29 November 2017 Startup 2018: The companies and issues to watch

The ‘dark’ future of delivery: the rise of off-site kitchens

Startup 2018: The business of takeaways has been remodelled over the last few years. Now, it’s set for an even bigger change as kitchens gets outsourced.

It’s no secret that the UK’s restaurant sector is in an almighty pickle. Ingredient prices are going up, chefs are in short supply, the workforce could be decimated by Brexit negotiations, and it’s only getting more costly to open and run restaurants. Enter so-called ‘dark kitchens’; pipped as a potential solution to at least some of these woes.

Out of the darkness

In the UK, Deliveroo’s betting big on this model. In September, the company raised £284m to boost growth of ‘Editions’ – essentially, kitchens detached from restaurants – in carparks and industrial lots across a ballooning portfolio of cities, from Brighton to Melbourne. Some of the kitchens are offshoots from restaurant chains, others are run by street food operators, while a few are first-time ventures. The restaurant industry is watching closely.

‘Dark kitchens mean you can open sites and offer your food to customers for considerably less risk and investment than opening a full bricks-and-mortar restaurant,’ says investor Chris Miller. ‘With a dark kitchen, if something works, then great; you roll it out with lower capital costs. If it doesn’t, you can simply delete it at minimal costs and trial something new.’

Consider the alternative for a small operator: plump for a restaurant site based on size, rent costs and anecdotal evidence about demand in the area; wrangle with landlords for months or even years; invest tonnes of money; and expect, in many cases, to lose out.

Being risk averse

For Brittney Bean, who is opening two off-site kitchens in London with Deliveroo in Whitechapel and Crouch End, they ‘add a level of stability while everything else is in flux’. She expects the two kitchens to be a ‘solid revenue driver’ while her fried chicken business, Mother Clucker, is in the process of adding a permanent venue to its four street food sites.

‘It’s a very risk averse way to test out a market,’ she adds. ‘It allows us to go to places we wouldn’t normally go to, test out menu items and see what people think about them, while building brand awareness.’

While Deliveroo’s yet to face any sizable competition on this front in the UK (although unsurprisingly, it has now run into teething problems with several local authorities over noise and congestion caused by the sites), US competitor Door Dash has recently announced plans to open similar kitchens across North America. For both, the additional choice these kitchens bring could give them an edge over the likes of Uber Eats and Grub Hub.

Although there’s scope for new startups to set up kitchen networks of their own (such as Green Summit in the US), the delivery companies’ secret sauce is data. Deliveroo identifies gaps in neighbourhoods’ takeaway offerings and then finds suitable food operators to fill them from its off-site kitchens.

It builds 35ft units for each operator, and helps chefs work on bespoke menus and food production – advising on the best packaging to ferry around chips in, for example, or on the preferences of the locals.