Knowledge

Could A Virtual Multi-Restaurant Strategy Increase Your Restaurant Profits?

The restaurant industry is very competitive. It’s hard not to find one even if you’re just traveling a short distance. According to an old article by a web scraping website named TheWebMiner Blog, there is approximately 15,000,000 restaurants as of 2014.

It’s now 2023, so this data if correct is actually 9 years old. So, it’s very dated. But we must also note that the global restaurant industry is growing at a CAGR of over 10%, we can reasonably assume that the number of restaurants today are way over 15,000,000.

However, even though the restaurant industry is growing fast, many restaurants operate on razor thin margins. This is due to the sheer fact that there are just so many restaurants now and competition is fierce.

Another thing to note is that the pandemic really did in a lot of restaurants. Even before the pandemic happened, many restaurants are already struggling. The forced closure of public places including restaurants during the pandemic was the final nail in the coffin for most struggling restaurants.

However, many restaurants also survived during the pandemic when they embraced the concept of food deliveries which turned out to be a very profitable product/service during the pandemic.

According to Grandview Research, It is estimated that the food delivery industry market size exploded to US$ 189.70 billion in 2021 and is expected to reach US$ 215.69 billion in 2022. It has a CAGR of 10.8% and is expected to reach US$ 388.74 billion in 2028.

Quite a phenomenal industry growth and size right? This is why big companies are entering this industry. Some of them are: Uber Eats, DoorDash, Just Eat Takeaway, Meituan, Eleme, Deliveroo, Delivery Hero, Swiggy, Zomato and so on.

However, as already said, the food industry which includes the food delivery industry is extremely competitive. It is even reported that many of these food delivery companies are not profitable at all.

One good thing about the food delivery industry though is that it brought a lot of employment for many people. According to the US government’s National Library of Medicine website, there are over 15,000,000 people employed in the food delivery industry,

1. The Pandemic: Food delivery has been going on for decades but exploded during the pandemic when customers have no other option but to have restaurant food delivered in their home if they want to eat restaurant cooked food.

2. Customers are spoilt on choices: Unlike ordering food on a single restaurant only, food delivery apps spoils the customer on food ordering options. These apps allow customers to order food on restaurants they never even had eaten to before.

3. The convenience of eating at home: The pandemic has shown many people that eating restaurant ordered food at home could be better than eating in a physical brick and mortar restaurant.

The advantages of eating at home are varied: from not having to dress up and travel (also consider the traffic), to having the privacy from not being disturbed by the other customers of a restaurant. You also have the option to watch your favorite movies or listen to your favorite music while you eat restaurant ordered food at home.

4. People are cooking lesser and lesser: This must be due to the fact that either people are getting more busy or are getting lazier. But one thing is true, more and more people are eating restaurant ordered food while minimizing home cooking.

Virtual restaurants can be businesses offering cooked food without any dining facilities of their own or restaurants who besides offering dining services, also offers food delivery. One thing is for sure, they advertise online.

1. One advantage of a virtual restaurant is that as a business it has less overhead. There would be minimal need for dining staff like waiters and entertainers. There would also be minimal need for dishwashers and cleaners because they don’t have to service dining customers.

2. Another big advantage of virtual restaurants is that a business gets to reach more customers. With a brick and mortar restaurant, the restaurant can only handle the diners inside their restaurant.

With a virtual restaurant, each customer’s home becomes the restaurant’s dining area. A virtual restaurant might only have one kitchen but is able to serve a large territory as long as their delivery service can reach these customers.

3. Lastly, a virtual restaurant can create virtually any restaurant identity. For example, a restaurant predominantly staffed with western looking people can open an Asian, Indian, or African food themed restaurant and their customers would be hard pressed to know this.

This must be probably why there are food businesses that have capitalized on the virtual restaurant concept. This is basically a food business with several online food theme identity. These food businesses can get around race food profiling.

For example, you might see a Chinese brick and mortar restaurant serving Chinese food, but what you might not know is that they also serve European, Japanese and all other kinds of different food which they also sell online but under a different restaurant name and theme.

This is because if a restaurant is perceived as a specialist restaurant, like being perceived as a purely Italian, Indian, Korean, Chinese or Japanese restaurant, they can charge higher rates as against general food restaurants like those at food courts.

This also enables the virtual restaurants to profit off the changing palates of customers which often happens from time to time. For example, a family might want to eat western food today and asian food tomorrow.

Lastly, this allows a small food business to expand without spending a lot of money like opening another brick and mortar restaurant with a different food theme. They can also expand their market reach without having to open another branch.

They can target entirely new segments of customers without spending much. For example, asians prefer meals with rice while Latin Americans prefer meals with corn. A virtual multi restaurant can target both with ease and at little cost.

1. There have been non-traditional restaurant businesses that are also capitalizing on the growing trend of virtual restaurants. For example, a cooked meal food factory that traditionally only services for example the frozen food, airline passenger or military customers can now also offer cooked meal food delivery to households.

2. Food Truck Businesses have also capitalized on the virtual restaurant business. There are now food truck businesses who don’t travel anymore to customer locations. Rather, they stay on one location only and deliver food to most of their customers.

3. There are also home-based cooked meal food businesses that are based entirely right off someone’s home. These days, these small businesses only need to have an online presence to start their food business.

4. And let us not forget fast food restaurants which have been one of the greatest beneficiaries of the food delivery business. Food delivery now accounts for a large portion of the fast food industry’s profits.

Just imagine how much larger McDonalds would be if it partnered with other food suppliers to offer more food than just the traditional McDonalds food offering. For example, McDonalds can go to the cakes and ice cream business without much trouble.

All that McDonalds needs to do for example is to state that their cakes and ice cream are only offered online for home delivery. McDonalds’ cake and ice cream suppliers can then do most of the work while McDonalds for example can do the logistics and marketing.

Of course, the biggest advantage of McDonalds would be its reputation which it has build over the decades. Customers rarely question the quality and cleanliness of McDonalds food offerings. I’m sure they’ll do the same thing if McDonalds expanded their food offerings online.

Of course, quality control can be an issue for McDonalds in the beginning. But knowing the reputation of McDonalds, this would hardly be a problem if ever it does become one. McDonalds and the other big fast food companies could actually grow much, much bigger.

A catering company can also use the virtual multi restaurant strategy. The catering company might not even cook their own food but offer in their website food that are produced by their many food suppliers.

This would enable a catering company to offer a much broader line of meals. For example, if the catering company used to only offer western food before, if they have an asian meal food supplier, they can now offer asian food. All they have to do is add the asian meals in their website.

The same goes for desserts and party favors. If the catering company only used to offer western desserts and party favors, with an asian meal food supplier, they can now also offer asian desserts and party favors.

This is the same for drinks, alcohol and wine. Since these products are now largely made by big soda and wine companies, the catering company can’t really afford to make these drinks by themselves. But they can partner with these soda and wine companies to be their soda and wine suppliers.

This has the advantage of almost satisfying all of the customer’s food requirements without the customer having to leave the catering company’s website. In essence, a virtual multi restaurant concept relieves the customer of the burden of having to shop around for their food needs.

A virtual multi restaurant strategy can be very profitable for any kind of food business and not only traditional brick and mortar restaurants. It allows restaurants to offer more food options and reach more customers without much additional costs.

Only time will tell if the big restaurant chains would gain an almost monopoly on the food delivery business. This is because big restaurants like McDonalds and the other fast food restaurant giants can easily integrate much smaller restaurants’ food offerings with hardly any cost.

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