Sam Nazarian’s C3 portfolio includes Umami Burger and Krispy Rice.

Sam Nazarian’s C3 portfolio includes Umami Burger and Krispy Rice.

When Sam Nazarian, started to notice several industries trending toward direct-to-consumer offerings, the hospitality industry veteran went with the flow and founded the ghost kitchen company Creating Culinary Communities.
 
He launched the Beverly Hills-based business known as C3 in 2019 with the goal of giving dormant kitchens in malls and restaurants new life as shared cooking spaces for culinary brands, as well as a new proprietary delivery app.


“At that point, food hadn’t really been disrupted,” Nazarian said. “We started seeing that the onset of these delivery apps and marketplace apps had really started to make an impact.”


Today, C3’s portfolio includes Umami Burger, Krispy Rice and Sam’s Crispy Chicken, along with the Go by Citizens app, which allows users to have food delivered from multiple brands in one shopping trip.

 
C3 operates more than 250 kitchen locations across the United States, and the company has plans for rapid growth after attracting attention from investors.


Nazarian said C3 has given him the opportunity to work with notable chefs such as Dario Cecchini and Masaharu Morimoto to offer high-end meals with quality ingredients and interesting recipes at affordable prices.
 
Through C3’s app and its partnerships with other delivery companies, the company sold more than 1.3 million meals in the past 12 months.


Nazarian previously founded SBE Entertainment Group, a hospitality company that owns and manages hundreds of hotels, nightclubs, bars and restaurants.


In November, Nazarian sold SBE’s hotel segment to French hospitality company Accor for $850 million. Nazarian kept ownership of C3 and SBE’s Disruptive Restaurant Group, which includes popular spots like Japanese eatery Katsuya and Hyde Sunset, a night club that has a fine dining concept in the works.

The C3 concept, combined with Nazarian’s hospitality industry know-how, has attracted partners and investors. In June, C3 announced plans to open 500 locations in Saudi Arabia through a joint venture with investment group WK Holding worth $100 million. And on July 6, the company closed an $80 million Series B funding round, giving it a valuation of roughly $500 million.


The funding has fueled C3’s growth plans. Nazarian said the company is expanding its office space in Beverly Hills, leasing a 15,000-square-foot office building in addition to its campus next to offices of YouTube, Live Nation Entertainment Inc. and Fandango.

 
The space will triple C3’s existing office space in the area. It will also serve as the company’s tech campus, housing creative studios for developing its culinary brands and a test kitchen. And it will be a home base for C3’s Go by Citizens app.


Embracing technology 

Nazarian said the expansion will help C3 “double down” on its technology, including its direct-to-consumer platform, customer acquisition and performance marketing.
 
“The way that the city has evolved over the last five to 10 years is really encouraging entrepreneurs to come back,” he said. “It’s really making Beverly Hills the beacon of ‘First Ofs.’ It’s a city that is nimble, a city that’s forward thinking. It’s a city that embraces technology.”

 
Devin Klein, vice president of retail at Jones Lang LaSalle Inc., said it’s no surprise C3 has boomed. Other ghost kitchen businesses, such as Pico Union-based CloudKitchens and Pasadena-based Kitchen United, have also seen strong growth during the pandemic, he said.

 
“You have to wonder if Covid didn’t happen, would it have boomed so quickly?” Klein said. “When Covid hit, (delivery) was the top business in the retail world.”

 
Nazarian said it was “lucky” C3 had established its business model pre-pandemic. Though he had to temporarily shut down several of Disruptive Restaurant Group’s brick-and-mortar establishments and furlough some staff at the start of the pandemic, C3 was able to maintain 1,200 employees and expand its delivery-only operation.

 
“I think it gave our family of team members opportunities to come to work, take care of their families and get a paycheck and also serve food to people that really needed affordable and high-quality food,” Nazarian said.

 
In part because of C3’s success during the pandemic, the company has attracted interest from potential investors and partners.


Jason Maurer, senior vice president of retail leasing for Brookfield Properties, said that in 2019 when his company was considering leasing spaces in Manhattan West, a 5.4-million-square-foot development project in New York, he was intrigued by C3’s concept as a “multibrand food operator.”

 
Two years later, Brookfield co-led C3’s Series B funding round and has leased a food hall to the company in Manhattan West that is slated to open in September.
“With C3, what’s really interesting for us, aside from the high level of operational expertise, is this chef-driven culinary talent and this desire to constantly innovate (and) incubate brands,” Maurer said.


According to Klein, the ghost kitchen industry was heating up before the pandemic and accounted for approximately 15% of all of real estate in the restaurant industry.

 
Anticipating growth

Though more people are opting to eat in restaurants as pandemic restrictions ease, Klein doesn’t expect growth in the industry to slow. Within the next two years, he anticipates that ghost kitchens will account for more than 20% of real estate in the restaurant industry.

“Let’s face it, we’re in a very fast-paced world that just keeps getting faster and faster,” Klein said. “We’re in an age where people like things quickly. And a lot of people have become homebodies during Covid. I do not see this business going away. If anything, it’s just going to get stronger.”


C3 is preparing for that growth.

 
The company plans to have more than 1,000 kitchens by the end of 2021 and is on track to open 12,000 kitchens by 2023. C3 employs more than 3,500 people and plans to hire another 5,000 in its kitchens and offices domestically and internationally.

 
The company will also add several more culinary brands partnering with chefs such as Dani García and Katsuya Uechi to its portfolio this year.

 
“If we can be the arbiter and the accelerator for turning the global restaurant business from analog to digital, then we’ve done our job,” Nazarian said.

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