Ghost kitchens make more sense overseas than in the US

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New digital technologies allow businesses to expand globally in ways that were once impossible.

Just last week, Texas-based restaurant chain 130+ On The Border announced it was increasing its presence in South Korea; Arby’s, the sandwich chain of more than 3,500 stores owned by Inspire Brands, announced its expansion into Saudi Arabia; and Kevin Ozan, executive vice president and chief financial officer of McDonald’s, told analysts the chain’s plans to open 1,300 new international restaurants this year.

Earlier this month, FAT Brands-owned Johnny Rockets restaurant chain, which has more than 325 locations in more than 25 countries, announced plans to expand its presence in South America. The chain’s international expansion is made possible in part by using the shadow kitchen model to drive digital sales without the operating expenses of a full restaurant, said FAT COO Thayer Wiederhorn. Brands, to PYMNTS in an interview.

“Internationally, the economy of shadow kitchens and virtual restaurants makes more sense than it does in the United States,” Wiederhorn said. “Rental of space for kitchens is cheaper, as are rates for delivery drivers, etc. The codes are also less sophisticated. Overall, new technologies develop faster internationally and often cannot take hold in the United States because the economy does not make sense. »

One and the same

Wiederhorn noted that the main differences from market to market come down less to consumer behavior and more to local laws and economies.

“In South America, our brands do a significant portion of the ghost cooking and virtual dining business,” Wiederhorn said, citing the strong performance of the chain’s digital sites in Chile as an example. “It all comes down to wages and the economic difference.”

He said he thought consumer behaviors once the technology was available were very similar across markets. However, the one notable short-term exception he pointed to is that the evolution of the COVID-19 virus, which has varied from market to market, and how each government has responded have caused consumers to behave differently in different places.

“There are countries that won’t have vaccines for a while, so they face abrupt government shutdowns,” he said. “It definitely has an impact on consumer ordering behaviors.”

I can’t touch this

As restaurant brands seek to deliver increased digital accessibility around the world to adapt to these shifts in regulations and behaviors, Wiederhorn said he believes some innovations will prove stickier than others.

“I think kiosks are overrated,” he said. “Everyone has a ‘kiosk’ in the palm of their hand – their cell phone.”

He added that where there was once “probably a window” where technology made sense, the evolution of ordering on one’s own device has made kiosks less relevant, especially since he said that he thought the pandemic had made consumers more hesitant to reach out to the public. devices.

In fact, research from the PYMNTS 2021 Restaurant Readiness Index, created in conjunction with Paytronix, found that restaurant managers overestimate the value of kiosks relative to consumers. Specifically, 28% of restaurant managers said they believe self-service kiosks will be important to the future success of restaurants, while only 19% of consumers said the same.

Read more: QSR’s Lagging Loyalty and Reward Investment Harms Innovation and Sales

However, the study also found that top performing restaurants offer the option of ordering using in-restaurant self-service kiosks far more often than poor performers, with 32% of top performers offering the option compared to just 14% of the seconds.

Still, Wiederhorn said he believes solutions that outsource labor to people offsite, like the one offered by San Jose, Calif.-based company Bite Ninja, are a more efficient way to make order more efficient than kiosks.

In the palm of their hands

Even with all the mobile innovation of the past two years, Wiederhorn said he thinks phones are still underutilized in restaurant technology. For example, he said he thinks QR codes that only show menus waste the ability to offer payments on his own device, allowing the restaurant to learn more about his customers.

“If I’m just looking at a PDF on my phone, the restaurant is missing a rare data collection opportunity,” he said. “It should be a tool that informs pricing, suggests add-ons, and can react quickly to commodity pricing and supply chain issues.”

Additionally, he noted, mobile devices can offer real-time information about location-specific changes in store opening hours, an issue that is particularly relevant now with the challenges of working and of the pandemic. After all, surprise closures can frustrate consumers, risking reduced brand affinity and loss of loyalty.

Overall, he said he thinks the biggest impediment to restaurant innovation around the world remains inflation.

“In the US, omicron is booming, but we’re not seeing the same extreme fallout from eating out or ordering food; the biggest problems come from inflation,” he said. “I hope [in a year] we are in a better state with COVID and the supply chain is becoming more stable. This will lend itself to talking more about innovation and category growth versus setbacks.

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