WEBVTT 00:00:00.000 --> 00:00:03.120 Welcome back to the deep dive. I want to, uh, 00:00:03.319 --> 00:00:06.500 I want to start today by setting a scene. Okay. 00:00:06.580 --> 00:00:09.199 It's a scene that I guarantee almost everyone 00:00:09.199 --> 00:00:11.820 listening has, you know, has lived through. It 00:00:11.820 --> 00:00:13.439 might have even happened to you last Friday night. 00:00:13.560 --> 00:00:16.039 The universal Friday night dilemma. I know it 00:00:16.039 --> 00:00:19.339 well. Exactly. Picture this. It's the end of 00:00:19.339 --> 00:00:22.859 a long week. Your brain is just fried. The absolute 00:00:22.859 --> 00:00:25.940 last thing you want to do is, like, chop an onion, 00:00:26.079 --> 00:00:29.699 preheat an oven. Or wash a single dish. Oh, yeah. 00:00:29.760 --> 00:00:32.780 You're done. You are so done. So you flop onto 00:00:32.780 --> 00:00:34.820 the couch. You pull out your phone. You open 00:00:34.820 --> 00:00:37.079 the app. DoorDash. Uber Eats. Grubhub. You know, 00:00:37.079 --> 00:00:39.340 pick your poison. The modern foraging expedition. 00:00:39.939 --> 00:00:41.560 Scrolling through the digital forest. Right. 00:00:41.929 --> 00:00:44.509 And you're scrolling. And you're bored. So bored. 00:00:44.630 --> 00:00:46.670 You're tired of the usual Thai place you order 00:00:46.670 --> 00:00:49.049 from every single Tuesday. You had burgers on 00:00:49.049 --> 00:00:51.149 Wednesday. You want something new. You want a 00:00:51.149 --> 00:00:53.649 discovery. I want a discovery. And then suddenly 00:00:53.649 --> 00:00:56.850 the algorithm blesses you. You see a logo you've 00:00:56.850 --> 00:00:59.700 never seen before. The moment of hope. You see 00:00:59.700 --> 00:01:03.740 a place called Pasquale's Pizza and Wings. Pasquale's. 00:01:03.740 --> 00:01:07.040 Okay. It sounds quaint, doesn't it? Pasquale's. 00:01:07.060 --> 00:01:09.400 It just sounds like a guy. I picture a guy with 00:01:09.400 --> 00:01:12.239 a thick mustache, maybe a little flower on his 00:01:12.239 --> 00:01:15.239 apron, you know, tossing dough in the air. Like 00:01:15.239 --> 00:01:17.959 a classic local pizza joint. Totally. It sounds 00:01:17.959 --> 00:01:20.000 like a family recipe passed down through generations. 00:01:20.299 --> 00:01:22.939 The logo looks a little artisanal. Maybe it has 00:01:22.939 --> 00:01:25.400 that, you know, wood -fired oven vibe. So you 00:01:25.400 --> 00:01:27.560 think, hey. I want to support a local business. 00:01:27.640 --> 00:01:30.019 Let's give Pasquale a shot. So you hit order. 00:01:30.159 --> 00:01:33.079 Of course. I hit order. 30 minutes later, the 00:01:33.079 --> 00:01:35.859 driver drops the bag at the door. I open the 00:01:35.859 --> 00:01:38.760 box. The pizza is fine. It's just fine. It's 00:01:38.760 --> 00:01:41.879 warm. It's cheesy. But there is something nagging 00:01:41.879 --> 00:01:45.620 at me. It tastes vaguely familiar. Like a sense 00:01:45.620 --> 00:01:48.280 of culinary deja vu. A taste you have experienced 00:01:48.280 --> 00:01:51.120 in a past life, perhaps. Or a past birthday party. 00:01:52.010 --> 00:01:54.930 Because, being the curious person I am, and frankly 00:01:54.930 --> 00:01:56.670 a little suspicious because the crust tasted 00:01:56.670 --> 00:01:59.390 exactly like cardboard, I decided to do a little 00:01:59.390 --> 00:02:01.230 detective work. You went down the rabbit hole. 00:02:01.390 --> 00:02:04.129 I did. I pull up Google Maps. I typed in the 00:02:04.129 --> 00:02:06.549 address listed for this charming Pasquale's pizza. 00:02:07.209 --> 00:02:09.909 I zoomed in on Street View, expecting to see 00:02:09.909 --> 00:02:12.129 a cute little bistro with a checkered tablecloth 00:02:12.129 --> 00:02:14.129 and maybe a Vespa parked out front. And what 00:02:14.129 --> 00:02:18.189 did you see? I saw a giant beige box of a building 00:02:18.189 --> 00:02:22.379 with a huge purple sign. I saw... A Chuck E. 00:02:22.439 --> 00:02:25.099 Cheese. Welcome to the Masquerade. I remember 00:02:25.099 --> 00:02:28.120 when I first found this out, I felt bamboozled. 00:02:28.240 --> 00:02:30.939 Pasquale isn't a local chef. No, he is not. Pasquale 00:02:30.939 --> 00:02:33.479 is the name of the animatronic drummer in the 00:02:33.479 --> 00:02:35.699 Chuck E. Cheese robot band. That is absolutely 00:02:35.699 --> 00:02:38.479 correct. Yeah. And that pizza wasn't made in 00:02:38.479 --> 00:02:41.199 a wood -sired oven by a guy named Pasquale. It 00:02:41.199 --> 00:02:43.979 was made in the exact same industrial conveyor 00:02:43.979 --> 00:02:46.979 belt oven that is, at that very moment, churning 00:02:46.979 --> 00:02:49.080 out pies for a six -year -old's birthday party. 00:02:49.389 --> 00:02:51.330 right next to the ball pit this is what we are 00:02:51.330 --> 00:02:53.689 diving in today this isn't just about chuck e 00:02:53.689 --> 00:02:55.990 cheese trying to sell pizza to adults who would 00:02:55.990 --> 00:02:57.789 be embarrassed to you know walk into their store 00:02:57.789 --> 00:03:01.050 no this is the tip of a massive almost invisible 00:03:01.050 --> 00:03:04.550 iceberg It really is. We are looking at the world 00:03:04.550 --> 00:03:07.270 of virtual restaurants. And frankly, it is probably 00:03:07.270 --> 00:03:09.909 the biggest shift in the economics of food since 00:03:09.909 --> 00:03:11.590 the invention of the drive through. I would agree 00:03:11.590 --> 00:03:14.330 with that. We have a stack of articles, market 00:03:14.330 --> 00:03:17.150 research and exposés here that describe a world 00:03:17.150 --> 00:03:19.569 where the restaurants you see on your phone. 00:03:20.080 --> 00:03:22.280 they simply don't exist well not in the way you 00:03:22.280 --> 00:03:24.340 think they do exactly not in the traditional 00:03:24.340 --> 00:03:26.659 sense and it's a story about economics for sure 00:03:26.659 --> 00:03:29.479 but as we dig into these sources it becomes a 00:03:29.479 --> 00:03:33.379 story about psychology about technology and a 00:03:33.379 --> 00:03:36.659 little bit of deception a lot of deception if 00:03:36.659 --> 00:03:39.800 you ask me so today our mission is to pull back 00:03:39.800 --> 00:03:42.379 the curtain on this entire ecosystem we're going 00:03:42.379 --> 00:03:46.000 to look at the why Why are these big chains hiding 00:03:46.000 --> 00:03:48.360 who they are? We're going to look at that. How 00:03:48.360 --> 00:03:51.099 how does a kitchen in a basement pretending to 00:03:51.099 --> 00:03:53.599 be five different restaurants actually, you know, 00:03:53.599 --> 00:03:55.860 work? And then we're going to ask the big question. 00:03:56.039 --> 00:03:58.379 Does it even matter if the burger tastes good? 00:03:58.939 --> 00:04:01.340 Do you care if it came from a ghost? That is 00:04:01.340 --> 00:04:04.500 the million dollar question. Exactly. So let's 00:04:04.500 --> 00:04:06.139 start with the basics, because when I was reading 00:04:06.139 --> 00:04:08.840 through the source material on this, I got hit 00:04:08.840 --> 00:04:10.819 with a ton of buzzwords. Oh, yeah. There's a 00:04:10.819 --> 00:04:14.099 lot of jargon. Virtual restaurants. Ghost kitchens, 00:04:14.199 --> 00:04:17.360 cloud kitchens, dark kitchens. Are these all 00:04:17.360 --> 00:04:22.699 just fancy marketing terms for delivery? Or is 00:04:22.699 --> 00:04:26.040 there a real difference? They're often used interchangeably, 00:04:26.040 --> 00:04:28.529 you know, in the media, but there are some. Important 00:04:28.529 --> 00:04:31.410 nuances. Yeah. And understanding the names actually 00:04:31.410 --> 00:04:33.269 helps you understand the entire business model. 00:04:33.430 --> 00:04:35.149 Okay. So let's break them down. Let's start with 00:04:35.149 --> 00:04:38.129 virtual restaurant. Okay. So a virtual restaurant 00:04:38.129 --> 00:04:40.709 is the brand. It's the listing you see on the 00:04:40.709 --> 00:04:43.970 app. So Pascuales. Pascuales is a perfect example 00:04:43.970 --> 00:04:46.529 of a virtual restaurant. It exists virtually 00:04:46.529 --> 00:04:48.970 on your screen, but it doesn't have a storefront 00:04:48.970 --> 00:04:51.769 you can walk into. It's purely a digital storefront. 00:04:51.870 --> 00:04:54.529 Okay. So Pascuales is the software. It's the 00:04:54.529 --> 00:04:57.389 interface I'm interacting with. Precisely. Now, 00:04:57.410 --> 00:05:00.689 ghost kitchen or cloud kitchen usually refers 00:05:00.689 --> 00:05:03.089 to the hardware. It's the physical infrastructure 00:05:03.089 --> 00:05:05.930 where that food is actually being cooked. The 00:05:05.930 --> 00:05:08.009 actual kitchen. The kitchen itself, yeah. Cloud 00:05:08.009 --> 00:05:09.990 kitchen is the one that really stuck out to me. 00:05:10.029 --> 00:05:11.930 It sounds very Silicon Valley, like I'm going 00:05:11.930 --> 00:05:14.089 to eat a sandwich that's made of data or something. 00:05:14.329 --> 00:05:16.649 And that association is completely intentional. 00:05:17.129 --> 00:05:20.600 The term is a direct nod. to cloud computing. 00:05:20.740 --> 00:05:23.459 Oh, interesting. Think about it. How did the 00:05:23.459 --> 00:05:26.160 internet used to work? If you wanted to launch 00:05:26.160 --> 00:05:30.300 a website in, say, 1999, what did you have to 00:05:30.300 --> 00:05:33.680 do? Oh, man. You had to buy a physical server, 00:05:33.819 --> 00:05:36.819 a big... loud box. You had to have a room with 00:05:36.819 --> 00:05:39.720 like special air conditioning to keep it from 00:05:39.720 --> 00:05:42.319 overheating. Right. You had to hire an IT guy 00:05:42.319 --> 00:05:44.339 to make sure the server didn't, you know, catch 00:05:44.339 --> 00:05:46.199 fire. It was a whole production. Exactly. It 00:05:46.199 --> 00:05:48.220 was incredibly expensive. It was CapEx heavy. 00:05:48.259 --> 00:05:49.980 That's capital expenditure. Right. You had to 00:05:49.980 --> 00:05:52.180 spend a massive amount of money before you could 00:05:52.180 --> 00:05:55.199 make a single dime. Then a company like Amazon 00:05:55.199 --> 00:05:58.100 Web Services, AWS comes along. Right. And they 00:05:58.100 --> 00:06:01.540 said, look. we'll build the giant air -conditioned 00:06:01.540 --> 00:06:04.259 server farms. You just rent a slice of our hard 00:06:04.259 --> 00:06:06.139 drive from us. And now I can launch a website 00:06:06.139 --> 00:06:08.319 for $10 a month. I don't need my own server room. 00:06:08.660 --> 00:06:11.759 Exactly. Now, apply that exact same logic directly 00:06:11.759 --> 00:06:14.259 to food. Historically, if you wanted to sell 00:06:14.259 --> 00:06:16.579 a burger, what did you have to do? I had to lease 00:06:16.579 --> 00:06:20.379 a building. Probably a five -year lease. I had 00:06:20.379 --> 00:06:24.339 to buy tables, chairs, plates, silverware. All 00:06:24.339 --> 00:06:27.819 of it. I had to hire waiters, a host, a busboy, 00:06:28.019 --> 00:06:30.860 a bartender. I had to pay for a big expensive 00:06:30.860 --> 00:06:32.779 sign out front so people would see me from the 00:06:32.779 --> 00:06:35.459 street. That is your server room. All of that 00:06:35.459 --> 00:06:38.579 is the heavy capex. A cloud kitchen is the AWS 00:06:38.579 --> 00:06:42.079 of food. Ah, okay. I get it now. You don't need 00:06:42.079 --> 00:06:43.420 the dining room. You don't need the waiters. 00:06:43.420 --> 00:06:45.339 You don't need the sign. You just rent a spot 00:06:45.339 --> 00:06:47.339 on the grill. So it's literally infrastructure 00:06:47.339 --> 00:06:50.800 as a service, but the service is pad thai. That 00:06:50.800 --> 00:06:52.699 is the perfect way to put it. You are renting 00:06:52.699 --> 00:06:55.480 the capability to cook without all the baggage 00:06:55.480 --> 00:06:57.319 and expense of a traditional restaurant. Okay. 00:06:57.379 --> 00:06:59.139 But then we have this other term that I saw in 00:06:59.139 --> 00:07:01.199 the sources, and it sounds a lot more sinister. 00:07:01.839 --> 00:07:06.259 Dark kitchen. Yes. Dark kitchen. It sounds like 00:07:06.259 --> 00:07:09.000 something out of a dystopian sci -fi novel. You 00:07:09.000 --> 00:07:11.439 know, citizens report to the dark kitchen for 00:07:11.439 --> 00:07:14.199 your daily nutrient paste. It does sound ominous. 00:07:14.199 --> 00:07:18.250 I'll give you that. But the term dark in this 00:07:18.250 --> 00:07:20.329 context, at least originally, just meant dark 00:07:20.329 --> 00:07:23.050 to the street. What does that mean? It means 00:07:23.050 --> 00:07:25.050 there are no lights on for the public because 00:07:25.050 --> 00:07:27.290 the public isn't allowed in. If you walked past 00:07:27.290 --> 00:07:29.069 one, you probably wouldn't even know it was a 00:07:29.069 --> 00:07:31.389 restaurant. The windows might be frosted over. 00:07:31.490 --> 00:07:33.589 There's no menu in the window, no happy hour 00:07:33.589 --> 00:07:36.050 sign. It's invisible from the outside. Exactly. 00:07:36.050 --> 00:07:39.649 But the sources we looked at, they hint that 00:07:39.649 --> 00:07:42.829 dark has taken on a bit of a double meaning lately. 00:07:43.129 --> 00:07:46.170 It has. And we will definitely get to the controversy 00:07:46.170 --> 00:07:49.610 later on, the working conditions, the lack of 00:07:49.610 --> 00:07:52.709 transparency. But initially, it just meant invisible. 00:07:53.069 --> 00:07:54.930 It meant that the lights of the dining room were 00:07:54.930 --> 00:07:57.449 off, but the kitchen inside was firing on all 00:07:57.449 --> 00:07:59.509 cylinders. OK, so we know what they are. We have 00:07:59.509 --> 00:08:01.970 the terminology down. But I really want to understand 00:08:01.970 --> 00:08:04.189 the why, because I'm looking at these profit 00:08:04.189 --> 00:08:07.089 margins in our notes here, and they are. They're 00:08:07.089 --> 00:08:10.069 significant. Why is this exploding right now? 00:08:10.370 --> 00:08:12.910 To understand why this is just blowing up. You 00:08:12.910 --> 00:08:14.930 really have to understand the brutal economics 00:08:14.930 --> 00:08:17.569 of a traditional restaurant. I've always heard 00:08:17.569 --> 00:08:19.970 that restaurants are a terrible business. Just 00:08:19.970 --> 00:08:22.790 a super high failure rate, razor -thin margins. 00:08:22.949 --> 00:08:25.810 My parents always told me, don't open a restaurant 00:08:25.810 --> 00:08:29.290 unless you really hate money. They're not wrong. 00:08:29.449 --> 00:08:31.949 The margins are typically somewhere between 3 00:08:31.949 --> 00:08:35.529 % to 5%, if you're lucky. That's nothing. It's 00:08:35.529 --> 00:08:37.269 nothing. I mean, if you are running a very tight 00:08:37.269 --> 00:08:43.610 ship and... The single biggest killer. The number 00:08:43.610 --> 00:08:49.169 one cost. Let me guess. Rent? Real estate. Absolutely. 00:08:49.250 --> 00:08:51.190 Because you have to be where the people are. 00:08:51.350 --> 00:08:53.250 Right. If you want to sell expensive burgers 00:08:53.250 --> 00:08:54.750 and have people sit down and eat them, you need 00:08:54.750 --> 00:08:56.450 to be on Main Street. You need that corner location 00:08:56.450 --> 00:08:58.269 with the big windows. You need foot traffic. 00:08:58.389 --> 00:09:00.350 And the landlords, they know that. Oh, they know 00:09:00.350 --> 00:09:02.850 that. And they charge a massive premium for that 00:09:02.850 --> 00:09:05.070 visibility. You're paying for the eyeballs. You're 00:09:05.070 --> 00:09:07.750 paying for the sidewalk. You are. Now imagine 00:09:07.750 --> 00:09:09.789 you're a virtual restaurant. Do you need to be 00:09:09.789 --> 00:09:12.409 on Main Street? No, because nobody is walking 00:09:12.409 --> 00:09:14.929 in. There's no door to walk into. Exactly. The 00:09:14.929 --> 00:09:17.090 only person who needs to find the door is the 00:09:17.090 --> 00:09:20.269 delivery driver. And they have GPS. So where 00:09:20.269 --> 00:09:23.730 do you put your kitchen? I guess anywhere. Literally 00:09:23.730 --> 00:09:26.210 anywhere with a gas hookup and a roof. You put 00:09:26.210 --> 00:09:27.929 it in the industrial park on the edge of town. 00:09:27.990 --> 00:09:30.289 You put it in a basement. You put it in a converted 00:09:30.289 --> 00:09:32.730 parking lot behind a gas station. You go wherever 00:09:32.730 --> 00:09:36.190 the rent is dirt cheap. So your rent, your biggest 00:09:36.190 --> 00:09:39.850 single cost, drops from, say, $10 ,000 a month 00:09:39.850 --> 00:09:43.629 on Main Street to maybe $1 ,000 a month in the 00:09:43.629 --> 00:09:46.990 dark location. At least. And then you strip away 00:09:46.990 --> 00:09:51.789 the labor. No host, no waiters, no busboys, no 00:09:51.789 --> 00:09:53.570 bartenders standing there polishing glasses. 00:09:53.870 --> 00:09:55.870 You just need cooks. That's it. You just need 00:09:55.870 --> 00:09:57.950 the people actually making the food. But here's 00:09:57.950 --> 00:09:59.429 the kicker, and this is the part that really 00:09:59.429 --> 00:10:02.519 stood out to me in the reading. The price of 00:10:02.519 --> 00:10:05.500 the food doesn't drop. No, not at all. If I order 00:10:05.500 --> 00:10:07.960 a burger from the fancy bistro on Main Street, 00:10:08.179 --> 00:10:11.340 it's $15. If I order a burger from the ghost 00:10:11.340 --> 00:10:13.299 kitchen in the basement next to the tire factory, 00:10:13.559 --> 00:10:16.500 it's also $15. Because on the app, they look 00:10:16.500 --> 00:10:19.259 exactly the same. The photos are just as glossy. 00:10:19.360 --> 00:10:21.820 The description is just as delicious. You, the 00:10:21.820 --> 00:10:24.360 consumer, you're paying for the idea of the restaurant, 00:10:24.460 --> 00:10:27.139 not the physical reality of it. So the operator 00:10:27.139 --> 00:10:29.960 is keeping that difference, that massive difference 00:10:29.960 --> 00:10:34.159 in cost. That is pure profit arbitrage. It's 00:10:34.159 --> 00:10:36.539 a brilliant efficiency play. The source material 00:10:36.539 --> 00:10:39.480 we have mentions a facility in Cologne, Germany, 00:10:39.600 --> 00:10:42.139 and it describes the entrance as having, you 00:10:42.139 --> 00:10:45.539 know, barely any signage, just a small buzzer 00:10:45.539 --> 00:10:48.320 for drivers to press. But inside. But inside, 00:10:48.539 --> 00:10:51.100 it's a hive of activity. And this brings up the 00:10:51.100 --> 00:10:53.860 WeWork comparison. I saw this in our notes. It's 00:10:53.860 --> 00:10:56.750 a very, very apt analogy. In a WeWork, right, 00:10:56.850 --> 00:10:59.610 you have a freelancer, a small startup, and maybe 00:10:59.610 --> 00:11:02.409 a corporate team, all sharing the same coffee 00:11:02.409 --> 00:11:04.809 machine and the same printer. Right, shared infrastructure. 00:11:05.289 --> 00:11:07.429 In a ghost kitchen, you have what they call the 00:11:07.429 --> 00:11:10.090 single kitchen format. Meaning one kitchen, multiple 00:11:10.090 --> 00:11:12.549 restaurants? One physical room. Yeah. One line 00:11:12.549 --> 00:11:15.789 of cooks. But on the app, that one room is listed 00:11:15.789 --> 00:11:18.509 as a sushi place, a burger joint, and a Thai 00:11:18.509 --> 00:11:20.799 spot. All at the same time. Wait, wait, hold 00:11:20.799 --> 00:11:22.860 on. Is it the same cook as the guy who's flipping 00:11:22.860 --> 00:11:25.340 the burger also rolling the maki? In some of 00:11:25.340 --> 00:11:27.399 the models, yes. Absolutely. They call it cross 00:11:27.399 --> 00:11:29.360 -utilization of labor. It's a cross -utilization. 00:11:29.379 --> 00:11:31.620 If you have a good line cook, they can follow 00:11:31.620 --> 00:11:34.000 a recipe for a quesadilla just as easily as they 00:11:34.000 --> 00:11:35.899 can follow a recipe for a grilled cheese sandwich. 00:11:36.480 --> 00:11:38.799 The ingredients are prepped. The station is set 00:11:38.799 --> 00:11:40.769 up. It's just a different set of instructions 00:11:40.769 --> 00:11:44.350 on an iPad. That is wild. So I'm picturing, you 00:11:44.350 --> 00:11:46.809 know, three different chefs in three different 00:11:46.809 --> 00:11:49.889 authentic kitchens sweating over their specific 00:11:49.889 --> 00:11:52.690 craft. And it's actually just one guy named Steve 00:11:52.690 --> 00:11:55.230 in a windowless room looking at three different 00:11:55.230 --> 00:11:57.769 iPads. That is the reality in many of these places. 00:11:58.009 --> 00:12:01.509 And it creates incredible, almost unbelievable 00:12:01.509 --> 00:12:04.250 flexibility. It feels like this just exploded 00:12:04.250 --> 00:12:06.429 overnight. I really feel like I didn't even hear 00:12:06.429 --> 00:12:08.210 about this five years ago. And now it's just. 00:12:08.750 --> 00:12:10.929 It's everywhere. Was this just a COVID thing? 00:12:11.070 --> 00:12:13.669 Did the pandemic create this? COVID was the gasoline, 00:12:13.870 --> 00:12:16.970 but the fire was already burning. It was an accelerant, 00:12:16.970 --> 00:12:19.370 not the cause. So who started it? Who was the 00:12:19.370 --> 00:12:21.950 first person to say, hey, we don't need tables, 00:12:22.009 --> 00:12:24.570 we don't need chairs? The pioneers in this space 00:12:24.570 --> 00:12:26.409 are generally considered to be a company called 00:12:26.409 --> 00:12:28.610 Rebel Foods. Rebel Foods sounds like a faction 00:12:28.610 --> 00:12:30.850 from Star Wars. They're based in India, actually. 00:12:31.389 --> 00:12:34.190 And they launched their first cloud kitchen way 00:12:34.190 --> 00:12:37.730 back in 2015. 2015, that's really early. It is. 00:12:37.809 --> 00:12:40.409 But the really interesting move to burn the ship's 00:12:40.409 --> 00:12:44.590 moment for them was in 2016. They looked at their 00:12:44.590 --> 00:12:47.649 books, at all the data, and they realized something 00:12:47.649 --> 00:12:51.090 pretty profound. What was that? Their dining 00:12:51.090 --> 00:12:54.490 rooms were losing them money. The actual restaurant 00:12:54.490 --> 00:12:57.029 part of the restaurant was a liability. The part 00:12:57.029 --> 00:12:58.970 that makes a restaurant a restaurant was the 00:12:58.970 --> 00:13:02.700 problem. That's amazing. It was an anchor holding 00:13:02.700 --> 00:13:05.519 them back. So they made a really radical decision. 00:13:05.720 --> 00:13:07.879 They closed all the dining rooms. They went 100 00:13:07.879 --> 00:13:11.220 percent cloud. In 2016. That's years before the 00:13:11.220 --> 00:13:13.120 pandemic forced everyone else to do it. Years. 00:13:13.299 --> 00:13:17.200 It was truly visionary. They saw two. Big societal 00:13:17.200 --> 00:13:19.799 shifts happening. One was urbanization. Right. 00:13:19.960 --> 00:13:21.860 Cities are getting denser. Traffic is getting 00:13:21.860 --> 00:13:23.840 worse. People don't want to drive to a restaurant 00:13:23.840 --> 00:13:25.860 after a long day at work, try to find parking, 00:13:26.000 --> 00:13:27.980 wait for a table. The friction was getting too 00:13:27.980 --> 00:13:30.480 high. And the second thing. Increasingly busy 00:13:30.480 --> 00:13:32.620 lifestyles. Or, you know, if you want to be a 00:13:32.620 --> 00:13:34.019 little more cynical about it, you could call 00:13:34.019 --> 00:13:36.159 it the laziness economy. I prefer the efficiency 00:13:36.159 --> 00:13:39.309 economy. Thank you very much. But no, I get it. 00:13:39.450 --> 00:13:41.769 We got used to streaming movies at home instead 00:13:41.769 --> 00:13:43.490 of going to the theater. It makes perfect sense 00:13:43.490 --> 00:13:45.070 that we'd want to stream our dinner instead of 00:13:45.070 --> 00:13:47.269 going out to the restaurant. Exactly. And in 00:13:47.269 --> 00:13:50.009 the United States, that shift from on -premise 00:13:50.009 --> 00:13:53.470 dining to off -premise dining was already climbing 00:13:53.470 --> 00:13:56.990 steadily year after year. The line on the graph 00:13:56.990 --> 00:13:59.049 was going up and to the right. And then, and 00:13:59.049 --> 00:14:01.580 then? March 20. And then the world just stocks. 00:14:01.840 --> 00:14:04.379 Dining rooms become illegal. You literally cannot 00:14:04.379 --> 00:14:06.639 open your doors to the public. If you were a 00:14:06.639 --> 00:14:09.139 traditional restaurant owner in March of 2020, 00:14:09.500 --> 00:14:11.919 you were staring into the abyss. You have rent 00:14:11.919 --> 00:14:14.399 to pay. You have staff to pay and you have zero 00:14:14.399 --> 00:14:17.399 revenue coming in. It was an extinction level 00:14:17.399 --> 00:14:20.220 event for many. So the ghost kitchen model went 00:14:20.220 --> 00:14:23.399 from being a cool experiment for a few companies. 00:14:24.200 --> 00:14:26.700 To being the only life raft in the middle of 00:14:26.700 --> 00:14:29.139 the ocean. Precisely. It became a survival mechanism. 00:14:29.360 --> 00:14:32.080 If you're a big chain like Applebee's and nobody 00:14:32.080 --> 00:14:34.379 can come sit in your booths, you have a giant 00:14:34.379 --> 00:14:36.779 kitchen sitting there, totally idle. You have 00:14:36.779 --> 00:14:38.679 cooks on the payroll. You have a freezer full 00:14:38.679 --> 00:14:41.600 of food. So you start spitting up ghosts. You 00:14:41.600 --> 00:14:44.539 start inventing brands to put on the delivery 00:14:44.539 --> 00:14:47.559 apps. This is where the creativity and, you could 00:14:47.559 --> 00:14:50.100 argue, the deception really ramped up. This is 00:14:50.100 --> 00:14:51.980 what the sources call the masking phenomenon. 00:14:52.340 --> 00:14:54.059 This is my absolute favorite. part of the deep 00:14:54.059 --> 00:14:57.159 dive the names the branding it's like playing 00:14:57.159 --> 00:15:00.580 a game of guess who with your dinner it's fascinating 00:15:00.580 --> 00:15:03.080 marketing it's almost psychological warfare against 00:15:03.080 --> 00:15:05.320 the consumer but before we list them let's talk 00:15:05.320 --> 00:15:07.700 about the why again specifically for these big 00:15:07.700 --> 00:15:10.980 chains why does a company like applebee's need 00:15:10.980 --> 00:15:14.100 to hide Everyone knows Applebee's. It's a massive 00:15:14.100 --> 00:15:16.440 brand. It's in every suburban neighborhood. Why 00:15:16.440 --> 00:15:19.960 not just sell Applebee's wings on Uber Eats? 00:15:20.080 --> 00:15:22.779 The simple answer is brand baggage. Baggage. 00:15:22.779 --> 00:15:25.360 Think about it. If you're a 22 -year -old scrolling 00:15:25.360 --> 00:15:28.299 through DoorDash at 11 p .m. on a Saturday night 00:15:28.299 --> 00:15:30.519 and you see the name Applebee's, what do you 00:15:30.519 --> 00:15:33.100 think? What's your immediate association? I think 00:15:33.100 --> 00:15:35.820 suburban family dinner. I think my aunt's birthday 00:15:35.820 --> 00:15:38.059 party where all the servers come out and sing. 00:15:38.340 --> 00:15:41.639 Right. Do you think... Cool, spicy, trendy, late 00:15:41.639 --> 00:15:45.240 night snack. Definitely not. No. That is the 00:15:45.240 --> 00:15:49.259 baggage. Applebee's has spent 40 years and billions 00:15:49.259 --> 00:15:52.240 of dollars building a very specific brand image. 00:15:53.059 --> 00:15:55.460 That image works great for families in the suburbs 00:15:55.460 --> 00:15:58.539 at 6 p .m. It works terribly for Gen Z in the 00:15:58.539 --> 00:16:01.059 city who want something cool at midnight. So 00:16:01.059 --> 00:16:04.340 they create a mask, a whole new identity. They 00:16:04.340 --> 00:16:06.940 create a new brand from scratch that is specifically 00:16:06.940 --> 00:16:09.519 designed to appeal to that late night scroller 00:16:09.519 --> 00:16:12.080 without the uncool vibe of the parent company 00:16:12.080 --> 00:16:14.580 attached to it. It's a clean slate. You get to 00:16:14.580 --> 00:16:17.379 be the new cool kid on the block without actually 00:16:17.379 --> 00:16:19.600 changing a single thing in the kitchen. Precisely. 00:16:19.620 --> 00:16:21.700 It's brand arbitrage. Okay. I want to play a 00:16:21.700 --> 00:16:23.440 game. I've got the list from our sources here 00:16:23.440 --> 00:16:26.259 in front of me. I'm going to name the ghost brand, 00:16:26.480 --> 00:16:28.779 the virtual brand. And I want you to tell me 00:16:28.779 --> 00:16:31.279 who's really behind it. And this is the important 00:16:31.279 --> 00:16:34.440 part, why they chose that specific mask. What's 00:16:34.440 --> 00:16:36.759 the strategy behind that name? I am ready. Let's 00:16:36.759 --> 00:16:38.960 do it. Okay. We already covered Pasquale's and 00:16:38.960 --> 00:16:41.360 Chuck E. Cheese. The strategy there is pretty 00:16:41.360 --> 00:16:44.990 clear. Hiding the mouse. Correct. Selling adult 00:16:44.990 --> 00:16:47.370 -ish pizza to adults who don't want to admit 00:16:47.370 --> 00:16:49.549 they're eating food from a children's entertainment 00:16:49.549 --> 00:16:52.629 center. All right. Next one. A big one. Cosmic 00:16:52.629 --> 00:16:57.269 wings. Ah, yes. Cosmic wings. This is a great 00:16:57.269 --> 00:17:00.340 example. The name sounds trippy. Psychedelic, 00:17:00.340 --> 00:17:02.419 even. It does. And the menu reflects that. It 00:17:02.419 --> 00:17:05.599 features wings covered in Cheetos dust. Both 00:17:05.599 --> 00:17:07.779 the crunchy and the flaming hot kind. Cheetos 00:17:07.779 --> 00:17:10.460 dust. Okay, so who is making these psychedelic 00:17:10.460 --> 00:17:12.920 Cheetos wings? That would be Applebee's. Applebee's. 00:17:13.000 --> 00:17:16.460 Okay, break down the strategy here. Why Cosmic? 00:17:16.539 --> 00:17:19.180 Why Cheetos? Look at the target demographic. 00:17:20.039 --> 00:17:23.180 Who is ordering delivery late at night? who love 00:17:23.180 --> 00:17:25.660 snack foods like Cheetos, who might be attracted 00:17:25.660 --> 00:17:28.180 to a name like Cosmic. Are you suggesting they 00:17:28.180 --> 00:17:30.799 are specifically targeting people who might be 00:17:30.799 --> 00:17:32.960 under the influence of certain recreational substances? 00:17:33.380 --> 00:17:36.200 I am saying they are very clearly targeting the 00:17:36.200 --> 00:17:39.279 munchies demographic. The stoner strategy, that's 00:17:39.279 --> 00:17:41.220 what it is. Effectively, yes. It's a textbook 00:17:41.220 --> 00:17:43.839 case of market segmentation. Applebee's is for 00:17:43.839 --> 00:17:46.160 your parents' dinner. Cosmic Wings is for you 00:17:46.160 --> 00:17:48.160 and your friends at 1 a .m. after a night out. 00:17:48.259 --> 00:17:50.730 And it's the exact same chicken. It's the exact 00:17:50.730 --> 00:17:53.769 same fryers and the exact same chicken, but they 00:17:53.769 --> 00:17:55.890 are selling it into two completely different 00:17:55.890 --> 00:17:58.549 worlds. It's brilliant. I should also mention 00:17:58.549 --> 00:18:00.450 they also run a safer one called Neighborhood 00:18:00.450 --> 00:18:03.289 Wings, but Cosmic was the real breakout hit. 00:18:03.410 --> 00:18:06.109 Okay, that's incredibly smart. Next one, The 00:18:06.109 --> 00:18:09.490 Burger Den. That one belongs to Denny's. Denny's, 00:18:09.609 --> 00:18:12.809 okay. The Burger Den. It's a little on the nose, 00:18:12.869 --> 00:18:15.799 isn't it? A little obvious. It is. But think 00:18:15.799 --> 00:18:18.420 about Denny's brand perception. What is Denny's 00:18:18.420 --> 00:18:22.440 famous for? Grand slams, pancakes, breakfast, 00:18:22.759 --> 00:18:26.000 specifically a drunken breakfast at 3 a .m. Exactly. 00:18:26.319 --> 00:18:29.019 Breakfast. Now, if it's 7 p .m. on a Wednesday 00:18:29.019 --> 00:18:31.279 and you want a high quality burger for dinner 00:18:31.279 --> 00:18:33.680 for your family, is Denny's the first name that 00:18:33.680 --> 00:18:36.000 pops into your head? No, not at all. I feel like 00:18:36.000 --> 00:18:38.599 Denny's at dinnertime is a little sad. No offense 00:18:38.599 --> 00:18:40.799 to Denny's. Precisely. They have the ingredients. 00:18:40.920 --> 00:18:42.460 They have the flat top grill. They know how to 00:18:42.460 --> 00:18:44.819 make a burger. Yeah. but the brand prevents people 00:18:44.819 --> 00:18:46.640 from ordering dinner from them. So the Burger 00:18:46.640 --> 00:18:49.319 Den unlocks the dinner crowd for them. It allows 00:18:49.319 --> 00:18:52.220 them to compete directly with brands like Five 00:18:52.220 --> 00:18:55.400 Guys or Shake Shack on the delivery app, which 00:18:55.400 --> 00:18:57.400 Denny's could never ever do under its own name. 00:18:57.700 --> 00:19:00.319 They also have one called Meltdown for patty 00:19:00.319 --> 00:19:02.579 melts and other sandwiches. Same strategy. Okay, 00:19:02.619 --> 00:19:04.400 here's one that I think is genuinely hilarious. 00:19:04.940 --> 00:19:09.170 Hootie's Burgo Bar. Chuckles. Yes. This is, of 00:19:09.170 --> 00:19:11.549 course, owned by Hooters. Now, Hooters has a 00:19:11.549 --> 00:19:14.690 very specific brand asset, a very famous one. 00:19:14.710 --> 00:19:17.210 They do. The orange shorts, the tank tops, the 00:19:17.210 --> 00:19:21.029 whole atmosphere. Right. Now, the food at Hooters, 00:19:21.049 --> 00:19:23.470 the wings specifically, is actually pretty famous. 00:19:23.549 --> 00:19:25.369 People genuinely like the wings. They have a 00:19:25.369 --> 00:19:27.410 following. They do. It's considered good bar 00:19:27.410 --> 00:19:30.329 food. But think about the friction of ordering 00:19:30.329 --> 00:19:33.670 Hooters for delivery in certain contexts. Let's 00:19:33.670 --> 00:19:35.799 say you were at a corporate lunch meeting. You're 00:19:35.799 --> 00:19:37.880 in charge of ordering food for the team. Can 00:19:37.880 --> 00:19:40.339 you order Hooters? Absolutely not. You cannot 00:19:40.339 --> 00:19:43.660 have a bag with the Hooters owl and the big orange 00:19:43.660 --> 00:19:46.220 font sitting on the conference room table. HR 00:19:46.220 --> 00:19:49.400 would have a field day. Exactly. Or maybe you're 00:19:49.400 --> 00:19:51.640 a family with kids at home. You want the wings, 00:19:51.720 --> 00:19:53.720 but you don't really want to explain the brand 00:19:53.720 --> 00:19:55.980 to your eight -year -old son or daughter. So 00:19:55.980 --> 00:19:58.940 Hootie's Burger Bar is basically incognito mode 00:19:58.940 --> 00:20:02.039 for Hooters. It creates a safe, sanitized way 00:20:02.039 --> 00:20:05.279 to access the product. Without the social stigma 00:20:05.279 --> 00:20:08.779 or awkwardness of the parent brand, it completely 00:20:08.779 --> 00:20:12.200 sanitizes the transaction. They also operate 00:20:12.200 --> 00:20:15.259 Hooties Bait and Tackle and Hooties Chicken Tenders. 00:20:15.690 --> 00:20:17.869 That is just fascinating. It's decoupling the 00:20:17.869 --> 00:20:19.869 food from the experience. You know, usually restaurants 00:20:19.869 --> 00:20:22.569 say the experience is everything. And Hooters 00:20:22.569 --> 00:20:24.630 is basically saying, actually, for this specific 00:20:24.630 --> 00:20:27.430 customer, our experience is a liability. So let's 00:20:27.430 --> 00:20:29.410 hide it. Precisely what they're doing. OK, let's 00:20:29.410 --> 00:20:31.089 rattle through a few more of these because the 00:20:31.089 --> 00:20:34.750 creativity here is just endless. How about Conviction 00:20:34.750 --> 00:20:38.470 Chicken? That is TGI Fridays. Conviction Chicken, 00:20:38.609 --> 00:20:41.160 like you're convicted to eat it. Or it's criminally 00:20:41.160 --> 00:20:43.259 good. Or perhaps they are convicted to serving 00:20:43.259 --> 00:20:45.059 great chicken. It's a bold name. You have to 00:20:45.059 --> 00:20:47.579 give them that. Okay, how about Fresh Set or 00:20:47.579 --> 00:20:50.920 The Wing Dept? Those are both operated by Red 00:20:50.920 --> 00:20:53.420 Robin. They also run one called Chicken Sammies. 00:20:53.539 --> 00:20:55.299 Everyone loves a chicken sandwich. It really 00:20:55.299 --> 00:20:57.640 seems like chicken is a huge theme here. Wings, 00:20:57.700 --> 00:21:00.799 tenders, sandwiches. Chicken wings and sandwiches 00:21:00.799 --> 00:21:03.160 travel really well. They hold their heat. They 00:21:03.160 --> 00:21:05.339 don't get soggy too quickly. They're perfect 00:21:05.339 --> 00:21:07.970 for the delivery model. A steak, for example, 00:21:08.089 --> 00:21:10.289 does not travel well. That's true. It gets cold. 00:21:10.369 --> 00:21:12.289 The texture gets tough. So you see a lot of these 00:21:12.289 --> 00:21:15.430 ghost brands focusing on finger foods and things 00:21:15.430 --> 00:21:18.009 that can survive a 20 -minute car ride. Speaking 00:21:18.009 --> 00:21:19.970 of chicken traveling well, here's one that I 00:21:19.970 --> 00:21:21.769 remember seeing in the news because it was just 00:21:21.769 --> 00:21:25.569 so strategically clever. Thigh Stop. Ah, yes. 00:21:26.029 --> 00:21:29.509 Thigh Stop. This was a Wingstop creation, and 00:21:29.509 --> 00:21:31.710 it's a master class in supply chain management. 00:21:32.089 --> 00:21:34.589 Now, Wingstop is already a cool brand. They don't 00:21:34.589 --> 00:21:37.549 have that uncool dad problem like Applebee's 00:21:37.549 --> 00:21:39.970 or Denny's. So why would they launch a ghost 00:21:39.970 --> 00:21:42.529 brand? This wasn't about branding. This was purely 00:21:42.529 --> 00:21:45.170 about survival. Do you remember the great chicken 00:21:45.170 --> 00:21:47.589 wing shortage a while back? I do. It was a dark 00:21:47.589 --> 00:21:49.930 time for America. Wing prices went through the 00:21:49.930 --> 00:21:53.529 roof. They skyrocketed because wings are a finite 00:21:53.529 --> 00:21:56.009 resource. A chicken only has two wings. Right. 00:21:56.589 --> 00:21:59.269 But it also has two thighs. And in America, nobody 00:21:59.269 --> 00:22:01.309 really wants the thighs as much. They want the 00:22:01.309 --> 00:22:04.299 white meat. Exactly. In the U .S. market, thighs 00:22:04.299 --> 00:22:07.500 are significantly cheaper than wings. So Wingstop 00:22:07.500 --> 00:22:10.460 was facing a massive margin crisis. They couldn't 00:22:10.460 --> 00:22:12.980 sell wings profitably anymore, but they couldn't 00:22:12.980 --> 00:22:15.819 just stop selling wings. Their name is literally 00:22:15.819 --> 00:22:19.079 Wingstop. If Wingstop stops selling wings, they're 00:22:19.079 --> 00:22:22.220 just stop, which is not a great name for a restaurant. 00:22:22.460 --> 00:22:25.700 Exactly. So what do they do? They launched Thighstop, 00:22:25.960 --> 00:22:29.500 a virtual -only brand. dedicated to crispy chicken 00:22:29.500 --> 00:22:32.359 thighs using the same sauces and recipes. That 00:22:32.359 --> 00:22:35.440 is brilliant. Just brilliant. It allowed them 00:22:35.440 --> 00:22:38.339 to shift consumer demand. They marketed the heck 00:22:38.339 --> 00:22:40.380 out of thigh stock to get people to try and buy 00:22:40.380 --> 00:22:42.880 the cheaper cut of meat, which relieved the pricing 00:22:42.880 --> 00:22:45.420 pressure on their wing supply, all without confusing 00:22:45.420 --> 00:22:47.960 their core customers or changing their main brand. 00:22:48.180 --> 00:22:50.119 So it's supply chain management disguised as 00:22:50.119 --> 00:22:52.420 a hip new restaurant. It is. And the beauty is 00:22:52.420 --> 00:22:54.859 once the wing shortage eased up, they could just... 00:22:55.039 --> 00:22:57.400 delete the brand yeah or keep it it's just software 00:22:57.400 --> 00:22:59.420 it's totally flexible okay a couple more quick 00:22:59.420 --> 00:23:02.059 ones thrilled cheese that would be ihop they 00:23:02.059 --> 00:23:04.460 also run super megadilla for quesadillas and 00:23:04.460 --> 00:23:07.779 pardon my cheesesteak ihop doing quesadillas 00:23:08.240 --> 00:23:10.799 Super Megadilla. That sounds like something a 00:23:10.799 --> 00:23:13.000 14 -year -old boy came up with. Well, again, 00:23:13.099 --> 00:23:15.539 think about it. IHOP is the International House 00:23:15.539 --> 00:23:18.319 of Pancakes. It's incredibly difficult for them 00:23:18.319 --> 00:23:21.140 to sell dinner. These brands allow them to utilize 00:23:21.140 --> 00:23:24.220 their giant flat -top griddles, which are perfect 00:23:24.220 --> 00:23:26.420 for making quesadillas and cheesesteaks during 00:23:26.420 --> 00:23:29.140 the evening hours when almost nobody wants pancakes. 00:23:29.500 --> 00:23:32.180 It's about asset utilization, keeping the kitchen 00:23:32.180 --> 00:23:35.339 busy. 100%. And lastly, what about rotisserie 00:23:35.339 --> 00:23:38.500 roast? That one is Boston Market. Which makes 00:23:38.500 --> 00:23:40.819 perfect sense, as rotisserie chicken is their 00:23:40.819 --> 00:23:43.180 core competency. Yeah. It's not much of a mask, 00:23:43.279 --> 00:23:45.480 but it's still a separate digital entity. Now, 00:23:45.539 --> 00:23:47.500 is this just an American thing? Are we the only 00:23:47.500 --> 00:23:49.400 ones being tricked by all these creative names? 00:23:49.539 --> 00:23:51.480 Not at all. The source material is very clear 00:23:51.480 --> 00:23:53.880 that this is an international phenomenon. In 00:23:53.880 --> 00:23:55.539 Canada, for instance, there's a chain called 00:23:55.539 --> 00:23:57.779 the Pickle Barrel that operates a ghost kitchen 00:23:57.779 --> 00:24:00.819 called Dirty Dogs. Dirty Dogs. Okay. Classy. 00:24:00.819 --> 00:24:04.119 And in Brazil... Outback Steakhouse, which ironically 00:24:04.119 --> 00:24:06.720 is an American company themed after Australia, 00:24:06.920 --> 00:24:09.440 operates a very successful virtual brand called 00:24:09.440 --> 00:24:12.119 Aussie Chicken. Wait, wait. So Outback Steakhouse, 00:24:12.200 --> 00:24:14.240 an American chain pretending to be Australian, 00:24:14.559 --> 00:24:17.839 operates a ghost kitchen in Brazil called Aussie 00:24:17.839 --> 00:24:20.539 Chicken. The layers of branding and globalization 00:24:20.539 --> 00:24:24.259 are quite dense, yes. Yeah. It is truly a world 00:24:24.259 --> 00:24:26.880 of globalized confusion. They also do this in 00:24:26.880 --> 00:24:28.480 the U .S., by the way, under the name Tender 00:24:28.480 --> 00:24:31.460 Shack. This whole thing leads me to the tech 00:24:31.460 --> 00:24:33.940 side of this, because what you just described 00:24:33.940 --> 00:24:36.819 with Wingstop spinning up a brand to solve a 00:24:36.819 --> 00:24:38.880 supply chain problem, that sounds like something 00:24:38.880 --> 00:24:41.119 a software company does. We have a bug in the 00:24:41.119 --> 00:24:43.900 code. Let's push a patch. That is the third big 00:24:43.900 --> 00:24:46.200 takeaway here, and it's a crucial one. These 00:24:46.200 --> 00:24:48.220 aren't just restaurants anymore. They are data 00:24:48.220 --> 00:24:50.920 companies that happen to sell food. Explain that. 00:24:51.259 --> 00:24:54.140 How is a guy frying chicken in a basement a data 00:24:54.140 --> 00:24:56.740 company? Think about the data feedback loop in 00:24:56.740 --> 00:24:59.400 a traditional restaurant. The owner knows what 00:24:59.400 --> 00:25:01.599 sold well that night because he sees the empty 00:25:01.599 --> 00:25:03.940 pleats in the sales report. Right. But he doesn't 00:25:03.940 --> 00:25:06.380 know why someone didn't order the steak. He doesn't 00:25:06.380 --> 00:25:08.099 know how long they looked at the menu before 00:25:08.099 --> 00:25:11.019 deciding. He has very little data on customer 00:25:11.019 --> 00:25:13.920 behavior. But on an app? On an app, everything 00:25:13.920 --> 00:25:16.759 is tracked. The scroll depth. The click -through 00:25:16.759 --> 00:25:19.690 rate. How long your thumb hovered over the spicy 00:25:19.690 --> 00:25:22.990 option before you tapped on mild. Every single 00:25:22.990 --> 00:25:25.369 interaction is a data point. So they are A -B 00:25:25.369 --> 00:25:28.250 testing my dinner in real time. Constantly. This 00:25:28.250 --> 00:25:30.730 brings us to the concept of beta testing for 00:25:30.730 --> 00:25:33.720 food. In the old world. If I wanted to try a 00:25:33.720 --> 00:25:35.720 new restaurant concept, let's say I want to open 00:25:35.720 --> 00:25:39.140 Paul's Spicy Tacos, I had to take a huge, massive 00:25:39.140 --> 00:25:41.640 risk. A huge risk. You have to sign a five -year 00:25:41.640 --> 00:25:44.180 lease. You have to buy a neon sign. You have 00:25:44.180 --> 00:25:46.359 to paint the walls green. You have to hire staff. 00:25:46.700 --> 00:25:48.940 If it turns out nobody in your neighborhood likes 00:25:48.940 --> 00:25:50.819 Spicy Tacos, you go bankrupt. What about with 00:25:50.819 --> 00:25:52.960 a ghost kitchen? With a ghost kitchen, you just 00:25:52.960 --> 00:25:56.200 design a logo in Canva and upload a PDF menu 00:25:56.200 --> 00:25:59.900 to Uber Eats. If nobody orders Paul's Spicy Tacos 00:25:59.900 --> 00:26:02.309 in the first two weeks, you just delete it. Poof, 00:26:02.309 --> 00:26:04.990 it's gone. And the next week you launch Paul's 00:26:04.990 --> 00:26:07.829 mild burritos. Exactly. Zero construction cost. 00:26:07.950 --> 00:26:10.890 Zero lease breaking fees. It brings the fail 00:26:10.890 --> 00:26:13.269 fast, fail cheap mentality of Silicon Valley 00:26:13.269 --> 00:26:16.069 directly into the kitchen. So we could see a 00:26:16.069 --> 00:26:19.089 world where menus are totally dynamic. Like if 00:26:19.089 --> 00:26:22.049 a snowstorm hits, the app automatically spins 00:26:22.049 --> 00:26:25.730 up a virtual brand called Cozy Soups for 24 hours. 00:26:25.990 --> 00:26:28.910 We are already seeing that. If a certain ingredient 00:26:28.910 --> 00:26:32.460 or recipe goes viral on TikTok like. Say that 00:26:32.460 --> 00:26:34.720 feta cheese pasta thing from a while back at 00:26:34.720 --> 00:26:37.000 Ghost Kitchen Network can have a viral feta pasta 00:26:37.000 --> 00:26:40.539 brand live on DoorDash in 24 hours. A traditional 00:26:40.539 --> 00:26:43.539 restaurant with printed menus and a static brand 00:26:43.539 --> 00:26:46.359 simply cannot move that fast. It's agile development, 00:26:46.440 --> 00:26:49.119 but for food. It is. Our source is called Data 00:26:49.119 --> 00:26:51.740 Driven Dining. They track the feedback, the star 00:26:51.740 --> 00:26:53.519 ratings, the wait times, and they can adjust 00:26:53.519 --> 00:26:55.980 the menu instantly based on that data. If an 00:26:55.980 --> 00:26:57.880 item gets bad reviews, they can just remove it 00:26:57.880 --> 00:27:00.309 from the menu mid -service. OK, so far, this 00:27:00.309 --> 00:27:02.269 sounds kind of amazing from a business perspective. 00:27:02.450 --> 00:27:04.630 It's efficient. It's cheap for the owner. It 00:27:04.630 --> 00:27:06.589 gives me, the consumer, exactly what I seem to 00:27:06.589 --> 00:27:09.410 want when I want it. But we have to talk about 00:27:09.410 --> 00:27:11.710 the flip side. We do. Because the sources use 00:27:11.710 --> 00:27:13.769 some pretty grim language when they describe 00:27:13.769 --> 00:27:15.730 the reality of working in some of these places. 00:27:15.869 --> 00:27:18.269 We do need to address the dark side of the dark 00:27:18.269 --> 00:27:20.589 kitchen. And this is where the term stops being 00:27:20.589 --> 00:27:22.309 about street lighting and starts being about 00:27:22.309 --> 00:27:24.690 ethics and transparency. The descriptions in 00:27:24.690 --> 00:27:29.710 the articles we read, cramped, windowless. unpleasantly 00:27:29.710 --> 00:27:32.769 hot imagine working in a shipping container or 00:27:32.769 --> 00:27:35.670 a basement with no ventilation windows you are 00:27:35.670 --> 00:27:38.069 standing over a deep fryer for a 10 -hour shift 00:27:38.069 --> 00:27:41.509 but unlike in a normal kitchen there is no release 00:27:41.509 --> 00:27:44.579 there's no connection to the outside world What 00:27:44.579 --> 00:27:46.640 do you mean by that? In a normal restaurant kitchen, 00:27:46.839 --> 00:27:48.819 it's hot and stressful, yes. Yeah. But you can 00:27:48.819 --> 00:27:50.500 hear the buzz of the dining room. You see the 00:27:50.500 --> 00:27:52.660 servers coming in and out. Most importantly, 00:27:52.720 --> 00:27:54.640 you see the empty plates coming back, which means 00:27:54.640 --> 00:27:57.119 someone out there enjoyed the food you just cooked. 00:27:57.660 --> 00:27:59.960 There is a human connection, a sense of purpose. 00:28:00.180 --> 00:28:02.400 In a ghost kitchen? It is just a tablet that 00:28:02.400 --> 00:28:05.839 screams at you. Ping, order, hashtag 455. Ping, 00:28:05.940 --> 00:28:09.240 order, hashtag 456. A delivery driver in a motorcycle 00:28:09.240 --> 00:28:11.859 helmet shoves a phone in your face, grabs the 00:28:11.859 --> 00:28:15.200 bag, and leaves without a word. You never see 00:28:15.200 --> 00:28:17.259 the person who is eating the food. You're just 00:28:17.259 --> 00:28:19.539 a manufacturing node in a logistics network. 00:28:19.839 --> 00:28:22.599 It turns the craft of cooking into an assembly 00:28:22.599 --> 00:28:25.440 line. It turns the chef into a factory worker. 00:28:25.700 --> 00:28:29.039 That is a very common critique, that it strips 00:28:29.039 --> 00:28:31.839 the soul and the art out of the culinary arts. 00:28:32.240 --> 00:28:34.799 And there are real concerns about working conditions 00:28:34.799 --> 00:28:37.740 because these places are hidden from public view. 00:28:38.190 --> 00:28:41.250 No customers walking in means less scrutiny, 00:28:41.430 --> 00:28:43.930 less pressure to maintain a certain standard 00:28:43.930 --> 00:28:46.450 of cleanliness or safety. And then there's the 00:28:46.450 --> 00:28:50.210 other dark side, the deception aspect, the transparency. 00:28:50.329 --> 00:28:53.970 This is a big one. The sources we looked at highlight 00:28:53.970 --> 00:28:56.829 a specific case study in the UK from back in 00:28:56.829 --> 00:28:59.250 2019. What happened there? Two big corporate 00:28:59.250 --> 00:29:01.640 restaurant operators. The restaurant group and 00:29:01.640 --> 00:29:04.380 casual dining group, they faced significant public 00:29:04.380 --> 00:29:06.440 backlash. And what were they doing? They were 00:29:06.440 --> 00:29:08.460 caught operating several virtual brands that 00:29:08.460 --> 00:29:10.319 were selling the exact same food as their high 00:29:10.319 --> 00:29:12.759 street chain restaurants, but they were marketing 00:29:12.759 --> 00:29:15.119 it as if it were from a new independent local 00:29:15.119 --> 00:29:17.380 business. That's the betrayal we talked about 00:29:17.380 --> 00:29:19.220 at the very beginning with Pasquale's. It's the 00:29:19.220 --> 00:29:22.180 feeling of being tricked. It raises a real consumer 00:29:22.180 --> 00:29:26.380 rights issue. Do you, as a consumer, have a right 00:29:26.380 --> 00:29:29.319 to know who actually made your food and where 00:29:29.319 --> 00:29:31.819 it came from? I feel like I do. If I'm buying 00:29:31.819 --> 00:29:34.960 something marketed as grandma's organic artisanal 00:29:34.960 --> 00:29:37.200 granola and I find out it's actually made in 00:29:37.200 --> 00:29:39.799 a factory by a subsidiary of a massive chemical 00:29:39.799 --> 00:29:42.839 company, I feel lied to. Even if the granola 00:29:42.839 --> 00:29:44.880 tastes exactly the same. It's been called culinary 00:29:44.880 --> 00:29:47.240 catfishing. That's a perfect term for it. And 00:29:47.240 --> 00:29:49.819 it's all enabled by the delivery apps. The apps 00:29:49.819 --> 00:29:51.619 are the accomplices in this whole scheme. They 00:29:51.619 --> 00:29:53.960 are the platform. And frankly, they benefit from 00:29:53.960 --> 00:29:55.839 the illusion of choice. Right. If I open the 00:29:55.839 --> 00:29:57.700 app and I see 50 different restaurants in my 00:29:57.700 --> 00:29:59.920 area, I think, wow, what a vibrant, diverse food 00:29:59.920 --> 00:30:02.099 scene. But if I knew that it was actually just 00:30:02.099 --> 00:30:04.240 three big kitchens wearing 50 different hats. 00:30:04.440 --> 00:30:06.640 The app looks a lot less valuable, doesn't it? 00:30:07.000 --> 00:30:09.779 One of the sources mentions that a single 6 ,000 00:30:09.779 --> 00:30:13.559 square foot kitchen can produce Italian, Thai, 00:30:13.859 --> 00:30:16.779 burgers and sushi. To the algorithm, that's four 00:30:16.779 --> 00:30:20.420 distinct choices. In reality, it's just one place. 00:30:20.640 --> 00:30:22.940 It's the illusion of diversity. It's a monoculture 00:30:22.940 --> 00:30:25.640 that's disguised as a rainforest. That is a very 00:30:25.640 --> 00:30:28.359 profound way to look at it. So where is all of 00:30:28.359 --> 00:30:31.240 this going? We've got Pasquale serving us pizza. 00:30:31.339 --> 00:30:34.299 We've got stoned people eating Cheeto -dusted 00:30:34.299 --> 00:30:37.240 wings from Applebee's. And we've got chefs working 00:30:37.240 --> 00:30:40.599 in shipping containers. Is this the future of 00:30:40.599 --> 00:30:43.319 how we eat? The sources seem to point to three 00:30:43.319 --> 00:30:46.039 main takeaways for the future, three trends that 00:30:46.039 --> 00:30:48.740 are very clear. Okay, lay them on me. First, 00:30:48.920 --> 00:30:51.539 the efficiency play is absolutely here to stay. 00:30:51.940 --> 00:30:54.319 The brutal economics of commercial real estate 00:30:54.319 --> 00:30:57.299 are not getting better. Rent is high. Labor is 00:30:57.299 --> 00:30:59.640 expensive. The math of the ghost kitchen just 00:30:59.640 --> 00:31:01.779 works too well for the industry to ever go back. 00:31:02.019 --> 00:31:03.880 So we're going to see fewer traditional dining 00:31:03.880 --> 00:31:06.400 rooms and more of these delivery -only warehouses. 00:31:06.579 --> 00:31:08.299 I think that's inevitable. Second, the marketing 00:31:08.299 --> 00:31:11.539 play. We will see more masking, not less. Big 00:31:11.539 --> 00:31:13.640 brands have now realized they can be anyone they 00:31:13.640 --> 00:31:15.680 want to be on the Internet. They will not give 00:31:15.680 --> 00:31:18.440 that power up. So expect more hooties and less 00:31:18.440 --> 00:31:21.400 hooters on your delivery app. For sure. And finally, 00:31:21.519 --> 00:31:24.559 the data play. Food will become more and more 00:31:24.559 --> 00:31:28.180 like software. Faster updates, more personalization, 00:31:28.279 --> 00:31:30.940 and more algorithmic menu design based on real 00:31:30.940 --> 00:31:33.339 -time trends and feedback. It's a little exciting 00:31:33.339 --> 00:31:36.299 and also a little dystopian all at the same time. 00:31:36.380 --> 00:31:39.019 Like most disruptive technology. So here is my 00:31:39.019 --> 00:31:40.680 final thought for everyone listening tonight. 00:31:41.039 --> 00:31:44.559 The next time you are on your couch, doom scrolling 00:31:44.559 --> 00:31:47.819 on a Friday night, starving, looking for something 00:31:47.819 --> 00:31:51.500 new, and you see a cool logo for a place you've 00:31:51.500 --> 00:31:53.539 never heard of before. Do a little detective 00:31:53.539 --> 00:31:56.240 work. Copy that address from the app. Paste it 00:31:56.240 --> 00:31:59.619 into Google Maps and hit Street View. See where 00:31:59.619 --> 00:32:01.279 your dinner is actually coming from. And ask 00:32:01.279 --> 00:32:04.599 yourself, is this a charming local bistro or 00:32:04.599 --> 00:32:07.279 is it a ghost? And then you have to ask yourself 00:32:07.279 --> 00:32:09.539 the really hard question. If the fries are hot 00:32:09.539 --> 00:32:12.680 and crispy, do I even care? That is the question 00:32:12.680 --> 00:32:14.920 that is going to find the next decade of the 00:32:14.920 --> 00:32:16.859 food industry. Thanks for diving deep with us. 00:32:16.900 --> 00:32:17.599 We'll see you next time.