THE RISE OF THE DIGITAL RESTAURANT
SAN FRANCISCO — At 9:30 on most weeknights, Ricky Lopez, head chef and owner of Top Round Roast Beef in San Francisco, stacks up dozens of hot beef sandwiches and sides of curly fries to serve hungry diners.
He also breads chicken cutlets for another of his restaurants, Red Ribbon Fried Chicken. He flips beef patties on the grill for a third, TR Burgers and Wings. And he mixes frozen custard for a dessert shop he runs, Ice Cream Custard.
Of Lopez’s four operations, three are “virtual restaurants” with no physical storefronts, tables or chairs. They exist only inside a mobile app, Uber Eats, the on-demand meal delivery service owned by Uber.
“Delivery used to be maybe a quarter of my business,” Lopez, 26, said from behind Top Round’s counter, as his staff assembled roast beef and chicken sandwiches and placed them in white paper bags for Uber Eats drivers to deliver. “Now it’s about 75% of it.”
Food delivery apps like Uber Eats, DoorDash and Grubhub are starting to reshape the $863 billion U.S. restaurant industry. As more people order food to eat at home, and as delivery becomes faster and more convenient, the apps are changing the very essence of what it means to operate a restaurant.
No longer must restaurateurs rent space for a dining room. All they need is a kitchen — or even just part of one. Then they can hang a shingle inside a mealdelivery app and market their food to the app’s customers, without the hassle and expense of hiring waiters or paying for furniture and tablecloths. Diners who order from the apps may have no idea that the restaurant does not physically exist.
The shift has popularized two types of digital culinary establishments. One is virtual restaurants, which are attached to real
life restaurants like Lopez’s Top Round but make different cuisines specifically for the delivery apps. The other is “ghost kitchens,” which have no retail presence and essentially serve as a meal preparation hub for delivery orders.
“Online ordering is not a necessary evil. It’s the most exciting opportunity in the restaurant industry today,” said Alex Canter, who runs Canter’s Deli in Los Angeles and a startup that helps restaurants streamline delivery app orders onto one device. “If you don’t use delivery apps, you don’t exist.”
Many of the delivery-only operations are nascent, but their effect may be far-reaching, potentially accelerating people’s turn toward order-in food over restaurant visits and preparing home-cooked meals.
Uber and other companies are driving the change. Since 2017, the ride-hailing company has helped start 4,000 virtual restaurants with restaurateurs like Lopez, which are exclusive to its Uber Eats app.
Janelle Sallenave, who leads Uber Eats in North America, said the company analyzes neighborhood sales data to identify unmet demand for particular cuisines. Then it approaches restaurants that use the app and encourages them to create a virtual restaurant to meet that demand.
Other companies are also jumping in. Travis Kalanick, the former Uber chief executive, has formed CloudKitchens, a startup that incubates ghost kitchens.
Yet even as delivery apps create new kinds of restaurants, they are hurting some traditional establishments, which already contend with high operating expenses and brutal competition. Restaurants that use delivery apps like Uber Eats and Grubhub pay commissions of 15% to as much as 30% on every order. While digital establishments save on overhead, small independent eateries with narrow profit margins can ill afford those fees.
“There’s a concern that it could be a system where restaurant owners are trapped in an unstable, unsuitable business model,” Mark Gjonaj, chairman of the New York City Council’s small-business committee, said at a four-hour hearing on third-party food delivery in June.
Delivery apps may also undermine the connection between diner and chef.
“A chef can occasionally walk out of the dining room and observe a diner enjoying his or her food,” said Shawn Quaid, a chef who oversaw a ghost kitchen in Chicago. Delivery- only facilities “take away the emotional connection and the creative redemption.”
Uber and other delivery apps maintain that they are helping restaurants, not hurting them.
“We exist for demand generation,” Sallenave said. “Why would a restaurant be working with us if we weren’t helping them increase their orders?”
Delivery-only establishments in the United States date to at least 2013, when a startup, the Green Summit Group, began work on a ghost kitchen in New York. With Grubhub’s backing, Green Summit produced food that was mar