Ex-Uber startup Virtual Kitchen competes with Kalanicks CloudKitchens – Business Insider

 

Travis Kalanick

Ex-Uber CEO Travis Kalanick
Steve Jennings/Getty Images for TechCrunch


  • Virtual Kitchen is one of the many companies renting kitchen space to restaurants, to help them streamline their meal preparation for delivery services. 
  • Ken Chong, the startup’s co-founder and CEO, says that the restaurant business is set to transform as drastically as the retail industry did when stores decided to start selling clothes online. 
  • The company raised $15 million last week, from venture capital firms such as Andreessen Horowitz and Base10 Partners. It also announced partnerships with three local restaurants in the Bay Area. 
  • But the business also promises to be competitive. Uber co-founder and ex-CEO Travis Kalanick reportedly raised $400 million for his startup CloudKitchens, raising tensions with his old company Uber. UberEats reportedly also tested running a ghost kitchen in Europe, according to Bloomberg.
  • Visit Business Insider’s homepage for more stories.

The restaurant business is going through a change as consequential as the separation of an egg’s yolk from its white.

In just a few years, predicts Ken Chong, the concept of a restaurant kitchen will look very different from the cramped galleys located at the back of dining rooms today. In many cases, the kitchens won’t be connected to dining rooms at all, says Chong, the cofounder and CEO of Virtual Kitchen.

His startup is one of several so-called ghost kitchens that have cropped up to take advantage of a shift that began with the explosion of app-powered food delivery services such as DoorDash, Postmates and UberEats.

Chong, a former product manager at Uber, founded Virtual Kitchens along with Matt Sawchuk, a former manager at UberEats, and Andro Radonich, an expert in food operations at scale. The ex-Uber employee says that the team’s past experience played a key role in guiding them to found the company. Working at UberEats or within the Uber marketplace showed that while delivery was thriving, restaurants were struggling to balance delivery with their dine-in services.

Kitchen space is already expensive. Employees could only cook so many meals at the same time. Logistical problems in delivering food persisted. 

Chong compares the problems facing the industry to the retail industry’s shift to using warehouses for storage as stores shifted online. 

“In terms of refrigeration space and storage, the need for infrastructure is very similar,” Chong told Business Insider. 

Competing against Uber cofounder Travis Kalanick

Investors have developed a taste for ghost kitchens and their business potential. Last week, Virtual Kitchens raised $15 million from venture capital firms such as Andreessen Horowitz and Base10 Partners to grow their business.

Companies like Virtual Kitchen allows restaurants to “offer delivery without having to build out a new restaurant in a high-foot traffic area,” explained Andrew Chen, of Andreessen Horowitz in a blog post. “This makes it more affordable for a restaurant to get up and running and to quickly scale their customer base.” 

The business also promises to be extremely competitive. Chong’s old boss and ex-Uber CEO Travis Kalanick reportedly raised $400 million from Saudi Arabia for his new venture, CloudKitchens. 

Even Uber tested a ghost kitchen program in Europe, Bloomberg reported in May. Businesses hosted on the UberEats app could rent out fully-equipped kitchens. A company spokesperson said that Uber had since moved away from the the capital-intensive ghost kitchen business, and instead drilled down on the Uber Eats restaurant partnerships to serve clients with data insights.  

But Chong said the number of companies on the market fell in line with his own thinking, that the restaurant industry is in need of some innovative thinking.

“There’s a ton of innovation needed,” he said. “Different companies are focusing on different parts of the problem from real estate to staff. We’ve chosen a lean asset-light approach.” 

For now, Virtual Kitchen has partnered with three local restaurants in the Bay Area, and handles the back-end of the delivery business. It not only rents kitchen space but co-ordinates with delivery apps like UberEats to help make meal delivery faster. 

Doug Wong, owner of one of Virtual Kitchen’s partner restaurants Poki Time, told Business Insider that the company was “addressing things that are new on the delivery scene.” 

“Partnering with a kitchen gives us the opportunity to scale and grow,” Wong added. The restaurant rebranded itself at the end of October, marketing its delivery under its old name Poki Time and dine-in services under Tuna Kahuna. 

 

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