US Foods Ghost Kitchens

27September 2020

https://youtu.be/4Rrfz5mXIac

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[Music] the future of the restaurant industry is going to depend
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on a few key elements that are starting to develop as kind of the breaking area of where maybe the food service
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industry is going we’re going to get a chance to talk about that today my name is paul barron and this is the
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baron report we’re going to jump into something probably most of you have heard about
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maybe you’re even doing one of these and that is a ghost kitchen or virtual brand our experts today are coming from an
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unusual place i won’t say it unusual but a different place in the food industry versus operators
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as it goes and with me today i’ve got jim osborne who is the u.s food senior vice president
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of customer strategy in an innovation and also sitting in adam stin who is the director of
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business solutions great to have you guys on the show thanks for having us thank you all right
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so so let’s just jump right into it i want to just kind of open up with a little
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bit about how u.s foods who is predominantly a distributor
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for foods in supply chain you guys of course one of the biggest and best in the industry
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kind of what took you guys into the next step in terms of developing ghost kitchens and kind of this
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virtual brand component and direction can you guys kind of share that with our audience here
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sure so uh uh you know as as you said we may come at it from a bit of an unusual place but uh
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to us it was it was really uh second nature um you know we’re uh one of the
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america’s great food distributors of great food companies with over 300 000 customers all across the
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country and all different types of food operations and a few years ago we set out our
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promise to be we help you make it and we help you make it really means a couple things it means we help you make
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it from a food perspective but we also help you make it from a business perspective and so
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we’ve really set a strategy around helping our customers be successful helping them with their food helping
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them with their technology helping them with their operations we’ve got you know a team support
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structure that really focuses on restaurant success so a lot of this has been in
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place for for many many years and then uh in march when the when the pandemic took hold uh it really
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kind of pulled into action all of the things that we’ve been practicing for for uh for years making sure that we’re
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we’re helping our customers uh understand what they need to do to get into the off-premise
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game if they weren’t there already understanding how technology can help them
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from an ordering perspective how to pivot their business model how to rethink their p
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l those are all things that we’ve been helping customers with for for years and it’s never been more important than than
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it has been over the last seven months yeah and i think you know with ghost kitchens that’s kind of been the
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you know pretty much the hot uh word of the year it seems like at least in the food service
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industry virtual brands have started to really ex you know expand quite a bit we’ve seen brands who are now using
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transportable methods of placing brands within other restaurants uh and
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enabling them to sell their services or their products um all right so let’s kind of drill down
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into the ghost kitchen component uh in terms of how many and what operations you guys have standing today
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talk to me a little bit about what these look like for people who maybe have not seen one of these you want to
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jump in there so maybe i’ll start and then hand it over to adam what i would say is we’re not in the
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real estate game for ghost kitchens what we’re looking at is uh you know the the hundreds of
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thousands of uh independent restaurants primarily that uh have already they’re already
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paying rent they’ve already got inventory they’ve already got labor um and they’ve got
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capacity on their hands so how can we help enable those customers to get more revenue
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through their their fixed cost structure without a lot of risk or a lot of upfront investment
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right and what we’ve done is we’ve really put together a playbook that helps them go from
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inspiration all the way through to execution that they can pick and choose as much as
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they they want to help them be successful we’ve got a team of experts of
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restaurant operation consultants and food fanatic chefs that uh really been at the centerpiece for the
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last uh seven months in running webinars and doing direct one-on-one consultations with customers
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so that’s really where it starts is a customer or anybody in the industry quite frankly can
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jump on one of the webinars and learn more about uh how this can benefit their business what to think about what are
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the key uh you know areas to understand and then they can engage directly with a food
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fanatic chef or a restaurant operation consultant or rock as we call them
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to get into the details and start applying it to their their situation and their scenario adam
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when you look at kind of the business development side of it what what does it take to kind of bring
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these people on what’s kind of the ramp up speed what do you guys go out with in terms of
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a package uh to kind of get you know operators moving in this direction yeah for sure
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um i would i would say that the speed is going to be dependent a lot on the operator
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um but we’ve we’ve kind of designed this to be executed very quick we have some good partners and
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all of our internal resources are prepared to help out operators come on board but
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um you know we’ve developed it in such a manner that it really kind of breaks down in three
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stages um we’ve got them uh how they stand up a brand and this is looking at best practices
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for right social media for developing a brand uh and activating if you will and
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creating that brand equity out in the market and then the next module is is really
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what we call optimizing their menu and what we do here is we make sure they understand hey
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what does good look like what is what does it take to be profitable is there you know appropriate white
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space around them to be successful uh and then we we help them you know forecast orders and turn the whole thing
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on in a relatively painless manner so in terms of speed
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a lot of it depends on the operator but if somebody’s fully engaged and wants to stand one of these up
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um you know we’ve seen it done in as little as three weeks wow okay all right so let’s talk
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investment from an operator who’s out there that i’ve got a little excess capacity what
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what am i dealing with with u.s foods in terms of how much outlay do i have to do to maybe
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launch a ghost restaurant what i would say was it’s going to depend on the size of the operation but
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one of the things we developed was a cross utilization tool which allows operators to take a
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evaluation of what they’re currently doing in a brick and mortar if they happen to operate a brick and mortar
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and in drilling into one of the menus that we’ve developed and saying hey what makes the most sense around you but then
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also what makes the most sense on what you’re currently buying um and that’s really to help
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lower that risk to entry and potentially the cost um that could be associated with
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standing one of these up so keeping that in mind another great thing that our restaurant operations
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consultants will do is sit down with the operator and actually go through that p
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l and determine what makes sense how do they what’s break even what’s good how much does this cost
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and how how do you want to execute this and make sure you’re successful are you guys bringing any um any
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research to the table in terms of helping say an operator establish listen i’m an italian concept i’m not
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open during the day for lunch but i have an evening business but my lunch capacity could be here if i
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switched or flipped my my menu a little bit but i don’t really know what that lunch crowd looks like
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are you guys bringing any kind of data to the table that kind of helps that process
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along jimmy you want to take that one or you want me to no go ahead adam that’s well so the answer is to answer
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that question yes yeah so the answer is yes um we have a partner that
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and what we do before we ever get into what we’re calling the playbook before we ever sit down
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and start to build that brand we we take a look at what’s around them uh we help them understand the demographics right
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uh we help them understand uh if there is any white space and opportunity around them um
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so so yes uh the short answer is yes we definitely help them understand their market what’s around them uh who’s
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who’s dining out the most at lunch and do everything in our power to identify that that
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best segment that’s going to make them successful yeah very cool so you’ve got data you’ve got
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a supply chain there uh let’s move on to kind of the branding component for ghost kitchens that’s been
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one of the the pitfalls i think for a lot of operators is either one they don’t you
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know they’ve been an expert at you know marketing their restaurant for years uh
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so moving into a new brand is really might as well just be starting up a new restaurant so you’ve got marketing costs
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and even today marketing understanding uh because you’re probably dealing with maybe even a little different
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demographic um how far are you guys going into that side of it whether it’s content social
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media those kind of strategies that help a restaurant launch in a ghost format
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i think uh so you know whether it’s a full ghost kitchen or whether it’s a brand extension or a pivot off their
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existing brand one of the big benefits that we have is these restaurant operation consultants of food fanatic
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chefs that sit down with an operator whether virtually or in person and help
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understand their scenario and and you know what are the pros and cons to both um you know as we go through the
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playbook it really becomes a color by numbers in terms of how to stand up an online presence how to stand
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up online ordering what it takes to run a social media campaign what it needs to
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you know just because you put a ghost kitchen up it doesn’t mean that you know customers will just start
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flooding in you’ve really got to understand the marketing piece and i think that becomes
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a core part that we can really help with that is different for an independent restaurant than a chain where a chain
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has a you know maybe a corporate office or people that get paid to do this for a
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living an independent restaurant doesn’t have any of the support so
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that’s really where we look at the the value that we can provide yeah that’s going to be a good service i
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think to the industry because you’re dead on there in terms of independent restaurants especially the operators
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uh they typically don’t have you know a roster especially now when you look at the amount of layoffs that have occurred
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just to deal with uh you know kind of the pandemic repositioning um okay so let’s let’s
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talk a little bit about kind of the what i think always is the 800 pound elephant in the room and that
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is third party delivery and being able to deal with those marketplaces which in the past have been
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kind of the holy grail to an operator being able to have some marketing people call it delivery i call ubereats as a
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marketing vehicle uh you know to get your product out there what
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and how far do you guys go in that direction in terms of actually creating is there a marketplace
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for this or is this something where you just align up with postmates ubereats and and the
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likes to get the products out there so i think first off it’s about education and again you know the
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restaurant operation consultants and the food fanatic chefs will look at and understand what are the pros and cons of
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of each of the the solutions and uh you know the knock against the the third parties is
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they’re a costly solution um the benefit is their instant marketing their traffic their
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their you know they’re getting your brand out there so uh what we would advise is really
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understand you know kind of how to how to use them properly
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um but don’t just kind of you know turn them on and and let them run because then it can end up as you know
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one of the most significant lines on your on your p l yeah any any plans to try to
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maybe put together a consortium of sort uh go to uber and say listen we’ve got you know a few thousand
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independent operators that we’ve created in terms of a a platform can you give us a group deal
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almost like a buying group where we can get because that’s where independent operators really kind of
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lose out as opposed to chains so so that’s you know what adam’s responsible for our check business tools
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program which has a bunch of great partnerships uh you know with chow now around online
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ordering or bento box around setting up websites or toast around point of sale systems
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i think that the delivery piece is is really the most challenging uh aspect of it because there’s a there’s a
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real cost there um and uh you know what we do is work with uh
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you know the the folks to figure out what their best solution is um you know that’s that’s the short of
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it interesting all right so this seems and you wanted to add something there adam
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i was just going to say you know they’re they’re not going away they’re definitely part of the landscape and one
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of the things we very consciously did on the onset was if we’re going to sit down and
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talk to an operator about profitability we’re going to include that delivery cost so
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we’ve got it built into there to one of the tools that we use with uh with the operators when the
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rocks sit down so we’re absolutely making that part of the conversation so that they do understand
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and jim said it earlier there’s a great customer acquisition piece and and discovery piece there that they
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offer that shouldn’t be overlooked if you’re standing up a new brand but you do have
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to understand the math and the profitability behind it to be successful yeah
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have you guys considered or you are you currently taking in operators that you know hey listen i’ve
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got a unit over here i’m you know i’m almost at capacity but i’m thinking i want to run a ghost
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restaurant i’ve got some access to some flex space over here i’ve got access to equipment things like
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that but it’s not a brand today would you take a concept like that as pretty much essentially a startup
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and run with it uh kind of build a program for them uh i i would say if they’re if they’re a
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restaurant tour you know jim said at the beginning our our focus is to support restaurant tours and
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operators and so anybody trying to to stand up whether it be a commissary or a food truck or
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or wherever they’re looking to do business if they have excess space we absolutely want to work with them
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um you know and we’ve seen independent operators be be very be very creative and you know some of
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the early successes we’ve had we’ve seen a customer in in minnesota who whose uh uh restaurant
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was was shut down but the kitchen was still operating so to your point they had all this excess kitchen capacity and
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they actually stood up a couple different um ghost kitchens out of the back of that restaurant and are
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still operating on a carryout basis um so we have you know we definitely want to support restaurant tours and
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operators and um i think that you know all shapes and sizes
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you guys have put a lot of research into this um you know obviously us food’s a major company within the industry um you
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know tens of thousands if not hundreds of thousands of customers out there
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when you look at the category of ghosts and virtual brands a lot of restaurants that are starting to kind of
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you know they’ve kind of the curtains been pulled back they figured that takeout is
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a big part of the business today much more so than it was just 12 months ago i’m curious when you look at kind of the
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consumer trends that are happening today do you feel like this is something that’s going to
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stick around for a while and be kind of just a new normal and this is the
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the model that restaurants need to adapt to for the future so i think uh uh you know there was
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research back in february that that 75 percent of operators um thought that off-premise dining was
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was going to be their their biggest opportunity for growth so pre-covet uh if you look at i think was
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mpd 19 of full-serve restaurants were you know had uh off-premise options back
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in february and i think it was 55 in june the trend’s been coming this just
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accelerated it uh i think the phrase ghost kitchen really is is creating a lot of buzz
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around it but underneath the covers it’s it’s you know it’s takeout and delivery it’s what you know what we’ve been
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talking about the industry for for many years i think now it’s just it’s taken hold
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and i think that there’s always going to be um you know restaurants and
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and the social uh impact that they provide and the excitement the energy but
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i think that uh takeout delivery are going to be here to here to stay no matter what happens over the coming
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months and years yeah we’ve talked to a lot of technology companies in the last few
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months here on this show and really kind of the evolution of what we’re seeing in terms of contactless payment
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digital menu you know new new functions within um the restaurants themselves to amp up
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all the way out to the curb really when you look at curbside components drive-through
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manipulation new store design all those kind of things um and i think all those are great but at
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the end of the day it’s it does fall down to how many you know how many orders can i
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get in how’s my marketing gonna really kind of get me out there if you look at at that particular
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challenge as probably being the number one challenge of a ghost or virtual brand out there is
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just brand awareness right and you look at third party
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and and what’s happening in that um you know that ecosystem do you see down the road potentially
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the ability for self-delivery logistics companies to come in and start to make a play
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for companies like this to where you know delivery isn’t necessarily 20 to 25 of my ticket
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any longer now i’ve got a much better uh price point so i can spend more dollars on digital marketing
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is that something you’ve seen coming down the the pipeline so i think so delivery’s a delivery is probably the
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you know one of the toughest nuts to crack i think the the the reality that that
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operators have really discovered you know especially on the independent side lots of lots of people got into the
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restaurant world because they loved the culinary aspect or the service the social aspect of it
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and they’ve realized over the last seven months that they’re running a business and you know navigating a cares act and
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the ffcra and kind of the the new p l is is really um you know challenging so i think uh
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looking at you know what are those what are those areas that you might not have paid as close of attention to
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on your line item p l before now you’re going to be looking at those with a lot more scrutiny and you’re going to be
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looking for options on how you can uh you know get the most efficiency and i think delivery is is probably one of
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those one of those challenges uh you know there’s obviously uh insurance
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challenges and and uh you know difficulties trying to do it yourself there’s cost
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challenges trying to do it with a third party um that that’s a that’s a piece where
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we’re going to continue to see all kinds of uh of expansion and innovation uh in that
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area yeah that’s for sure i think that that market is ripe for some disruption right
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now especially just because of the cost relationship and the fact that you know companies
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like ubereats postmates etc i mean they’re not necessarily making a profit so at some point down the road
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they’re going to have to implement some sort of tactic that enables them to make a profit and
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if you do that then it obviously is going to raise rates or get or charge other services
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out there um you know to the restaurant operator which as you and i know that’s going to be a
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tough one to crack uh in the coming years especially as we recover uh for the uh
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the industry when you guys look at the number one let’s say one or two top challenges you get a
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chance to talk to a lot of operators today what are you finding out in the field
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where the operators are saying is it labor is it hey listen i’ve got to figure out a way to get guests back in
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what are some of the the big challenges you guys have uncovered here as our last question
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uh i i would start and say that staffing still remains and labor still remains the
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number one challenge it’s been a challenge in the industry for a while and um
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i think this just compounded it to some to some degree um right so you know we’re trying to be
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very thoughtful about how we approach uh solutions to staffing uh and helping solve
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that that labor piece and you know just as we talk about ghost kitchens and executing a new brand
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um you know we we try to keep it simple we look at what are you already doing and how can you expand it with the staff
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that you’ve got um you certainly don’t want to bring on a bunch of uh or try
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attempt to bring on a bunch of staff just to execute a ghost kitchen but in a lot of cases the staff is just not
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out there to be found right now and so yeah for me uh staffing and from what i’ve heard from
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from a lot of operators staffing still remains the number one challenge yeah for sure so i i think what i would
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just maybe weigh on so i agree with staffing i think that that new p
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l and understanding the new economics as kind of the lines shift as the revenue changes uh as uh you know third party uh
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comes in there like there’s all these different kind of uh factors at play in the p l so
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understanding how to make a restaurant profitable when you’ve tripled your your off premise uh
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dining and you’re at 50 capacity understanding that i mean at the best of times
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uh the average independent restaurant makes four cents of every dollar so once you start looking at the
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challenges that they’ve got and as the as the mix shifts it becomes a really really difficult
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business proposition so i think that’s you know the other big challenge that we really focus on helping them with
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yeah and you know union economics have started to shift dramatically obviously with real estate
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taking somewhat of a back seat because of the limitation on what you can put into your
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restaurant and then also accessibility i mean markets in in major cities have started to take a hit
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we’ve seen a lot of movement here so it looks like there’s going to be kind of a new map
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or landscape should i say of where the restaurant industry might be going in the next few years is going to be
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interesting very interesting to watch so it’s been great having both of you
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on the show today i’ve got again mr jim osborne and adam stenn right here from u.s foods great to have you
00:21:22
thanks paul appreciate it thank you you bet all right so all of you tuning in right
00:21:27
now maybe you’re listening over on spotify or over on itunes make sure and drop us a rating that’s
00:21:32
how we get great feedback from our audience and it’s also the way i understand a
00:21:36
little bit more what you’re looking for us to cover here on the barren report and i do get a ton of traffic over on
00:21:43
twitter you can reach me there at paul barron feel free to dm me if you have maybe a
00:21:48
topic that you want explored right here on the show and if not just shoot us an email to producer
00:21:53
footabletv.com you can always reach us that way we’ll catch you next time right here on the baron report

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