The United States restaurant industry, according to 2019 figures, represents 10% of the workforce and 4% of GDP – estimated to be USD $863 billion (Khandelwal, 2019). The National Restaurant Association (2020) has published the restaurant industry grew three times faster than overall economy between 2010 – 2019. Furthermore, a National Restaurant Association (2018) article notates that roughly 30% of sales of the entire American restaurant industry can be related to travel & tourism. It is clear, that industry innovations and incentives that drive creation are important to economics and finance students, teachers, scholars, and observers. Additionally, several restaurant companies are publicly-traded and their valuation of operational performance, plus investments in technology and innovative industry practices are important to analyst, shareholders, and more. This article seeks to bring awareness to the industry innovations and the growth of virtual brands. Which, is a nontraditional, takeaway or delivery, only concept.
In 2019, it was a trend of plant-based menu development and using AI technology for drive-thru concepts to alleviate labor pressures (Ramanathan, 2019; Lunda, 2019). This year could be labeled as the year for exploiting big data in pursuit of strong operational excellence. Throughout this year, we have seen restaurant brands redeveloping their drive-thru processes and witness the QR barcode come back to life, thanks to the demand for touchless alternatives (Lucas, 2020; Field, 2020). But leading the way in innovation, are casual dining brands. These are the brands who arguably suffered the most during COVID-19. They receive such recognition due to the development of virtual brands to utilize existing assets. One company that is receiving strong praise around the globe is Brinker International and their creation of It’s Just Wings.
Who Are They?
Brinker International (“Brinker”) is the parent-company of Chili’s and Maggiano’s Little Italy (“Maggiano’s”) and their newest virtual creation within infancy, It’s Just Wings. Brinker ranks in the Fortune 1,000 list at 745 with over $3 billion dollars (U.S.D.) in revenue. The company is publicly-traded, EAT, and CEO Wyman Roberts has led the company since January 2013. Roberts, who holds an MBA in Finance and Marketing from Brigham Young University, has nearly 30 years of leadership experience with Darden, NBC Universal Resorts, and several previous roles within Brinker.
What is a Virtual Brand?
A virtual brand, also known as a ghost kitchen, is one that operates for the sole-purpose for delivery or take-out (Olson, 2019). This trend is becoming increasing popular due to the lack of investment costs needed to develop concepts. In Brinker’s case, the company is already paying rent towards company restaurant brands Chili’s and Maggiano’s, so allowing their virtual brand to operate in the same space, with nearly no additional capital expenditure. In other words, due to the coronavirus pandemic, the creation of a virtual brand held strong revenue incentive with low capital pressures.
Measuring Performance within Infancy
The key takeaways from the Brinker quarterly reporting call with executive leadership were about It’s Just Wings launch, highlighting:
i. USD $3M in weekly sales revenue;
ii. Company estimated margin of 15% EBITDA created from brand;
iii. Only capital expenditures were additional small refrigerators at some locations;
iv. Company-owned restaurants were down ~3.8% after launch;
These factors provide analysts optimism towards opportunity and measuring stronger performance than competitors (Garcia, 2020).
Industry Innovation
In early-June, four key success factors were noted during a webcast that featured Kitchen United, Concept Services, Uber Eats, and Euromonitor International; (1) speed, (2) menu, (3) kitchen equipment, and (4) minimizing food waste (Nation’s Restaurant News, 2020). Weeks after the call, Brinker officially launched It’s Just Wings. Each one of these key success factors are noted within their menu – which is built for speed, utilizing existing equipment, and reducing food wastage by made-to-order products. Other companies are taking notice of Brinker’s success. Bloomin’ Brands, parent-company of Outback Steakhouse and Carrabba’s Italian Grill, is testing their own off-premise brand named Tender Shack (Ruggless, 2020). Even, kid-entertainment brand, Chuck E. Cheese, is utilizing their pizza ovens for a virtual concept named after their fictional chef, Pasqually’s Pizza & Wings.
Author Statements
It is clear that companies are interested in Brinker’s model. The financial success has been provided through earnings calls and increased the optimism of their shareholders. The question, which is unanswerable at this time, will these creations become long-term staples for revenue flow? Time will tell. But it is clear that Brinker International is leading the way for virtual brand creations.
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Sources:
Field, M. (July 28, 2020). The unexpected return of the QR code. Daily Telegraph. Retrieved on 3 September 2020 from https://www.telegraph.co.uk/technology/2020/07/27/curious-return-qr-code/
Garcia, T. (2020, 14 August). Chili’s parent says its weeks-old virtual chicken chain It’s Just Wings will soon be a $150 million brand. MarketWatch. Retrieved on 6 September 2020 from https://www.marketwatch.com/story/chilis-parent-says-its-weeks-old-virtual-chicken-chain-its-just-wings-will-soon-be-a-150-million-brand-2020-08-13#:~:text=It’s%20Just%20Wings%20operates%20out,%243%20million%20in%20weekly%20sales
Khandelwal, R. (2019). The Restaurant Industry: An Overview. Market Realist. Retrieved on 6 September 2020 from https://marketrealist.com/2019/09/the-restaurant-industry-an-overview/#:~:text=According%20to%20the%20National%20Restaurant,10%25%20of%20the%20working%20population.
Lucas, A. (2020, 20 August). Taco Bell unveils new design with more drive-thrus as pandemic permanently shifts how we order. CNBC News. Retrieved on 3 September 2020 from https://www.cnbc.com/2020/08/20/taco-bell-unveils-new-design-with-more-drive-thrus-as-pandemic-permanently-shifts-how-we-order.html?
Luna, N. (2019, 23 May). 9 restaurant tech innovations to watch for. Nation’s Restaurant News. Retrieved on 4 September 2020 from https://www.nrn.com/technology/9-restaurant-tech-innovations-watch
National Restaurant Association. (2020). Restaurant Industry Facts at a Glance. National Statistics, National Restaurant Association. Retrieved on 6 September 2020 from https://restaurant.org/research/restaurant-statistics/restaurant-industry-facts-at-a-glance
National Restaurant Association. (2018). Restaurant Industry Outlook: Travel and Tourism Research Association Marketing Outlook Forum. National Restaurant Association. Retrieved on 6 September 2020 from https://ttra.com/wp-content/uploads/2018/11/Restaurant-Industry-Outlook_2019.pdf
Nation’s Restaurant News (2020, 12 June). Welbilt webcast uncovers top success measure for Ghost & Virtual Kitchens: Speed. Nation’s Restaurant News. Retrieved on 6 September 2020 from https://www.nrn.com/supplier-news/welbilt-webcast-uncovers-top-success-measure-ghost-virtual-kitchens-speed
Olson, A. (2019, 21 October). The rise of ‘ghost kitchens’: Here’s what the online food ordering boom has produced. USA Today. Retrieved on 5 September 2020 from https://www.usatoday.com/story/tech/2019/10/21/ghost-kitchen-virtual-restaurant-heres-how-works/4053659002/
Ramanathan, L. (2019, 15 February) How ‘plant-based’ rebranded vegan eating for the mainstream. The Washington Post. Retrieved on 4 September 2020 from https://www.washingtonpost.com/news/voraciously/wp/2019/02/15/how-plant-based-rebranded-vegan-eating-for-the-mainstream/
Ruggless, R. (2020, 3 September). Outback Steakhouse parent Bloomin’ Brands debuts virtual Tender Shack brand on DoorDash. Nation’s Restaurant News. Retrieved on 6 September 2020 from https://www.nrn.com/delivery-takeout-solutions/outback-steakhouse-parent-bloomin-brands-debuts-virtual-tender-shack
