could discount their delivery prices to compete with virtual restaurants, but that would be extremely problematic.
That is so interesting. I would have never even thought this was a thing. I’m all for it as long as the food is coming out of an actual restaurant and not someone’s basement.
Came across this earlier this year in Singapore.
Saw your post about Elephant Jump a month ago. Was working at a client yesterday and brought my coworkers. The 12 of us took over the restaurant, it was great!
One competitor of Uber Eats (at least I know this one but there may be others) has also started in a neigbourgh city of Paris to offer, not a virtual restaurant, but a kitchen to some contractors to cook for them and it delivers the food.
The company says there are not enough restaurants in that area to meet the demand and supply the food to be delivered.
And it also help some contractors to start their business as they do not have enough funds to open their own restaurants.
That can make sense in a way.
That was the case, at least in the city of Saint-Ouen close to Paris.
@Alex – so glad to hear!
@Gary- Loved to see the picture of “Elephant Jumps” restaurant in the strip mall photo. It’s a short distance from where I live and has amazing Thai food. Have you eaten there?
Yeah, that’s the common problem with food delivery services. I remember a couple of those that I have tried, and the only safe bet is ordering from the restaurant itself after verifying it.
https://restaurantguru.com/food-delivery-near-me
Literaly just made an order.
Courier picked it up. I started tracking him immediately.
Courier cycled to the nearest main rd and Cancelled the order.
I tried to go pick it up. Restaurant does not seem to exist. No phone number, no address.
This is known as a “dark kitchen” in real estate industry terms.
I know exactly where that pic was taken. It’s been ages, but ate a fair number of times at that Pho Cyclo (by Route 50 and Gallows Road) back when I lived in Falls Church and McLean (Virginia). Blast from the past, wow.
My girlfriend literally just ordered from a place called good souls food and catering In Charleston sc with a rivers ave address
Driver calls and tells us that the address must be wrong because there’s no restaurant
So we start looking it up online and see that it’s only listed on postmates and Uber eats
Then we have to cancel the order and wait for a refund which is unacceptable when the restaurant shouldn’t even be up! They’re claiming technical difficulties with the system but marked it as closed
This needs to be fixed! But I found this article so they know exactly wtf is going on! False advertising!