Food For Thought: Virtual Brands and Their Impact on the Future of Delivery

Meet Wow Bao, a Brand that Partners with Local Restaurants to Deliver Steamed Asian Food Across the United States

Wow Bao is a fast-casual Asian food brand founded in 2003 by Lettuce Entertain You. It has seen sustainable and significant growth in recent years due to its focus on its virtual brand. In 2009, there were three brick-and-mortar stores, but they quickly opened up in airports, music festivals, college campuses, as CPG in grocery stores, and more.

In 2017, a private equity firm, Valor Equity Partners, took a majority stake in the company and funded its growth. Within 60 days of the transaction, they opened a virtual cloud kitchen in LA for six months. That same year, they opened their first fully automated restaurants in Chicago. They’re passionate about using technology to find new and innovative ways to grow the business.

In 2019, when thinking of new growth strategies and upon realizing their restaurant connections, they found multiple opportunities in the industry where restaurants were either inefficiently using human capital or spending on operating costs with little return. From there, they realized they could sell their products, which required steaming to prepare, and branded Wow Bao through other restaurants to grow topline sales, increase profits, and help struggling restaurants.

What Does a Good Business Partner Look Like for a Virtual Brand?

A good business partner for virtual brands doesn’t just fit the operational needs (i.e., having a kitchen) —they also can “take care of” the brand by watching over food quality, presentation, brand management, and more. Partners could be anything from mom-and-pop shops to large enterprises with hundreds of locations. Typically, partners can do food service but are looking to make more sales and bring “more money to the bottom line.” 

The most “successful” kitchen partners can be measured by how much sales the partner is doing. Scalability in this business is essentially endless, so partners have a lot of upward mobility. The partners who go above and beyond run the virtual brand on multiple third-party delivery platforms, operate on the maximum days possible, spend money on marketing the brand, and ensure seamless customer experience, which usually looks like all ordered items make it to the customer with the correct packaging. Another issue many restaurants might face in adopting virtual brands is that additional orders require more staff, which is a persistent issue in the current economy. Staff shortages affect restaurants’ current operations; therefore, increasing those orders puts an even greater strain on the current workforce.

Virtual Brands Need to Make an Extra Effort to Market Themselves but Might Lose Out on Vital Data

The virtual service space is still new. The number one growth factor is not to stay stagnant but to constantly fix, evolve, and research new technologies to stay ahead of the competition. For example, you'll often need to use third-party delivery apps to reach new markets and create brand awareness as a virtual brand. There are two different ways to market yourself on third-party delivery platforms. 

1. Sponsored listings. Specific keywords are paid for to show up at the top of search results. 

2. Run Promotions. Free delivery, buy-one-get-one-free, and other offers can encourage new customers to try your restaurant or even return.

Either way, the selling entity needs to pay for the advertisement.

In the Wow Bao model, Wow Bao sells the product in distribution at a cost, and then the operator makes everything else. That means that the operator has to market it but is also making around a 40% profit. 

At the same time, many brands prefer to have customers order directly from their website for many reasons like ease of data collection, closer proximity to the customer, and better ability to analyze customer movements. Similarly, when brands are purely virtual and have no brick-and-mortar presence, the first challenge is that you don’t have a place for customers to “feel and touch you.” Brick-and-mortars also have the benefit of physically being “driven by” to stay top of mind (i.e., when customers think, “I haven’t visited that place in a while.”) or even to be introduced (i.e., “Hey! That’s a new restaurant.”) 

How Can Virtual Brands Drive Traffic from Third-Party Delivery Apps to First-Party Touch Points?

Moving customers from third-party delivery apps to first-party apps or ordering directly from the restaurant can be very difficult. Browsing through third-party delivery apps is usually the first step in the customer exploration process, as the individual thinks about what they would like to eat while scrolling through many options. These delivery apps also typically have mastered the art of an easy customer experience, with saved data and a familiar flow.

Due to the abrupt nature of the pandemic, many brands had to first fall into using third-party delivery apps as they had no other option to get customers food and run their businesses. That process essentially trained consumers to become accustomed to using those apps as proprietary platforms were not readily available and took time to make. Ensuring all marketing is catered towards redirecting customers directly to the brand’s website or app is crucial.

Other tactics to guide traffic toward the brand include bag stuffers, follow-up emails, and rewards programs. 

Although the Wow Bao brand attempts to ease operations for its partners, many partners fear additional operational headaches—all of which can be solved by an aggregator like Deliverect. Ease of preparation and partnerships with capable restaurants are posed to be a recipe for success for the Wow Bao brand.