Are virtual restaurants the future of dining?

Are virtual restaurants the future of dining?

By Rajeswari Jayaraman

Millennials and Gen Z-ers are tech-savvy generations shifting the paradigm of businesses towards a virtual world. The latest visual trend following virtual gaming and virtual shopping is the “virtual” restaurant. Virtual restaurants are delivery-only restaurants that serve restaurant-quality customizable food whenever and wherever you want. The concept is an extension of other trends like meal-packs and Domino’s pizza delivery. However, there’s one catch, these restaurants don’t have a physical address, they are simply an app on your smartphone.

The Virtual, Delivery-Only Model:

The demand for delivery of meals has never been greater with more consumers turning to delivery over take-out or dining out. This is seen as a global trend in the food service sector with a projected market value of US$39.2 billion by 2020. Some popular services include American start-ups like Ando, Munchery, Sprig, the French-based FoodChéri and the UK-based EatFirst. Delivery services like GrubHub/Seamless and UberEats play a central role in connecting the restaurants with consumers.  GrubHub alone partners with more than 50,000 restaurants in U.S. and London and serves a daily average of 292,500 grubs.

The Benefits of Virtual Restaurants:

The most attractive feature of starting a virtual restaurant is the cheaper start-up cost involved. Opening a conventional restaurant with a full décor, service staff, artistic wallpaper, and furniture is a significant investment.  A delivery-only restaurant with a kitchen space in a not-so-busy area could cut-down the upfront costs manifold especially in big cities where commercial real estate prices are soaring.

By outlining the health quotient of their foods, virtual restaurants sell the value proposition of a healthy, home-cooked meal to consumers. Many of these start-ups market their meals as prepared from organic, locally grown quality produce. Furthermore, with the data collected from online ordering, the restaurants can play with dynamic pricing based on traffic times and do a cost analysis on a particular dish to see if it’s worth keeping on a menu. This new leverage offered by the digital data can be used to drive businesses by bringing in data-driven dishes.

Challenges of Virtual Restaurants:

Most of the delivery-only restaurants exist on GrubHub/Seamless since these are still the heaviest trafficked websites for food delivery. To be listed on these platforms, restaurants have to pay a commission as much as 30 percent of all their sales, which can be a big burden. There are still other challenges like quality packaging, handling, and efficient delivery. Furthermore, dealing with customer complaints is harder when customers are eating at home.

In an interview with Eater, one delivery-only managing partner, Tim Powell explained that when he would be able to bring guests wine or fix a problem on-site for extra wait time or if an ingredient was sold-out, in virtual restaurants, “That’s the hardest part, the inability to quickly fix something.”

To deal with these problems to a certain extent, there are apps like Tookan App or delivery services like Favor, which lets customers track their order in real time and keep the customer updated via SMS and push-messages on their tablets and smartphones.

Top Or Flop? Still To Come:

The success of virtual restaurants is exciting to see how it will affect restaurant storefronts and also what new apps will be created for this new food trend. Start-ups are just now rolling the dice for the optimum set of variables among the online service, trackability, pricing and also the taste. 2017 is anticipated to bring an attractive growth opportunity in a sector that has been ignored by technology for quite a while.

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