When George Jacobs started his ghost kitchens startup, Accelerate, he didn’t expect to abandon the concept four years later. But that’s what happened.
Jacobs built Accelerate on the success of virtual restaurants – the idea that one kitchen could operate under several restaurants on food delivery platforms and search engine optimize its way to more online sales. Accelerate raised a $14.4 million series A round led by venture giant Sequoia Capital before completely revamping the company in 2024. Today, the company is called Open.
Under its new vision, Open has pivoted from the delivery platforms it once relied on, and it’s aiming to help restaurants do the same. The company now helps restaurants build their own online ordering and delivery platforms.
“Restaurant owners were realizing that online was going to be a massive business for them, and so they needed to set up their own online ordering systems,” Jacobs said. “They needed to think like e-commerce companies.”
The state of the industry
Though consumers are bracing for the Trump Administration’s tariffs and a potential recession, the food delivery sector hasn’t taken a hit yet. DoorDash Inc. reported during its first quarter earnings call in May that the extra delivery fees and tips haven’t dissuaded users from using the platform.
“We haven’t seen any changes in consumer behavior, even if there are changes in consumer sentiment,” said Tony Xu, the company’s chief executive, in a statement.
The food sector plays a big role in the U.S. economy. The food service industry is the second-largest private sector employer with one out of every 10 people working in the restaurant industry, according to the National Restaurant Association. In Los Angeles County, 75% of the hospitality sector is dominated by restaurants.
And yet the ailing Los Angeles restaurant economy is struggling. The threat of an economic recession, a higher minimum wage, skyrocketing commercial rents and changing consumer spending habits have put a damper on the sector. Delivery apps are increasingly becoming a quandary for restaurants. Though they allow for more people to order from an establishment, they often take a 20% cut on sales – and an even steeper cut, if restaurants pay extra to make their establishments more visible to consumers.
When Jacobs created Accelerate, ghost kitchens were becoming increasingly popular. California, the world’s capital of virtual kitchens, is home to 10% of the global virtual restaurants industry, according to PitchBook.
Travis Kalanick, the former founder and chief executive of Uber, started downtown-based CloudKitchens in 2016 and raised around $1.75 billion to do away with front-of-house expenses.
Ghost kitchens rely heavily on delivery apps, which have quickly become a mainstay in the restaurant industry. Suddenly, loud storefronts, wafting enticing smells and a cozy front-of-house experiences became less valuable for those ordering delivery via an app. Restaurateurs now had to make their products look as delectable as possible on a screen, surrounded by other restaurants that were looking to do the same.
For restaurants like Georgee’s Pizza, Jacobs’ father’s restaurant, virtual brands allowed the restaurant to market its pizza, wings and pasta under separate restaurants. That way, customers searching for pasta wouldn’t skip past a pizza restaurant and Georgee’s could grow its online orders.
“Restaurants kind of felt like they had to do it. They were like, ‘great, I love that you’re driving me these additional sales, but I wish I didn’t have to do this to make a little bit more money,’” Jacobs said. “‘I wish I could just focus on my core concept. I wish I could drive more sales direct.’”
Ninety percent of fine dining operators and 87% of casual dining operators are prioritizing on-premise sales over off-premise sales, according to the National Restaurant Association. Several bills have been introduced into the California state legislature requiring third-party apps to hand over customer data to restaurants, but they were struck down due to privacy laws.
Changing attitudes
When it came to delivery apps, Jim Papantonopoulos “hated their guts.”
The tech worker-turned restaurateur opened a brunch restaurant in Downey called Poached Kitchen in 2017 and quickly hatched new locations across Southern California.
In 2020, Papantonopoulos took Poached Kitchen off all delivery apps. The egg-centric restaurant was a hit with a worldwide egg shortage and began paying a premium for cartons, which compounded with rising labor costs. Delivery apps took too big of a slice, and the company lost even more money if the delivery driver forgot to deliver a drink, or delivered the wrong meal to a customer and the delivery app had to issue a refund.
“I refused to go back on because I just didn’t feel it fair to be giving up what I thought was my profit just to keep my crew busy,” Papantonopoulos said. “I was anti-delivery service. I absolutely refused.
In 2024, Poached Kitchen worked with Open to build an online ordering and delivery app. It launched an Open-only loyalty program that has been well-used; Papantonopoulos noted that one customer has ordered 196 times in less than a year. Overall, he saw his digital sales grow by 40%. The restaurant is on track to do more than $1 million in online sales per year, and Open is the only platform customers can order delivery from.
Open operates a slew of offerings for restaurants. It has a support feature for customers who have an issue with their order, an artificial intelligence platform that can help restaurants build marketing campaigns and loyalty programs, and data analytics that allow restaurants to understand who their customers are and what food is popular. The company works with hundreds of restaurants to support local delivery and pick-up.
“They can have this first-party experience that is not only at par with but actually superior to ordering from third-party marketplaces,” Jacobs said.
