Virtual restaurants are taking over the future, with the Blue Ocean Strategy here to stay
Story by Evgeniya Lazareva, Founder and Lead Designer of Hot Design Folks design studio
“Ghost kitchens”, “dark kitchens”, “cloud kitchens”. This is the new vocabulary of the F&B business these days, when virtual restaurants have been growing expansively across the globe. Companies such as Uber, Deliveroo and GrabEats are all investing heavily to set up international equipped rental facilities and luring more and more restaurateurs that are all too eager to widen their customer reach.
So what is a virtual restaurant and what is the buzz all about?
The Rise of The Virtual Restaurant
Let’s take a look at the restaurant business model from the perspective of strategists like INSEAD professors W. Chan Kim and Renée Mauborgne.
Whilst being one of the fastest growing industries, the traditional F&B business model would qualify as an old-hat Red Ocean sailor. In this case Red Ocean refers to a blood bath that a highly competitive F&B market feels like at times. Roughly 60% of all new restaurant concepts fail within their first 5 years of operations. Surviving in this business requires a great deal of elbowing, hard work and luck. It’s not an exaggeration to say that you need the stars to align to sail through these rough waters and get into the league of well established restaurants.
On the other side of the scale is an industry disruptor, a Blue Ocean surfer-virtual restaurant, an F&B concept that offers food delivery and no dine-in option. These digital-only establishments create a leap in value for the business by bringing to the table new strategic advantages, eliminating typical operational hindrances and unlocking a wider customer reach.
COVID-19 has turned thousands of restaurants “virtual” literally overnight. Whether we like it or not, this model has proven to be a viable solution aiding the survival of F&B businesses through the months of quarantine.
However, will virtual become the “new normal” and replace restaurant dining as we know it? We take a closer look at this market “challenger” together with the industry experts.
“Virtual restaurants are not new and we have considered this model in the past,” shares Jean-Christophe Cadoret, director of Napoleon Food & Wine Bar and Gaston Bistro. “Today we need to adapt our lunch offer and we see a potential in developing a special lunch menu for online ordering, keeping it simple and offering delivery friendly dishes that are easy to reheat and plate.” https://napoleon.sg
A novel “Low Overhead” approach
With this alternative operation model, three key advantages stand out and make it attractive to both new and well seasoned F&B owners:
Think about all the elements required to create a successful F&B concept: branding and interior design, interior fit-out, rent, wait staff, tables turn-over just to name a few. Eliminating dine-in space makes it possible to set up a dream kitchen with equipment that would not be achievable in a traditional restaurant.
Avoid the need to own a space in a high footfall area, and instead find a strategic location targeting dense residential areas to make sure you are close enough to your customers. Recent months of quarantine have challenged the rationale behind heavy investment in traditional in-dining.
“The biggest challenge for us so far (and I believe many other F&Bs as well) is revenue and how we can compensate for the loss of in-diners,” says Fiona Manini, co-founder of Casa Manini. “Rental has to come down or be based on a fixed percentage of the business’ monthly revenues. If rental calculations don’t change, we will see many more businesses folding.” https://casamanini.com
“During the months of quarantine we definitely questioned our CBD location. Being near to where people work was important when we first opened, however today we might need to be where people live,” adds Jean-Christophe.
Tech is power
“We’ve been able to maintain good relations with our customers through online engagements of our social media and the personalised ordering system on whatsapp. This way, we have sustained service without there being a physical presence since the circuit breaker,” shares Chef Houssein Hafian Rodriguez, owner of Next Door Spanish Cafe. https://www.nextdoorspanishcafe.com
Unlike brick and mortar counterparts, virtual restaurants can tap into the opportunity of data driven marketing, delivering relevant and fully customisable food options based on customers’ order preferences and history. Virtual outlets come with invaluable tools for multimedia customer engagement, data collection and evaluation, helping businesses hone their strategy, something that traditional restaurants seem to struggle with.
“We are in the era of digital – in the coming years work travel and business lunches will definitely become less and less present, whereas we should maintain our dinner crowd as destination restaurants. Virtual restaurants fill the market gap of casual dining,” mentions Jean-Christophe.
Relatively low operational costs make virtual restaurants an ideal opportunity to try out different food concepts, or even run multiple restaurants out of the same kitchen.
A web-based restaurant has the opportunity to change the menu depending on the availability of ingredients, market prices and most importantly preferences of client base. This offers a much wider customer reach, plus bad ideas can be scrapped swiftly if they are not working.
In “Going Virtual” it is important to decide which business you want to be in. Virtual restaurant models are best suited for “fast & easy” concepts and target the mass market,” Jean-Christophe tells us.
“Treacherous Waters” of the Blue Ocean
Taking all these advantages into consideration, why haven’t more F&B outlets ventured out with virtual concepts?
“Our regulars can’t wait to come back and dine with us and some have pre-booked their tables for the very first day that we are able to open again. Takeaways and deliveries cannot compare to being in the restaurant,” enthuses Fiona.
In the restaurant industry personal interactions are key to success. Paying attention to your customers, a simple “please and thank you”, can make a big difference between a good or a bad experience. If a consumer views a restaurant as an interchangeable convenience or a delivery app, there is very little room for a meaningful interaction. Restaurants lose control over customer experience and the personal touch that may lead to a repeat customer.
“Nothing will replace human interaction. There is a danger of not caring enough about the customer’s experience when operations rely heavily on tech whilst tending to their needs. Restaurants miss out on the opportunity to engage with the customers which makes a big difference,” adds Jean-Christophe.
“When people go to a restaurant, it is not only to consume food and drinks. They go to a restaurant to socialise with friends and the people around them. Since they haven’t been able to do so during the circuit breaker, people may crave for social interactions even more,” believes Chef Houssein.
“Online and mobile pre-order systems are very common these days, however with that you are missing out on a chance to build relationships with your crowd and at the end an opportunity to upsell,” reflects Jean-Christophe.
Undeniably virtual restaurants offer a lot of flexibility, numerous analytical tools enabling operators to deliver highly personalised food based on customers’ order history. However, by going “virtual” restaurants inevitably miss out on the opportunity to engage with the customers and upsell the dining experience. Moreover, relying on third-party platforms for discovery, ordering and delivery restaurants willingly hand over heaps of valuable consumer data which could be used to build relationships with their hard-won customers.
“When guests dine in and especially in groups, there’s also a tendency to order more as they are enjoying the moment and dining experience. More food, more alcoholic drinks. With takeaways, it’s not always the case that there will be alcohol included in their orders as they would buy from suppliers who are able to give a better deal,” confides Fiona.
Adds Chef Houssein: “We don’t know many virtual restaurants that are highly comfortable with their venture. On our end, we are not as confident in the sustainability of virtual connections.
“Also an important question thus far: how do we keep customers happy at their preferred delivery timings without compromising the food and drinks quality? We can have 60 people dining in, but we cannot deliver to 60 households at the same time.”
Quality is the biggest challenge and a lot depends on the type of cuisine you are serving. This may be a hard truth to stomach (pun intended), but customers’ opinions of the restaurant will always be as good as the last meal they were served, whether that was in-house dining or a delivery. Whilst restaurants are striving to maintain high standards, it is a tough challenge to deliver home-dining experience that is equally good since food is prone to quality lapses.
Regardless of how well it was packaged or how fast it was delivered, there is a high probability of dishes arriving cold, spilled or soggy. The bottom line is – the dining experience in a box will never compare to the standards of the food delivered on tables.
“With the emergence of social media dining has become increasingly “visual.” Whilst trying to recreate restaurant experience at home – plating has been one of the biggest challenges,” explains Jean-Christophe.
Dining is an always will be an experience
The future of the food delivery industry is definitely looking bright and there are many reasons to join this virtual revolution. Reduced financial risks and increased order volume make it an appealing ground to diversify existing brands and test out the new concept.
In the coming years we may see more and more casual dining outlets transitioning online with highly customisable menus, whereas specialty restaurants will continue to raise the game of inhouse dining experiences.
“It’s inevitable now that we would need to have a virtual restaurant to keep up with the competition, but that would not be the core business for us. The priority would still be our brick and mortar. There is nothing like human interaction,” reveals Fiona.
“With COVID we have to innovate ways to bring the same level of satisfaction to the customers regardless of the situation. Since the lockdown, our menu is available for viewing online and we will look at continuing to make it available even after we open,” concludes Chef Houssein Hafian Rodriguez, owner of Next Door Spanish Cafe.
“The golden age of traditional dining has passed, however I don’t think the industry is in any danger. People still need to meet physically to build relationships and the social aspects of F&B will not lose its value. However, virtual restaurants will create a wider and more distinct divide between take away mass market and restaurants that focus on the conviviality of in-house dining. Upping quality and focusing on experience is our strategy to stay competitive,” reckons Jean-Christophe.
Dining out is a vital activity for establishing social connections and is essential to satisfy our need for human interaction. With countless delivery food options at our fingertips, in the coming years brick-and-mortar restaurants will gain an even higher importance in the process of community spirit recovery post-pandemic.
“Virtual restaurants are a means of convenience, nothing more. Dining in is and always will be an experience,” shares Fiona on her final note.
Photographs courtesy of Napoleon Food & Wine Bar and Gaston Bistro; Casa Manini – Italian Restaurant; Next Door Spanish Cafe photo by Hisyam Osz; Jean-Christophe Cadoret, director of Napoleon Food & Wine Bar and Gaston restaurants; Fiona Manini, co-founder of Casa Manini; Chef Houssein Hafian Rodriguez, owner of Next Door Spanish Cafe.
More on More on the Blue Ocean Strategy here: https://www.blueoceanstrategy.com/what-are-red-blue-oceans/