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Throughout 2020, the restaurant industry faced unprecedented disruption, challenges, and uncertainty. Despite this, restaurateurs demonstrated their incredible resilience through creative and innovative solutions that enabled them to continue to serve their communities and feed hungry diners. One of the most compelling examples of this was the rise of virtual restaurant concepts.
Virtual restaurants are delivery-only restaurant concepts that use existing kitchen and staff to test new restaurant concepts and build diverse revenue streams into a restaurant’s business model. And with 60% of U.S. consumers ordering delivery or takeout once a week, it has become more critical than ever for restaurants to find innovative ways to connect to U.S. consumers who rely on delivery and takeout. Virtual restaurants are the perfect avenue to do this.
In this guide, we’ll cover the nuts and bolts of virtual restaurants.
- Thinking about opening a virtual restaurant? Here is what you need to know
- The benefits and challenges of opening a virtual restaurant
- Four strategic steps to take when opening a virtual restaurant
- How to go to market faster with a branded virtual restaurant from Grubhub
What is a virtual restaurant?
A virtual restaurant is a delivery-only restaurant concept within a brick and mortar restaurant that adds a new revenue stream without increasing overhead costs. Virtual restaurants utilize the existing staff to prepare and package the orders while leveraging third-party delivery services, like Grubhub, to deliver.
Virtual restaurants operate in tandem with the brick and mortar restaurant’s off-premise delivery model and are a great way to capture new customers without additional overhead costs. The customer orders from the virtual menu, typically listed on a marketplace like Grubhub, and the existing staff prepares the order alongside orders from the primary business.
Thinking about opening a virtual restaurant? Here is what you need to know
Throughout 2020, virtual restaurants have been a solution to revenue challenges many restaurants. As restaurants begin to plan for a post-COVID environment, many industry experts expect delivery-only restaurant concepts to continue growing and playing a significant role in the industry. In fact, the virtual restaurant market is expected to grow to $1 trillion by 2030 according to market research firm Euromonitor International.
Robert Earl, the founder of Earl Enterprises and Virtual Dining Concepts, told Nation’s Restaurant News, “I believe that five years from now, a very large percentage of the independent restaurant community in this country will have a second brand that is not available to the people dining in their place and have no interrelationships with the build, expect that they are using the same ‘kitchen.'”
Innovative restaurateurs are leveraging delivery-only restaurant concepts to grow their revenue, reach new customers, and supplement their core business model. Ric Gruber, Owner of Billy Brick’s Wood Fired Pizza, has found a way to successfully leverage virtual restaurants during COVID-19 and build new revenue streams into his model. During our webinar Exploring Growth Now: Hear From an Owner Who Made it Happen, Ric Gruber credited his virtual restaurant concepts as the reason his company was not only surviving through the pandemic but thriving.
Ric Gruber found unique ways to expand on menu items his core business offered while also targeting popular cuisines diners were searching for on Grubhub. For instance, while his core restaurant offered salads, he built a virtual restaurant called Capital Greens to expand its salad category. Through Capital Greens, he utilized the equipment, staff, and ingredients he had available for his core business while also targeting new customers on Grubhub. Capital Greens not only helped him increase his revenue but also helped decrease his produce waste.
Ric Gruber has also used delivery-only restaurants as a test kitchen for menu items. Through his virtual restaurant concept, Petey Pasta, he has tested out different pasta dishes. The most popular pasta dishes from Petey Pasta have now made it onto Billy Brick’s Wood Fired Pizza menu.
Ric Gruber’s innovative and entrepreneurial approach toward virtual restaurants is truly a model for success. He has made up lost revenue during the pandemic by adding additional revenue per concept every week through his virtual restaurant concepts.
Top three benefits of virtual restaurants
Maximize the performance of your core business with no increase to your fixed cost
You are already paying rent, insurance, and employees to fulfill orders for your core business. With virtual restaurants, you can open a new concept without having to pay for a new location. Additionally, you can tap into your core business’ resources, such as employees, to fulfill your new restaurant orders. This makes virtual restaurants a cost-effective way to increase your order volumes and add a new revenue stream to your overall business model.
More representation on Grubhub
Virtual restaurants enable you to increase your representation on Grubhub easily and quickly. In addition to your core business listing on Grubhub, your virtual restaurant will also be listed in the marketplace, adding additional opportunities for you to reach new customers.
Access to customers looking for a different cuisine
Virtual restaurants open you up to capturing new customers looking for cuisines and menu items that your core business currently does not offer.
Top three challenges of opening a delivery-only restaurant
At Grubhub, we’ve seen a variety of virtual restaurant concepts from both independent restaurateurs and major established brands. While there are many success stories such as Ric’s, some restaurant owners have found opening a virtual restaurant to be a costly and time-consuming challenge.
While virtual restaurants sometimes offer an easier path toward new customers than traditional brick and mortar restaurants, they can take the same amount of time to develop, market, and establish. Many restaurant owners face three considerable challenges to opening a virtual restaurant:
Developing a new restaurant brand, menu, and customer base can be very time-consuming, especially for restauranteurs maintaining their core business. From creating the restaurant concept to training your staff on new menu items, opening a virtual restaurant poses some of the same time-consuming challenges as opening a new brick-and-mortar restaurant.
The cost of creating your own virtual restaurant can add up quickly, and many restaurateurs find themselves facing higher start-up costs than they expected. Some incremental costs go to things such as branding, marketing, and suppliers.
From developing a new restaurant brand to building awareness, virtual restaurants require a lot of time and money to build recognition, customer loyalty, and online traction.
How to open a virtual restaurant
Are you a restaurateur looking to open a virtual restaurant and add a new revenue stream to your business model? Here are strategic steps to take before opening a virtual restaurant:
Research Local Laws:
Just like opening any new business, there may be state and city laws you must adhere to when establishing a new business. Make sure you research what is required to ensure your company is in compliance.
Establish a Restaurant Business Plan:
For your virtual restaurant to succeed, you should approach it as you would with any restaurant and build a restaurant business plan that establishes your virtual restaurant’s:
- Brand identity
- Menu concept
- Ideal customers
Develop a Marketing Strategy:
How will you market your new virtual restaurant to customers? It’s essential to think of the different channels you will utilize to build awareness for your virtual restaurant and generate buzz. Maybe you’ll use social media platforms like Instagram and Facebook to reach new customers and establish your new restaurant brand.
Additionally, leveraging online ordering marketplaces, like Grubhub, is a great marketing tool for delivery-only restaurants. Restaurants that partner with Grubhub can reach new customers and build a loyal customer base while also creating local awareness for their restaurant. In a Technomic, Inc. “Restaurant Insights” Survey conducted in partnership with Grubhub, 89% of independent operations that partner with Grubhub indicate that Grubhub helped their business by attracting new customers and increasing the volume of takeout and delivery orders.
Establish your food delivery operations:
Since virtual restaurants are delivery-only restaurant concepts, you must have an efficient and affordable delivery solution in place. Look for a delivery partner, like Grubhub, who can handle the entire delivery process. It’s important that the delivery partner you choose to work with can provide you the technology, customer care, and experienced drivers to ensure your customer receives a high-quality experience.
Like opening a traditional restaurant concept, a virtual restaurant concept can take a lot of time to develop, market, and grow a loyal customer base. If you are looking for an easier way to supplement your current restaurant’s revenue stream, you should consider a turnkey branded virtual restaurant concept.
Branded Virtual Restaurants are where an existing brick and mortar restaurant launches a pre-built, established virtual restaurant created by a third-party partner, like Grubhub. The partner handles the menu, branding, packaging, marketing, and more. The independent restauranteur manages cooking the food and fulfilling the orders with their existing kitchen and staff.
Branded virtual restaurants are a more manageable alternative to developing your own delivery-only restaurant concept. When you partner with Grubhub for a branded virtual restaurant you are able to go to market much faster while also reaping the following benefits:
Lower financial investment:
Pay no franchise fees or start-up costs to launch your branded virtual restaurant. Only pay for the food ingredients and packaging.
New revenue stream:
Easily add a new revenue stream to your business model without added labor costs or additional overhead costs.
Launch a fully developed concept and menu, including expertly crafted branding and packaging as quickly as two weeks, without having to invest time, money, and resources into developing a new concept.