Virtual brands and ghost kitchens could be more than a temporary measure for full-service restaurants.
It’s hard to ignore the momentum of off-premises channels these days, and even full-service brands are seeing the advantages of systems that were hitherto exclusive to the quick-service realm. Thanks to the limitations brought about by COVID-19, formats like ghost kitchens and virtual brands have become increasingly common ways for restaurants to connect with guests and produce new revenue streams.
The full-service operators who were already dabbling in off-premises options prior to the pandemic were best positioned to take the model and run. Many have already watched these new programs bear fruit.
Two years ago, Brinker International tasked an innovation team with finding new ways to drum up business beyond its flagship brands, Chili’s and Maggiano’s Little Italy. The company couldn’t have known that the byproduct of this initiative would play such a pivotal role in positioning it for success during a global pandemic. In June, Brinker debuted its first-ever virtual brand, It’s Just Wings, which serves wings, sauces, fries, and desserts. The fledgling concept shares space with its sister brands in that all dishes are prepared in Chili’s and Maggiano’s kitchens—totalling more than 1,500 across the country.
During an earnings call in mid-August, Brinker CEO Wyman Roberts reported that It’s Just Wings generated about $3 million in sales per week during its first month in action. That revenue has been a huge part of the reason why Brinker is now reporting that 32 percent of stores are posting positive year-over-year sales despite the pandemic.
The brand rolled out It’s Just Wings in conjunction with exclusive delivery partner DoorDash virtually overnight, with minimal investment or marketing. One of the biggest questions Brinker faced was how much the virtual brand would distract from its preexisting concepts. Roberts indicated that so far, it hasn’t been an issue, but it’s something the company will continue to monitor as business progresses.
“It’s a fair question—there were some SKU interruptions, and you just can’t ignore that,” Roberts said when asked about the potential for cannibalization. “This is where the power of your operating system is important. Our ability to take this new product and this new business and integrate it into the existing business seamlessly has been impressive from an operations standpoint.”
To ensure It’s Just Wings had a smooth introduction to the company roster, Brinker leveraged an already established, crowd-pleaser product: wings. It also helped that takeout wings tend to peak in later hours than Chili’s and Maggiano’s typical fare. Nevertheless, the company changed up the offerings enough to prevent in-house competition. Among the changes were a different frying style, new sauces, and even a dessert (Oreo County Fair Cookie) exclusive to It’s Just Wings.
For as successful as Brinker’s approach has proved, many restaurants lack the resources to follow suit. Instead, those operators have come up with smaller—yet no less creative—solutions to bolster their off-premises channels. Ghost kitchens are becoming especially popular, and experts expect them to proliferate in the future.
“Ghost kitchens could lead to a serious paradigm shift in commercial real estate,” says Matt Godinsky, research analyst for the service payments vertical at Euromonitor. “For years, it’s been really important to have that perfect, prime location. With ghost kitchens, it really doesn’t matter where you’re located, or if the building is older, so long as you have facilities to create the food.”
One brand that rolled out ghost kitchens in a number of locations was Smokey Bones, a 60-plus-unit full-service chain based in Florida. When CEO James O’Reilly was hired in November 2019, one of his goals was to improve restaurant operations and the customer experience by investing in technology and restaurant development. Within that strategy, off-premises became a growth priority.
“We had already redesigned our dine-in assets and are continuing to do that because we expect that the Smokey Bones restaurant of the future will be more off-premises–centric than the ones we’re currently operating today with respect to takeout areas and use of technology, curbside pickup, and things like that,” O’Reilly says.
Much like Brinker, its ghost kitchens sell items that aren’t available at brick-and-mortar locations but are still in line with the brand’s cuisine. For Smokey Bones, that includes a wedge salad and Idaho Burnt Ends (potato ends topped with cheddar-jack cheese, bacon, chipotle mayo, sweet barbecue glaze, and green onions).
“I’m very encouraged by the performance [of our ghost kitchen], and I’m excited about the potential of this strategy for this brand,” O’Reilly says. “We have been focused on off-premises technology, virtual restaurants, and ghost kitchens strategically before the pandemic. Through this experience, we have accelerated our thinking, our planning, and intentionality.”
It would be natural to wonder if ghost kitchens and virtual brands are a flash in the pan, spurred by capacity restrictions and a public health crisis that encourages consumers to stay home when possible. But long before the pandemic, momentum was building in these channels, as demonstrated by brands like Brinker and Smokey Bones. It’s far from a mere stop-gap measure, Godinsky says.
“If you were to open a full-service restaurant right now, I would tell you to invest in infrastructure that will allow you to do off-premises sales,” Godinsky says. “Now, I would also add the caveat that if you’re going to do it, you have to be committed to it. There has to be intention behind it, so think through it and make it part of your business.”