What is a virtual restaurant (and how do I start one)?
Running a restaurant has always been hard. Staying profitable when margins are thin and competitors abound is an uphill battle. Long-term success in the restaurant industry generally requires going beyond making delicious food (although that’s a definite requirement). It’s also important to be adaptable and willing to get creative when required.
Early in the pandemic, that meant adding food delivery for restaurants that didn’t already offer it. Now, as the popularity of delivery continues to grow, some savvy eateries are branching into creating virtual restaurants.
What is a virtual restaurant?
A virtual restaurant is an online-only food delivery business that works out of the same kitchen as a brick-and-mortar restaurant but functions as a distinct brand. For example, an Italian restaurant mostly known for its pizza and pasta dishes could start a virtual restaurant focused on soups and salads. That gives them a way to capture orders from customers who want lighter fare, while still serving their core audience of pasta lovers under their main brand.
Virtual restaurants versus ghost kitchens
Virtual restaurants are new enough that you may see the term used to describe multiple innovations. In particular, people sometimes use the phrase interchangeably with 'ghost kitchens'. Although they’re similar, the 2 terms describe 2 slightly different ways of doing business:
- Ghost kitchens, also referred to as commissary kitchens, are delivery-only restaurant brands that work out of a commercial kitchen space. Ghost kitchens don’t have a brick-and-mortar location open to customers. They operate only the kitchen side of a restaurant, without any of the in-person service elements. Restaurants with an existing brick-and-mortar location may use ghost kitchen facilities to expand their footprint within new or existing markets, while taking advantage of facility space that’s optimised for the delivery experience.
- Virtual restaurants are delivery-only restaurant brands that use an existing brick-and-mortar restaurant’s kitchen to create food for a second brand. Customers can still show up to the in-person side of the business, but they won’t see or be able to order from a menu for the virtual restaurant brand, just that of the original restaurant. Restaurants with an existing brick-and-mortar location may launch a virtual restaurant at that location to invest in new concepts, while taking advantage of their existing ingredients, space and staff.
The main feature that ghost kitchens and virtual restaurants share is how customers experience them. They are both considered 'dark kitchens', which means people can place orders with them only online — either through a third-party delivery app or a restaurant’s website — and enjoy their food only by delivery.
How the virtual restaurant model works
Virtual restaurants differ from traditional restaurants in that they primarily exist on third-party delivery platforms and don’t require an upfront investment in a new storefront. Instead of promoting your virtual restaurant in the broader community to entice new in-store customers, the focus is on investing in online channels to reach customers who regularly use apps to place food orders.
While some of the goals and tasks involved in running a virtual restaurant overlap with those of a traditional restaurant (you still need to focus on making delicious food and providing top-notch customer service), the main ways you promote the business and interact with customers are different. Your business strategy should emphasize understanding the mindset of customers on food delivery apps, prioritising the delivery experience and earning strong reviews on the platforms.
3 benefits of starting a virtual restaurant
The virtual restaurant model won’t make sense for every restaurant. But for some, it can offer compelling benefits.
Virtual restaurants tend to have lower upfront costs and risks
Traditionally, 2 of the biggest up-front costs of starting a new restaurant are real estate and the supplies required to stock a commercial kitchen. A virtual restaurant lets you skip those line items. You can use the space and supplies you already have and develop a menu that incorporates ingredients you already keep on hand. Instead of investing in tangible assets, your up-front investment will be more in soft assets like performing customer research and exploring new food concepts.
You can grow sales
A virtual restaurant increases your visibility in third-party delivery apps. Developing brands that target new audiences gives you a way to reach more customers on the platform, meaning more sales and higher profits for you. Depending on the business model you choose, it could also provide a way to extend the profitability of your kitchen into hours when you’re not paying servers. You could add the sales from a new daypart—like breakfast, snacks or dessert—to your bottom line without adding the cost of staffing servers and hosts during that time.
You can invest in new concepts and menu items
Some chefs have more creativity than their usual menu lets them explore. If you or your chef have great ideas for dishes that don’t quite fit with your main brand, a virtual restaurant gives you space to invest in a new concept without any risk to the primary restaurant brand you’ve worked so hard to build.
3 challenges to starting a virtual restaurant
Starting a virtual restaurant may be low risk, but it’s not no risk. Before you decide to open one, keep in mind a few important considerations, like these:
It splits your attention between 2 brands
One of the most important ingredients in creating a successful restaurant brand is building a strong reputation with customers. When you have 2 brands to build, all the results of that work will be split between the 2 — you’ll need double the positive reviews and word of mouth to build a comparable reputation for each of your brands. If your primary restaurant brand is pretty well established, that lets off some of the pressure. But you’ll still want to be strategic about giving both your restaurant brands the investment they require.
It requires more staff work and training
While the overhead costs of starting a virtual restaurant are comparatively low, someone still has to do the work of preparing and packing up all the orders that come in. Your kitchen staff will be tasked with learning a whole new menu. Plus, they’ll have to balance preparing the new items and the existing ones, while making sure it all comes out delicious.
You can make this easier on your staff by creating a virtual restaurant concept that’s compatible with the kind of food they prepare now. If burritos are a mainstay on your existing menu, launching a bowls concept that uses the beans, rice and meat your team already makes would be much easier than trying to add phở dishes into the mix.
You have to prioritise the delivery model
A delivery-focused business will have different challenges and priorities than one designed with the in-person experience top of mind. If your restaurant has been offering delivery for a while already, you may already have this part down pat. But if you’re still working out the kinks, it’s crucial to consider factors like the kind of containers you use to transport your food, how you package it, and which food items will taste the best after spending time in transit.
How to start a virtual restaurant
If the virtual restaurant model sounds like just what you need to boost sales and increase profits, follow the steps below to get started.
1. Join a third-party delivery platform (if you haven’t yet)
If you haven’t already partnered with a third-party delivery platform, joining one is a necessary first step. And really, you want to test third-party delivery for your main restaurant before you consider launching a virtual restaurant. If you’re just starting, take some time to learn how to use third-party delivery before you move on to the other steps on this list. Adding a virtual brand into the mix could mean a notable increase in the number of delivery orders your staff must handle, so you want a clear understanding of what’s involved in filling those orders before you venture into managing a lot more of them.
2. Do customer research
To create a successful virtual restaurant concept, you want to understand what the customers in your market want. Talk to your customers about their delivery experiences and what kinds of food items they wish they could get delivered. Consider using customer surveys to learn about their current delivery habits and gauge how much interest they have in different kinds of food concepts. Your virtual restaurant will be more successful if you know you’re meeting a need that exists.
3. Decide on a virtual restaurant concept
Understanding your market is an important part of deciding on a restaurant concept, but you also want to consider your current setup. A virtual restaurant works best if the concept fits neatly into the space you already have. A menu that requires stocking all new ingredients or investing in expensive new kitchen supplies defeats the purpose. You ideally want a complementary restaurant concept that mostly uses what you already have on hand and has menu items that will be somewhat familiar to your staff.
Consult with your chef and kitchen staff to get a feel for their ideas and to give them a chance to express any concerns you may not have considered. Combine what you learn from them with your market research to narrow your options. Once you’ve landed on a type of food to provide, start brainstorming brand names and concepts that will work with the menu you have in mind.
4. Develop a business plan
As with any new business you start, an important early step is developing your business plan. Some aspects will be easier because you’re using facilities that already exist; that should trim some costs and steps you’d have to take with another type of business. But you still want to think through factors like competitive analysis, branding, marketing and budgeting for what costs you’ll incur. You might not need to launch a website for your virtual restaurant, but you’ll still want to develop basic business branding elements like a brand name and logo.
You also want to make sure you understand all the policies and guidelines your third-party delivery company has for virtual restaurants. They might have rules dictating how unique your menu needs to be from that of your primary brand and what kind of standards the brand needs to meet to stay on the platform. You may also want to look into any in-app advertising options they offer, to help boost visibility of your new brand once you launch.
5. Create and test your menu
As a restaurant, the quality of your food will always be a key factor in your success, so take time to get this part right. Work with your chef to craft menu items that match your virtual restaurant concept and will be easy to make alongside your current menu. Be thoughtful about the menu’s length — too many dishes could add too much work for your kitchen staff, but you want enough for customers to feel they have options.
Also consider menu presentation at this stage. You want those menu items to look and sound good to potential customers, so spend some time taking delicious-looking photos and crafting mouthwatering descriptions.
Finally, try your menu. Don’t just see how items taste on-site, test the delivery side of things too. If you pack up the dish and send it to a friend who lives a 20-minute drive away, are they still happy with the results? The testing phase will help you make sure the food works for the delivery-only concept and will give you the chance to make sure you get the packaging right.
6. Launch and learn
Once you’re confident that your brand and menu are ready to go, it’s time to launch! Add your virtual restaurant to the third-party delivery platform’s marketplace and start taking orders. As you go, pay close attention to your reviews and ratings to track how well the business is performing. If customer feedback suggests the menu could use some tweaks, or if data suggests that adding certain items will meet a new need, adapt as you go.
Launch your virtual restaurant with Uber Eats
If starting a virtual restaurant is right for your business, you don’t have to manage every step of the process alone. Uber Eats is happy to work closely with restaurants on the platform to analyse data on local needs in your market, brainstorm restaurant concepts that are a good fit with your existing setup, and launch brands that work well for you and your customers. If you’re ready to move forward, get in touch with your account manager to learn more about our virtual restaurant program.
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