A Blog by Jonathan Low

 

Oct 27, 2018

Uber's Secret Restaurant Empire

The company uses data to identify opportunities by food category and neighborhood, then approaches local - or global - chefs and restaurant owners to fill the need, which it then delivers. JL


Kate Krader reports in Bloomberg:

The “virtual restaurant”starts with no storefronts and no seats; operate out of a corner of a professional kitchen, inside a restaurant with a different name and menu. These unconventional options are proliferating as the online food delivery business continues its pace of 20% year-over-year growth. Delivery overall is forecast to account for some $75.9 billion in gross merchandise volume by 2022.Uber Eats works with 1,600 virtual restaurants around the world in the 300 cities in which (it) operates.
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. There used to be only a couple of unspectacular burgers on the menu at Gerizim Cafe, and only about one a day sold, according to co-owner Joel Farmer.

But the data team at Uber Eats perceived a demand for gourmet burgers in the area, and they approached Farmer about the possibility of expanding the selection. Farmer liked the idea; most of the raw ingredients were already on hand. The Brooklyn Burger Factory has been such a success—it’s now selling as many as 75 burgers a day, with revenue 28 times that of Gerizim Cafe—that Farmer is changing the name of the entire operation.

Double cheeseburger from Brooklyn Burger Factory.
Source: Uber Eats

MIA Wings, likewise, operates out of a brick-and-mortar Miami Beach cafe called Venezia Pizza & Lounge. Since it began delivering chicken wings in September, Venezia has had an 80 percent increase in revenue. In Montreal, the casual Turkish restaurant Sultan had so much success with the savory galettes and fries being sold through the virtual French Takos it went ahead and made that the official name of the joint.
It’s a phenomenon that Jason Droege, vice president for Uber Everything, labels the “virtual restaurant.” Such places start with no storefronts and no seats; they operate out of a corner of a professional kitchen, inside a restaurant with a different name and menu.
These kinds of unconventional options are proliferating as the online food delivery business continues its pace of 20 percent year-over-year growth. Delivery overall is forecast to account for some $75.9 billion in gross merchandise volume by 2022. Grubhub, the category leader with a 52 percent market share and an $11 billion valuation, has been profitable since 2011.
Uber Eats is still a secondary player in this segment, but it’s expanding the fastest. It kicked off in December 2015 in Toronto, following various food delivery experiments including Uber Fresh. The virtual restaurant program began quietly in early 2016, and by March it had spread to 10 cities. Today the company works with 1,600 virtual restaurants around the world in the 300 or so cities in which Uber Eats operates. Almost 1,000 of them are in the U.S., ranging from Co5 Farm Fresh in San Francisco to Italian Dream in Oklahoma City. The company has also expanded in Australia and New Zealand, mostly in Auckland but also in smaller cities such as Hamilton.
There are now more than 300 Uber Eats employees as the unit leverages Uber Technologies Inc.’s existing drivers, data and name recognition to expand. Droege sees the most growth outside of the major urban centers—such as Montpellier in southern France or Ahmedabad in the west Indian state of Gujarat. Liz Meyerdirk, the global head of business development at Uber Eats, estimates the department is growing as fast as UberX did in its first three years. “Over the last year, 40 percent of new Uber Eats users are new to Uber, driving platform growth,” she says.
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.
The arrangement often results in restaurants with culinary ambitions serving basics for people at home. The menu at Rahi, an inventive Indian spot in New York’s Greenwich Village, contains more experimental dishes such as coconut-mango curry cod with crab butter. But the Uber Eats menu has classic dishes including butter chicken and vegetable samosas. “That’s what people want when they order Indian food,” says owner Roni Mazumdar. He also delivers via Caviar and Grubhub.
Even Michelin-starred cooks have gotten into it. At Pasta on Demand, the virtual restaurant from Marea chef Michael White, you can order his classic rigatoni from the comfort of your phone.

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