Restaurants are having a hard time keeping up with food delivery orders as smartphone apps like Postmates Inc. and DoorDash Inc. are funneling a growing number of orders to eateries already hustling to serve customers on site.
Many of those restaurants are now turning to offsite kitchen facilities where a separate cooking staff can prepare meals exclusively for delivery — a concept known as “virtual kitchens.”
According to a report from CBRE Group Inc., the number of virtual kitchens is expected to rise as restaurants strive to keep up with demand for food delivery, which has grown by 40% in the last five years. Sales reached $18 billion in 2018 and are estimated to reach $25 billion nationally by 2023.
“The popularity of these facilities are increasing because the infrastructure that is in place to support the demand for meal delivery is really nonexistent,” said Scott Steuber, a senior vice president at CBRE.
Steuber said virtual kitchens can also be a good place for restaurants to try new menu items — and for startups, which have less capital on hand, to test the demand for their brand.
The facilities tend to rent out kitchen spaces of just a few hundred square feet apiece as opposed to the thousands of square feet needed for a traditional restaurant.
CBRE has identified three virtual kitchens in Los Angeles — Colony, Cloud Kitchens and Kitchen United Inc. Each are strategically located within a 15-minute drive of hundreds of thousands of L.A. residents.
Kitchen United, backed by Alphabet Inc.’s venture arm GV, plans to build 400 more kitchen centers with 5,000 virtual kitchens in the next four years. It currently works with Amazebowls, Halal Guys Inc. and Wetzel’s Pretzels at its Pasadena location.
The group has plans for additional L.A. locations. It announced in April that it signed a lease for a kitchen to 152 W. Pico Blvd. in downtown.
Cloud Kitchens, which works with Sweet Rose Creamery and Joe’s Pizza among other eateries, said it takes a lot less capital to start up a virtual kitchen than it does to launch a restaurant. On its website, the company compares $20,000 in upfront costs at its virtual kitchen to an average of $1 million for a restaurant to get off the ground.
Steuber said virtual kitchens would continue to be in demand, though exactly what they look like may change.
“This is a new frontier,” he said. “There hasn’t been a proven business model that works, but the current infrastructure in place does not fit the technology advances and the demand.”
