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Chef Big Rube works 20 hours a day to meet growing demand from sequestered Philadelphians hungry for everything from his Red Velvet Waffle Fried Chicken Sammich to his Mac & Cheese Burger to his Cheesesteak Egg Rolls.

The chef, Reuben Harley, and his business partner, Aaron Anderson, decided to launch their restaurant business in December 2020 – right in the middle of a global pandemic that has shuttered thousands of eateries and left millions out of work. While many restaurants are struggling, Chef Big Rube’s Kitchen has become an overnight success. Ordering is easy and starts with clicking the “menu” option on his website or visiting a partner delivery service like Postmates.

Big Rube doesn’t have a traditional brick-and-mortar establishment—at least not yet. Instead, Rube cooks up his brand of gourmet grub in two ghost kitchens, each of which is about 350 square feet. Rather than investing tens of thousands of dollars into a commercial kitchen with restaurant seating, Chef Big Rube’s Kitchen got started by leasing space in two different Philly locations.

What is a ghost kitchen?

Ghost kitchens are dedicated commercial kitchens in buildings that offer shared space for multiple tenants. Restaurants—from well-known brands and chains to celebrity chefs and startups—can quickly open for business by renting low-overhead space that doesn’t require seating, wait staff, or traditional “front of house” employees. Overhead costs are reduced because multiple kitchens share the same commercial refrigerators, storage, and technology infrastructure.

To get a taste of Big Rube’s cooking, you’ve got to order for delivery or pick up from one of two non-descript buildings serving large populations in the Fishtown and West Philly sections of the city. This model is indicative of the future of food delivery, relying on third-parties to fulfill orders.

Chef Big Rube’s Kitchen currently has four concepts – or brands – all from the same two kitchens. Because consumers often search by food group, chefs sometimes develop separate brand categories. For Big Rube, the focus is on fried chicken, cheesesteaks, burgers, and breakfast sandwiches.

Chef Rube has been cooking for 30 years. He dabbled with a food truck in the 1990s. But his professional culinary roots started to grow into a business in 2012. That’s when he began offering pop-up menus at local bars and appearing as a guest chef at restaurants throughout the city.

The response to his homestyle cooking – and his personality – were both positive. He also gained a following on social media. Today, Rube has about 20,000 followers across multiple social channels. In addition to attracting new customers who have a taste for takeout, he spreads the gospel of good eating on a sports talk radio show, a nod to his younger days developing and selling throwback sports jerseys.

These days, Big Rube’s game is in the kitchen. Rube says Anderson, his business partner, came to him with the idea to launch a ghost kitchen brand. With demand for delivery growing, the two entrepreneurs reasoned that a takeout and delivery model was the place to test their concept.

Anderson, by the way, is a successful Philadelphia businessman with extensive restaurant industry experience. He is the president of Axxeum Ltd., and owns four locations of The Original Hot Dog Factory franchise.

From their two small kitchens, Rube and a team of eight employees prepare more than 200 orders a day. The food does the marketing once people try it. Rube says that ghost kitchens provided an economical way to go from idea to proof of concept.

Now, with demand growing, Chef Rube’s plans to add a brick-and-mortar location in the Fishtown section of central Philadelphia. Despite the ongoing pandemic, Rube believes he can rely on his takeout and delivery business until the dining scene returns to normal.

"All you’ve got to do is cook, we handle the logistics and fulfillment to make sure your orders are delivered with more accuracy, in less time." – CloudKitchen Website
Enabling kitchens-as-a-service

The Ghost Kitchen segment has been growing rapidly thanks to increased demand from stay-at-home foodies everywhere. This concept has spawned a new kitchens-as-a-service segment that marries the commissary kitchen with on-demand delivery service providers. Developers build-out commercial kitchen space in underutilized or distressed properties near major population centers.

Low-cost kitchen space is only part of the formula, however. In order to meet demand, ghost kitchens facilitate online ordering and seamless connectivity by partnering with on-demand delivery services, such as DoorDash, GrubHub, Postmates, and Uber Eats.

A report from Euromonitor International predicts that the ghost kitchen sector could reach $1 trillion a year by 2030. That includes serving half of the drive-through and takeout business, and 25 percent of all eat-in food service.

The two ghost kitchens that Chef Rube works with are owned by CloudKitchens, which was founded by former Uber CEO Travis Kalanick. While the company is a bit elusive, its value proposition is clear. First and foremost, restaurants can be up and running with a turnkey kitchen in about 30 days. “All you’ve got to do is cook, we handle the logistics and fulfillment to make sure your orders are delivered with more accuracy, in less time,” according to a pitch on the company’s website.

By using its infrastructure, CloudKitchens says that a partner kitchen can manage all of its orders from a single tablet. Analytics about everything from what’s selling to where orders are being delivered can help businesses fine-tune their business strategies. In some cases, that means multiple concepts can be cooked and tested from a single kitchen.

According to CloudKitchens, the typical delivery-only kitchen is between 200- and 300-square feet, compared to a 2,000-square foot commercial kitchen. Instead of 30 or more kitchen staff, as few as three people can manage a ghost kitchen. The company claims that some virtual restaurants can reach a breakeven point in about six months, based on a 10-percent profit on a million dollars in revenue. By contrast, it can take five years for a brick-and-mortar establishment to recoup its initial investment.

Optimizing for delivery made good economic sense even before the pandemic. CloudKitchens estimates the restaurant delivery business will skyrocket from $30 billion a year in 2016 to $490 billion a year by 2025.

Growth in the ghost kitchens sector is a bright spot in an otherwise challenging year for the restaurant industry. According to the National Restaurant Association (NRA), restaurant and foodservice losses totaled $240 billion in 2020, and the industry shed about 2.5 million jobs during the past year.

Consumers have responded to the addition of new takeout and delivery options. “The pandemic served to accelerate many trends we were already seeing, while it taught more consumers how to digitally access the restaurant meals they wanted, so expect many of these innovations to be long-term trends and not fads,” says Hudson Riehle, senior vice president of research and knowledge for the association.

Turning hotel kitchens into profit centers

While the ghost kitchen concept has provided a lifeline for some of the restaurant industry, the model is also gaining traction in the hospitality sector, which has been decimated by the impact of COVID-19 on travel.

The hospitality industry lost about 4 million jobs in 2020 and annual occupancy in the United States fell to about 44 percent for the full year, for a total decline of 458 million occupied rooms compared to 2019.

Against this dismal backdrop, Butler Hospitality raised $15 million to expand its ghost kitchen model for hotels. The company takes over loss-leading commercial kitchens inside of hotels and transforms them into delivery hubs that provide virtual room service to nearby full, limited- and select-service hotels.

Butler has developed a proprietary ordering and delivery tracking system to support its kitchens. Since launching out of the Entrepreneurs Roundtable Accelerator program in 2017, the company has grown the number of hotel rooms it services by more than 100 percent every year.

While hotel food and beverage sales topped $36 billion a year before the pandemic, many hotels still lost money from on-site kitchens and room service. The collapse of the travel industry has further exacerbated that problem, opening doors for Butler.

The company’s goal is to turn hotel cost centers into revenue generators. By offering fully uniformed "butlers," and fast, free delivery, Butler Hospitality has differentiated itself from competitors.

“The pandemic has really allowed our partners to refresh and restart,” says Premtim “Tim” Gjonbalic, the founder and CEO of Butler. “Where we fit in, in that space is not only the strategic go-to-market strategy in terms of taking over underutilized kitchens inside hotels, and leveraging that one kitchen to serve an additional 10 hotels in the surrounding cluster of density, but also building technology that rethinks guest education to make them aware of our products and services.”

Butler has weathered the pandemic by using its infrastructure to deliver beyond hotel rooms, and by helping hotels land more government business. In New York, for example, the company has delivered more than 175,000 meals to quarantined senior citizens and COVID-19 patients, and has provided service to first responders and military personnel staying in partner hotels.

Tim says the company’s COVID-19 response has been successful because Butler unbundles food and beverage operations from day-to-day hospitality management. “We empower our hotel partners to focus on ‘heads in beds,’ while knowing Butler will exceed their in-room dining and catering expectations, even during the COVID-19 lockdown,” he says.

Butler may sound like just a food service provider, but it goes way beyond food and beverage services. In addition to online ordering and fulfillment, Butler integrates with hotel billing systems to help provide low-cost incentives for upselling rooms. Moreover, better analytics enable hotels to gain more insight from data about guests and operations.

Butler leases kitchen space based on a price-per-square-foot basis and pays a percentage of overhead costs. It does not charge set-up or management fees. It also offers a 10 percent revenue-sharing commission on all guest orders.

In New York City, where the company got its start, a network of ghost kitchens in hub hotels are used to prepare meals that are delivered to hotel guests within 30 minutes, 365 days a year from 6:30 a.m. to 11 p.m. Butler typically operates a restaurant at a full-service hotel, and then uses that property’s kitchen to provide room service to other hotels nearby.

Butler has a strong foothold in the marketplace and hotels are clearly interested in reducing overhead while adding service amenities that foster brand loyalty and repeat business. Because it has a captive market once a kitchen opens, the company’s customer acquisition costs are limited to bringing new hotels online. That keeps the company’s focus on delivering value to guests and hotel partners.

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