One Item Restaurants

Virtual Food Halls are Redefining the Menu

Movement into cloud kitchens has provided step one towards the future of  restaurants: that is detaching menus from the storefront. The 'restaurant' has become a logo on the delivery app rather than a brick-and-mortar location. Next comes the food, which will become detached from the menu in a similar manner. For starters, when a restaurant deploys to Kitopi they often tailor their menu for core delivery items, meaning that forty items turn into fifteen. Products that aren’t differentiated, are distracting, or act as fillers can be jettisoned. A restaurant with ten burgers may choose five.

Taking this to a greater extent provides clarity on a broader shift in the digital restaurant space, particularly in the case of virtual food halls. At these halls, customers can order from any of sixty or so brands in a single order. The sixty number isn’t pulled out of a hat, that’s how many brands operate out of a single 2,000 square foot Kitopi - the Dubai based cloud kitchen company - hub. You can get your burgers from one place and your fries from another. This breaks down the friction that previously protected menus. When you walk into a restaurant, you accept that much of the menu is filler to cater to broad tastes or support optionality. Many of the starters are put there because people might prefer that option based on their preference for that category rather than its alpha over the alternative. Basically, you might order guacamole because you just prefer guac even if the Ceviche is 'better'. Consumers aren’t choosing the restaurant’s specialties per se. Even at a great restaurant only some fraction of the menu is going to be outstanding.

In the case of a virtual food hall, however, consumers don’t have to settle for subpar starters. Instead, those starters can be ordered from a different restaurant in the food hall. If you’re in the mood for sushi you’re able to get the rolls from one spot and the Brussels sprouts from another. Such a reality acts as a forcing function for restaurants to focus only on their core offerings. There are drawbacks to this optionality, however. Selecting items from different restaurants requires higher friction as well as uncertainty.

Are consumers going to have enough effort to track a Brussels sprout brand? Will a starter from one spot match the flavor profile of a different restaurant’s entrée? To answer that question, envision a complete disaggregation - so the items from all sixty brands are listed in one menu. Starters are lumped. Mains and desserts too. Bondi Sushi’s 'Shrimp Avocado Rolls' are sitting alongside a 'Kick My Boss - Spicy Burger' from Rock House Sliders. One note in support of this model is that it’s basically Cheesecake Factory - home of what seems like America’s and, who are we kidding, the World’s longest menu running 250 items. The menu has a small number of branded items of the type you’d see in this virtual food hall such as the Oreo Dream Extreme Cheesecake. So too, it spans cuisines from French to Korean to Mexican and carries breakfast, lunch, and dinner options. A customer flipping its pages could really imagine it having at one time been ten different restaurants lumped together.

So this model could work. Let's assume, though, that this optionality overwhelms the consumer leading to suboptimal ordering at the least. One possible solution is bundled menus. Delivery apps or Kitopi itself could look at each spot and coordinate their offerings into a number of menus. Some of Kitopi’s kitchens produce for one hundred distinct restaurants. If we spot each of these restaurants at twenty items - that’s two thousand unique items and potential for 1026 unique options for groupings of ten foods. This would provide the possibility to pick and choose the best from each brand to coordinate integrated menus. These menus could be A/B tested across the audience to find the optimal combinations. Taking this further, the quality of 'best' can be analyzed from two angles for middle and low priced restaurants. One is what’s most popular, the other is what any individual’s subjective opinion is.

For the latter, Kitopi would be able to deploy recommendation algorithm style strategies to create menus based entirely on consumer preferences. The platform would be able to learn what types of starters you prefer in combination with which mains and the like. Do you order dessert? What do you order when you do? Is the way you order Japanese food different from when you order Mexican food? By coordinating offerings catered to these tastes, Kitopi would merely be doing what every other content-based platform does - Netflix, YouTube, Amazon. Bringing recommendations down the chain to menu construction. This is feasible for group orders as well. Kitopi could create a menu based on its restaurant base that merges the preferences of five, or however many, people.

There’s potential for the creator economy angle here as well. The 'Travis Scott Meal' at McDonald's gave fans of the music artist the ability to order just as he does. Demand is clearly there - the meal led to the strongest revenue month in a decade for the Golden Arches and caused a shortage in chopped lettuce. The meal didn’t consist of any unique items, but rather just Scott’s effective order: Quarter Pounder with Cheese, Fries, Sprite. Simple as that. If Kitopi can create their own menus, creators could just as easily do the same. Any content creator could create their 'branded' menu or combo selecting from the 2000 possible items. They would get some rev-share from orders based on their menus and Kitopi wins because it will receive order spikes in the same vein as McDonald's did.

From the restaurant side, food itemization is effectively akin to licensing out their content library individually rather than as a whole. Kitopi may only want to serve samosas and butter chicken from an Indian restaurant because those are deemed the 'best', highest traction items. Some other spot does Dosas better. Maybe it won’t be this narrow and restaurants will do ten dishes with enough uniqueness and taste value to get picked up. This is almost certainly true, because restaurants doing one thing well is a strong indicator of the quality of everything else, but how strong an indicator is the question? Will that samosa restaurant start focusing on only samosas and make that their key offering? After all, they could license out these samosas to hundreds of kitchens to serve a broad customer base. Because of the distributed kitchen network, restaurants get high leverage on selling one item well. Without delivery, there aren’t enough local customers to support a samosa only shop. But there are millions of app customers who are in the samosa market. If that restaurant gets a ten percent kickback on each item sold, they have the potential to stand up a streamlined, scaled business on the back of their 'best' offering.

Or not. Once a restaurant comes up with a promising item, develops the recipe, and deploys it to the Kitopi base, there are a few options. One is to just sit back and collect the licensing fees, ride that Samosa money until a better one comes onto the market. Inevitably, however, one will come onto the market. This requires restaurants to operate like software companies, the Samosa needs to be versioned, iterated upon, and customized to stay ahead of the curve. This is part of the reason why restaurants may become incredibly narrow. Massive distribution means focusing on one item is enough of a business. Those who do will make that item at a level far greater than competitors. That’s all to say there may very well be an exclusively brussel sprout brand in Kitopi’s kitchens soon.