Kitchen United plans to open food centers at Kroger grocery stores, like this one in Dallas. / Photography courtesy of Kitchen United
Ghost kitchen supplier Kitchen United is about to get much bigger.
The Pasadena, Calif.-based company, founded in 2017, currently has approximately 30 outlets operating or underway nationwide. But he thinks he can hit 500 in the next five years, CEO Michael Montagano said. That would be an increase of almost 17 times.
Fueling this push is news $100 million investment which includes contributions from some of KU’s closest business partners. They will not only help finance the growth of the business, but also provide it with much of the space.
Kroger, for example, has added Kitchen United hubs to its grocery stores, while Simon Property Group is bringing KU’s technology at the restaurants of its shopping centers. Kroger has more than 2,700 stores in the United States, while Simon has nearly 200 malls, providing a big potential avenue for KU to expand its network.
“That’s the plan,” Montagano said.
Meanwhile, Burger King and Popeyes, the parent company of Restaurant Brands International (RBI) and owner of convenience store giant Circle K, also contributed funding and intend to deepen their relationship with KU. Montagano declined to provide details on what it might look like, but said RBI and Alimentation Couche-Tard would have more to say soon.
The investment, which also included Google’s GV fund and Happy Meal supplier HAVI Group, underscored Kitchen United’s unique connection to food, real estate and technology. The company started as an operator of multi-restaurant kitchen centers that only produce take-out food. These facilities have their own technology system, called Kitchen United OS, which allows customers to order from multiple restaurants at once and coordinates the schedule in the background.
Over the past year, its real estate strategy has evolved to offer more visible, high-traffic locations, including inside grocery stores. It has also brought its technology system to shopping mall food courts, enabling them to leverage off-site channels. And it has rolled out what it calls Outposts, which allows food halls or even restaurant groups to use its technology as an ordering system to process bulk orders from corporate customers.
Source: United Kitchen; numbers reflect current and “coming soon” locations
The main theme is to help physical businesses extend their reach into the digital world in an efficient way.
“Our vision is not to get into the restaurant industry or the convenience store industry or the real estate industry and disrupt it,” Montagano said. “Our goal has been, and continues to be, to enable incumbents in the market to adapt and evolve with changing consumer preferences for offsite.”
When asked which of the formats above had the most white space, he pointed to the opportunity offered by Kroger and Simon. But technology licensing is also an important area of focus given its low capital requirements. Freestanding kitchen centers, Montagano said, will be used as a replacement strategy. Exhibit A is the company’s newest outlet, a Kitchen United in Frisco, Texas, which joins a recently opened location in a Dallas Kroger.
“All [the formats] were strategically chosen because of their ability to scale and capital expenditure efficiency for us to scale,” Montagano said.
They also reflect a key shift in Kitchen United’s strategy from delivery to pick-up and even restaurant. At its two Kroger locations, for example, a large portion of transactions are advance pickups. His sites also get “a good amount” of walk-in traffic, Montagano said, especially around lunchtime, and then act more like a traditional ghost kitchen during dinner and late at night.
The measures appear designed to alleviate some of the challenges delivery-only businesses face, such as low visibility and reliance on expensive delivery orders. A food hall-style Kitchen United in downtown Chicago, for example, has a full bar and space for guests to dine in.
Regardless of the format, “delivery is always a big part of that mix, and still in many cases close to 50% of the volume,” he said. “So for us, it’s a hybrid between all of those elements that’s a huge part of the whole thing.”
And it looks like the company is ready to expand its offering beyond hot food, a step suggested by Circle K’s investment as well as KU’s presence in malls. In theory, the company’s technology could allow a customer to order a hamburger from the food court and a pair of shoes from Macy’s in a single transaction.
“By far, the biggest near-term opportunity is being able to diversify the offering to our end customers beyond just prepared food,” Montagano said.
“The larger idea is the same, and that’s that we take a real estate asset, we pair it with a robust technology asset…to maximize it for the whole day,” he said. “That’s the big thesis.”
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