The Rise of Virtual Brands: How They Can Help Your Restaurant Grow

HRC (Hotel Restaurant & Catering) 2023 is one of the largest hospitality industry exhibitions in the UK. It took place from the 25-27th March at the ExCel in London. The Tech X stage hosted discussions and presentations all about using technology in the hospitality industry. 

Deliverect’s UK and Ireland General Manager Joe Heather was on a panel hosted by the CRO of hospitality management platform Kobas, Chris Joliffe. 

The Tech X roundtable session was about the popularity of dark kitchens and virtual brands and how restaurants and hotels can use them to create new revenue streams. 

Faraz Nagree and Máté Kun completed the line-up of virtual brand and delivery specialists. Faraz founded The Lean Kitchen Network, a FaaS, or food as a service, that creates virtual brands and partners with restaurants and hospitality businesses with extra kitchen space to bring them to market.

Máté co-founded Growth Kitchen, which helps virtual brands scale across its network of host kitchens with better marketing, operations and technology.  

Let’s take a look at the highlights and key takeaways from the session, including: 

• Tips on how to make virtual brands a success from your existing kitchen

• How to get seen in the crowded digital delivery marketplace

• The panel’s thoughts on the future of dark kitchens and virtual brands

Key takeaways: how to grow revenue with virtual brands

The panel began by trying to pin down a definition for ‘dark kitchens’, one of many terms, along with ghost kitchens and cloud kitchens, that are used to mean a few different things.

Faraz sees dark kitchens moving from the image of a back-alley warehouse with dozens of anonymous brands to “a smaller number of very well put together concepts and brands that people recognise.”

He adds that the dark aspect needs to be more relevant now, with many brands offering on-site menus and food for delivery.

Máté adds that his company naturally moved to a licensing model as its more successful virtual brands asked Growth Kitchen to go as far as cooking the food, providing kitchen space, and creating the brand identity.

“I think that’s the direction,” Máté says, “A small number of great bands cooked across the country, near the end customer, in a very simple way.”

From a software provider's perspective for dark kitchens, Chris sees a similar progression: “When we first saw this concept rise, you just saw brands in a kitchen having multiple virtual opportunities to get land grab on their delivery platforms.”

“Ultimately, our consumer market is getting smarter,” he continues, and referring to the companies represented on the panel, adds, “The birth of these guys and their operations are making that service delivery level a lot higher, so it's becoming an operation in its own right.”

Starting with virtual brands

Next, the panel discussed why you would consider a virtual offering. Joe sees a massive opportunity for hospitality businesses to use virtual brands in their existing kitchens. 

“I'd say if anyone's got a commercial kitchen that's not at capacity, then absolutely virtual brands are potentially an opening for you,” he suggests, “If you're in an area where there's a driver carrier pool available, then you can facilitate a virtual brand within your existing establishment to create incremental revenue.” 

“Again, you're getting this rise of online food delivery. Why not exploit that audience and have an additional brand in place away from your existing offering?” Joe adds.

Faraz talks about helping clients get their on-premise menus before adding delivery to the mix.

“We’ve seen great success with hotels and bowling alleys,” he reveals, “Those sorts of venues where first and foremost the partner wants to drive their on-site revenue. So we focus on that first and build the digital menu as the next step.” 

How to make a virtual brand a success

The main goal of the discussion was to identify the ingredients for success for the audience of operators who might consider taking on virtual brands. This idea sparked a lively conversation, from which valuable tactics and tips emerged.

Start small

Asked where he’s seen the most success with virtual brands and dark kitchens, Joe says that brands that try to cram too many brands into a kitchen tend to have problems.

“Ultimately, you've got different cooking styles, different packing styles, which causes complications,” he says.

“Where it's done very well is where you've got a good existing business doing a strong operation, and then they add in a complimentary singular brand, maybe a secondary brand, and then they're just running it in coordinance with their existing operation.”

From the service delivery perspective, Máté’s advice is to focus on the first six weeks and invest in the right places to get the brand off to a flying start: 

“Pick one brand, maximum two brands, in your kitchen and try to focus on the first six weeks – the first six weeks are going to make it or break it.” 

“Invest in marketing, invest in great operations, invest in training, and work with a partner who can support you, like us or The Lean Kitchen Network, and go from there,” Máté adds.

He counsels that you will gain momentum as your team gets more efficient and more comfortable with the brand: 

“After the first six weeks, it becomes easier. Your staff will get used to cooking this brand and your own brand. Hopefully, you can manage it all next to each other, and after that, you can think about a second brand or a third brand. But start small and scale from there.”

Be adaptable in a fast-moving market.

Chris thinks one of the most critical factors for successfully implementing a virtual brand is to be agile and flexible in adapting to market changes.

“From a technology point of view, in-venue, you need something agile because this industry is still evolving, and I think we're going to see more changes on the horizon as the years come on, “ he says, adding, “You need something that's going to be able to be flexible and allow you to diversify in terms of the offering that you're delivering.”

Leverage well-known brands

Faraz reveals the success of established brands like Heinz Brekkie, a virtual breakfast brand built around Heinz ketchup, beans, and other popular products.

The Lean Kitchen Network helped bring the brand to market, and Faraz explains how established brands like Heinz can give restaurants fast results and boost new revenue stream needs.

“Selecting a brand that people know, love, and recognise absolutely helps,” he says, “We've seen examples where putting in known brands, such as Heinz Brekkie, doubles or triples the sales of an unknown brand.” 

“We've actually run them in parallel to see the sales different on-site conversion as well between big uplifts where you put something that customers know,” he adds.

Faraz believes that getting the basics of operations and marketing right is also fundamental to making your brand successful.

“Obviously, you've got to get the execution right. Hot, fast, high quality is non-negotiable,” he says.

Be fearless

As virtual brands require less time and money to launch than traditional restaurants, Joes sees an opportunity to be bolder and braver in implementing brands.

His take: “Don’t be afraid. If you run an operation that's doing some form of takeaway or delivery, it’s not going to be that much different. It's ultimately preparing that food, putting it onto a counter and then a driver coming to pick it up rather than a consumer. So take the risk, dive into it, don't get greedy, go with one brand.”

What’s the future for dark kitchens and virtual brands

The panel closed the discussion by looking forward. Each participant thought about the future of dark kitchens and virtual brands. 

Drive repeat business with better customer experiences

Faraz believes quality is more crucial than previously, with customers looking to brands they recognise and trust. 

Asked what brands need to do to succeed, he says, “We've been talking about consolidation. There's so much competition. Fewer, stronger concepts that are driving real value and focus on customer experience.”

Chris agrees that delivering a great experience to the customer will be key moving forward to drive loyalty in the competitive landscape of delivery marketplaces.

“I've been doing some work with another client at the moment, and driving the experience economy now is becoming really important,” he reveals, “It's all about capturing that customer initially and then re-engaging with them in a way that's going to entice them back to your brand.”

Chris continues: “We've got to try and maximise that single client customer and make sure that they revisit and invest in that brand, be it in the venue or on a digital platform.”

Máté agrees, “The future belongs to a few host kitchens, a few brands that can nail the operations and drive those repeat customers.” 

“We can always get a first order in. Look at Mr. Beast Burger. Everyone went crazy for it, and they are going crazy for it, but is there a repeat order?” he asks.

Find virtual brands on Deliverect Marketplace

Joe highlights an easy way for operators to explore some of the biggest brands out there that are available to add to existing kitchens, such as Ben and Jerry’s from Unilever and Flip The Bird by Peckwater Brands. He explains how Deliverect Marketplace makes finding well-known brands to partner with more accessible.

“Deliverect has a marketplace for virtual brands. On there, you've got Lean Kitchen Network and the best of their brands, you've got Unilever, Sessions Market, Peckwater,” he shares, “You have a whole host of other companies who have well-established brands, who are well marketed in one place.”

More control with better tech

Joe also sees restaurants having more control in the future, with better technology available to manage dark kitchens and virtual brands. 

“From our side, we enable an existing operation to handle multiple channels and multiple menus from one place,” he says, “And then we give you the ability to take on a virtual brand or several virtual brands and still control it from the same back office.” 

“You can ultimately have one menu driving everything out to multiple different locations or different brands, keeping the operational side clean,” he adds.

Chris echoes this and highlights how technology solutions are taking the risk away from restaurants, allowing them to launch brands and manage them easily from their existing kitchens without putting massive capital on the line. 

“When virtual brands came to market, we saw restaurants that were good at producing high-quality food in-venue and great at welcoming guests, trying to go online in a virtual world and assuming it would be the same,” he says. 

“But it's actually very different,” Chris cautions, “The technology behind it is different, the service levels are different, and the way you package and produce the food could be different.”

The panel agrees that technology can help restaurants new to the digital side of ordering and food delivery make virtual brands successful.

There’s never been a better time to grow with authentic virtual brands

The panel advises restaurant owners and hospitality leaders ready to launch virtual brands in their kitchens. 

“It’s tough to create virtual brands from scratch,” Máté advises, “We are all venture-backed, so we have money to invest into marketing.” 

A venture-backed partner is great to get a head start, but otherwise, he adds, you must create a brand with real purpose and uniqueness. 

“You have to be super, super authentic, really know your why,” Máté continues, “What is this brand? What does it stand for? What makes it unique? Why should I, as a consumer, care about ordering your food over the other 50 burger places next to you?”

Referring to the technology providers on the panel, Chris concludes: “The future is happening, and it’s happening with these guys and businesses like them because they're taking that risk element off you guys.”