Are Virtual Brands Dying?

1. MrBeast - sign that Virtual Brands are in Trouble?

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MrBeast Burger is distributed by many different restaurants that are licensed to cook and sell its food for delivery or pickup only.

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The idea is that the restaurants can use the additional online storefront to generate extra revenue. This setup allowed MrBeast Burger to grow quickly but has apparently resulted in inconsistent food.

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Quality control is one of a few problems virtual brands have faced since they began to catch on during the early days of the pandemic.

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Customers have complained that they feel tricked by the brands, which appear as stand-alone storefronts on delivery apps but are really coming from the kitchens of other restaurants. The brands can also add complexity to restaurants that are already busy.

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Meanwhile, consumer demand for delivery has started to slow down, which has hurt sales for such concepts.

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Nextbite, one of the leading providers of delivery-only concepts, sold itself last week, about a month after laying off much of its staff.

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Donaldson's effort to cut ties with MrBeast Burger is another troubling sign for virtual brands.?

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2. Why Did?Nextbite Fail??Who else is at Risk?

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Many former Nextbite employees brought up quality of food as an issue for the company’s virtual brands, though that’s not an issue exclusive to Nextbite.

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Multiple sources said that Nextbite sees itself as a tech company first and a food company second, which has sometimes meant that the food itself has taken a backseat.

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“There’s a huge difference between being a restaurant operator and being a tech guy; operators know right away when you’re a restaurant person,”?Kirk Mauriello ?said.

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At?Profit Cookers? , he provides detailed written instructions for each item of food that the company makes in both English and Spanish in order to avoid complexities.

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“We did this so the kitchen can operate efficiently; [our operators told us] nobody did this before, probably because they weren’t operators and didn’t know what it is like to run a kitchen.”

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The best virtual brand companies understand that operators don’t have time, energy, or staffing to deal with making complicated menu items out of the back of their kitchens when they already have their own menus to make, plus a front-of-house operation to deal with.

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This is a point that multiple sources confirmed on background was a major issue for Nextbite.

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3. New Ideas in Off-Premise Channels for Restaurants

"The first-ever restaurant drive-thru concept was launched way back in 1947. Red’s Giant Hamburg drive-thru allowed customers to drive up to a window to place orders and receive their food.

Since then drive-thrus have consistently delivered a significant chunk of the revenue in the QSR (Quick Service Restaurant) category.

COVID-19 has accelerated the need for restaurants to have a comprehensive drive-thru strategy in place and focus on drive-thru innovation.

This was primarily driven by:

1. Heightened anxiety about health and safety

2. Need for greater convenience and flexibility to order food

By the end of 2021, every major restaurant brand reported significant drive-through sales growth and drive-thru accounted for 52% of the customer traffic share for QSRs.

This trend is not just restricted to QSRs. Even full-service chains, cafes, and pizzerias that have traditionally invested in dine-in spaces are expanding drive-thru options for customers.

Recently,?Applebee's Neighborhood Grill + Bar ?revealed that they are planning to aggressively roll out drive-thrus to strengthen off-premise service capability."

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4. In-Car Payments increase Sales because of Convenience

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Tech provider?Mavi.io , which creates in-car ordering and payment features, announced Tuesday (March 14) that the YouTuber-helmed virtual restaurant chain will be available for consumers to order from their connected vehicles.

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“While MrBeast Burger has always prioritized a digital-first approach to customer service, the virtual nature of the restaurant can make it challenging to organically reach new customers,” Stephanie Sollers, CEO of the burger chain’s parent company Virtual Dining Concepts, said in a?statement . “

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With OnMyWay Commerce, we now have the perfect digital billboard to market our MrBeast Burger brand to any customer, whether they’re loyal MrBeast fans or just hungry drivers looking for fast, delicious food on the go.”

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MrBeast Burger ?is not the first restaurant chain to implement in-car ordering with Mavi.io.

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Fast-casual chain?BurgerFi ?is doing the same. In an?interview ?earlier this year with PYMNTS,?Karl Goodhew , BurgerFi’s chief technology officer, spoke to the opportunity that the ordering channel creates to drive large-scale B2B sales.

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5. No more Cosmic Wings f or You

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Applebee’s launched Cosmic Wings in February 2021. Delivery was booming, and parent company Dine Brands viewed delivery-focused concepts?a big part of its future .

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At one point, Cosmic Wings was in more than 1,000 Applebee’s, where it made up a small but incremental portion of sales.

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It is now down to about 670 restaurants, Moralejo said. A second virtual brand that was being tested is also apparently off the table.

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“We’ve made the decision that the brand and our franchisees are better off if we focus on our core menus, our core equities,” Moralejo said.

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The strategy contrasts with that of Applebee’s sister brand IHOP, which has two virtual brands and unveiled a third this week.

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But the two chains are quite different: IHOP is busiest at breakfast and on weekends, and has been using the virtual brands—which focus on quesadillas, grilled cheese and chicken tenders—to boost volume in slower dayparts.?

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Chicken wings, on the other hand, tend to fly out the door around dinnertime, when Applebee’s is already busy.?

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“The dynamics of an IHOP kitchen and the dynamics of an Applebee’s kitchen are completely different,” Moralejo said.?

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6. Franchise Sales Services

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Who Else needs a Fractional FDO?

You want to out-recruit your competition for operationally talented and financially qualified franchisees to exceed historic franchise system growth statistics.

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If you look at the results for the 4033 franchises offered for sale in North America that tell us 34.2% (1378) of franchisors have 5 or fewer units.

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You need our competitive advantage to beat these numbers and win out over all those other franchisors who after your franchise prospects.

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7. Mastering Restaurant Ordering: 2 Insider Tips for Guests to Maximize Convenience and Efficiency

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HungerRush ?commissioned a survey?and conducted by?Dynata , the world's largest first-party data company.

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The survey was conducted in May 2023 of 1,000 U.S. consumers 18 years and older to understand how the labor shortage is impacting restaurants of various sizes and the customer experience.

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Here are (2) tips from the survey.

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1.?Restaurants should look to address is the ordering stage, as 91% of consumers surveyed said the maximum amount of time they are willing to wait on hold to place an order is 3 minutes or less. 25% and 19% expect to place an order in less than 2 minutes and 1 minute respectively.

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Speed to order is critical to today’s consumers.

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2. Owners and operators need to focus on is the overall environment of the restaurant. When customers call a restaurant to place an order and can tell based on loud background noise that it is hectic, it impacts their overall experience. 57% of consumers aren’t confident that a busy store will actually take their order correctly if they need to personalize or modify regular menu items.

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Moreover, 19% of consumers actively avoid making any order modifications if they can tell a restaurant is busy in the background.

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In fact, 72% of consumers said they would opt to use an automated phone bot to place an order depending on the situation.

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