The WSJ had a piece recently on the rise of virtual brands in the restaurant space. Such a novel idea. Given the rise of super delivery apps (DoorDash, UberEats,GrubHub, etc), legacy restaurants such as Chili’s and Applebees can quickly develop new brands that cater to a digital audience. In one such example, Chili’s was able to spool up a completely new virtual brand with no physical stores called ‘It’s Just Wings’ and grow it to $150m in one year – that’s roughly 5% of Chili’s total business. Furthermore, they can keep their costs to a minimum with no massive advertising budgets, additional leases or significant overhead. Even after accounting for fees tacked on by the delivery apps this business is likely highly accretive. In fact, the majority of customers had no idea that this food was even being prepared at a Chili’s restaurant which shows having a virtual brand can help create new, non-cannibalistic revenue streams, and serve as an incubator for new food concepts. Startups and ad agencies should take note as there is ample space to create new businesses around this changing landscape.
What’s at stake is a massive TAM expected to hit $1T by 2030 made up exclusively of virtual brands and ghost kitchens. Similar to the private label business in grocery, get ready for a crowded, opaque market where it’s harder to tell where or by whom your food was created.