Business

How ‘virtual restaurants’ could be the future of South Florida’s food scene

The No. 6 wrap at Super Smoothie on Northwest 41st Street in Doral comes with turkey, egg and cheese.

The Super Breakfast Wrap available at All Day Power Breakfast comes with those same ingredients. In fact, they’re made by the same people, in the same place.

But you won’t find All Day on a map. Instead, it exists only inside the UberEats phone app.

All Day Power Breakfast is one of more than 150 “virtual” restaurants UberEats has been quietly setting up in existing restaurants’ kitchens across South Florida since 2016.

If you’ve ordered from UberEats since that time, chances are you’ve ordered from a restaurant you cannot visit in real life.

The virtual restaurants, and their close cousins called “ghost” or “cloud” restaurants, represent the future of food delivery. Besides satisfying local cravings, food delivery has become an essential component for businesses large and small hoping to survive in the competitive South Florida food landscape. It’s also become a key source of additional income for workers on the margin of the labor force.

And while there are now at least three different food delivery companies in the South Florida market—including DoorDash, Postmates and GrubHub, UberEats is the undisputed leader, a position the company is likely to solidify in the coming years.

A kitchen inside a kitchen

Virtual restaurants may sound futuristic, but the concept is simple: UberEats looks at what food a restaurant owner already has available. It then creates a new restaurant name through which it can help move more food out the door. UberEats takes a 30 percent cut of each order.

“If you search for ‘wings,’ you might get a pizza place, which might be an exact match,” Juan Pablo Restrepo, UberEats general manager for Miami, said. “So we can just create a wings place to satisfy that demand.”

In the case of Super Smoothie, UberEats determined that owner Frank Gomez could increase his business if he began selling the food he already had under a different name — one that was more breakfast oriented.

Gomez said he had been using UberEats for years, but that it wasn’t until UberEats helped him create his virtual restaurant that deliveries really picked up, and he now estimates business has increased 20% overall. He has kept the same staff, and prepares the food in the same area, as Super Smoothie.

But Gomez now prioritizes orders from All Day to keep business brisk; the restaurant has been reviewed 120 times on the app for a 4.5 out of 5 rating, compared with just 57 times for Super Smoothie, which has a 4.6 rating. He’s even re-ordered the placement of his tablets so he can see UberEats orders first.

“The name is catchy — All Day Power Breakfast,” Gomez says. “You can order breakfast at 2 p.m. or 10 p.m. And it’s healthy.”

Angel Benitez, who oversees the BurBowl chain of restaurants in Miami, is another virtual kitchen user. The name of his is a bit more straightforward — BurBowl To Go. Initially, the company didn’t even have delivery. But when UberEats came knocking, he couldn’t say no.

“They come to us with the data, and say these are your hottest plates,” Benitez said.

Instead of having to hire his own delivery team, Benitez can rely on gig drivers to pick up his food. He estimates that 35% of his revenue at BurBowl’s downtown location and 20% at his Doral location, comes from deliveries.

“The adoption and engagement we have seen from eaters and restaurant partners on the UberEats platform in South Florida have allowed us to pilot innovate concepts in the market, including Virtual Restaurants,” Restrepo said.

Main player — for most

The value of UberEats alone has been estimated to be worth north of $20 billion. Uber, which went public on the New York Stock Exchange in May, has an overall market cap of more than $75 billion.

Neither DoorDash, Postmates nor GrubHub — other delivery services that operate in South Florida — were able to provide the Herald with an immediate estimate of the scale of their operations in the region.

But the combination of virtual kitchens, a first-mover advantage in the market place, and name-brand recognition has made UberEats, for the most part, the dominant player here.

“In terms of consumer experience, people vote with their wallets,” said Sunil Bhatt, CEO of The Genuine Kitchen, a restaurant group that owns the Harry’s Pizzeria chain, among other brands. “And Uber is the vast majority of our [delivery] business.”

So large, Bhatt said, orders from the other three services combined do not total the volume from Uber.

UberEats is now the official partner for chains large and small that do business in South Florida. UberEats officials said the most popular restaurants among eaters are La Carreta — which began deliveries in January; Moshi Moshi, a sushi chain with three Miami area locations; and Piola, a pizza company. Other chains that use the service include McDonald’s, Five Guys, and P.F. Chang’s — the latter two being the most popular among chains in the area.

Of note: UberEats’ McDonalds and Starbucks partnerships, which are now global, were first piloted in South Florida.

Necessary expense

Before UberEats came knocking, Harry’s Pizzeria did not provide delivery.

“We just weren’t sure it was a product that was conducive to being eaten when it’s not fresh out of the oven,” Bhatt said.

And he admits that, to this day, the math is not 100 percent clear on how many incremental customers UberEats brings in; he said the company plans on halting deliveries at some point this year for awhile — as an experiment — to see how much it affects the pizza chain’s income.

In any event, Bhatt views delivery UberEats as a worthwhile marketing expense.

“If someone has already decided they’re staying in to watch Netflix, if they start scrolling through the options and see us, and haven’t heard of us before, that’s a new customer,” he said.

Not every restaurant chain has opted for UberEats. Barry Hennessy, who handles marketing for El Mago de las Fritas on Southwest Eighth Street, said the company gave up on UberEats after multiple experiences with poor service quality. Hennessey said he now uses PostMates exclusively.

Either way, he said, is a worthwhile cost to help keep existing customers happy, he said.

“We’re breaking even, maybe even gaining a little,” he said. “But relationship-wise, it’s a huge gain.”

Side hustle

If Miami is known for its side hustles, delivering for places like UberEats is one of the fastest growing options.

Unlike the regular rideshare driving for Uber and Lyft, food delivery allows someone who doesn’t speak English an opportunity to earn extra cash. It also allows a driver to not have to worry about what a rider might think of his or her car—so, upkeep demands are reduced. Hours are more regular, and the inanimate “passengers” involved in delivering food usually smell a lot better. Still, the pay is lower.

Adrian Silva, a 20-year-old from Venezuela, ticks many of those boxes. He delivers for UberEats in Doral to earn extra money on top of his other gig as a pressure washer at a car wash. He does not speak English, and he usually uses a scooter for his deliveries.

For the past year, he has made up to 15 trips a day, earning as much as $400 a week if he works seven days.

“There’s a lot of movement here in Doral,” Silva said. “And as a part-time it helps me cover my expenses. It definitely helps.”

Uber declined to state how many food couriers it has in South Florida. It has previously said it has 100,000 drivers statewide; with approximately three-tenths of the state’s population, South Florida may have as many as 30,000 drivers, making Uber drivers as common as kitchen cooks in the region, according to Bureau of Labor Statistics data.

The future

While there is talk of drivers someday giving way to autonomous vehicles, Harry Campbell, founder of industry website TheRideshareGuy.com, said that there is still too much technology that must be developed before drivers will completely go away.

Instead, Campbell said, the next evolution in delivery poses a challenge to restaurants and delivery companies alike.

Some call them “ghost” kitchens, others call them “cloud” kitchens. The idea is the same: commissary-style kitchens, ideally located in close proximity to food demand hotspots, that crank out orders exclusively for delivery. Like virtual kitchens, they wouldn’t appear on any map — but even from the street you wouldn’t know what was going on inside.

Here, a Miami-based company is leading the way. REEF Technology, formerly known as ParkJockey, was recently valued at more than $1 billion after an investment from a Japanese tech conglomerate made it the largest parking space lessor in North America.

A simple example of a cloud kitchen is a brand called American Eclectic Burger. A Google search reveals that it is located in Miami but that it lacks a website of its own. Instead, American Eclectic Burger’s food it is only available for delivery in the Miami-Dade area, through the apps of UberEats, DoorDash, Postmates and GrubHub.

REEF CEO and co-founder Ari Ojalvo told the Herald his company represents the next evolution in both parking and eating.

“Parking is all about reducing congestion,” Ojalvo said. “We’re not disrupting parking, we’re evolving it to its full potential, so the industry can do more than just storing cars.”

Two salient facts: Uber confirmed that it had recently lost several employees to REEF.

And one of REEF’s main competitors: CloudKitchens. Its founder: Uber’s founder and former CEO, Travis Kalanick.

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