Grow Topline: Virtual Restaurants and their untapped potential

Time to navigate the exhilarating world of virtual restaurants with Geoff Alexander, the entrepreneurial leader behind WowBao. This intriguing episode promises to dive into the finer details of this revolutionary sector, where we discuss the triumphs, the challenges, and the sheer potential that lies within. Geoff's passion for this space is infectious as he spills the beans on WowBao's unique approach to consistency and execution, and the importance of having resilient partnerships.

Are virtual kitchens the future? Is their impact on traditional restaurants fair game or an unwarranted criticism? We tackle these pressing questions with an unbiased lens, exploring the various models within this space and the pivotal role of delivery platforms like Uber Eats and DoorDash. We also shed light on the controversy that often surrounds virtual brands, questioning the fairness of the criticism they receive for simply trying to survive and generate revenue. 

Geoff reveals the importance of supply chain partnerships in virtual brands. His insights into the success story of WowBao's standout Chinese food underlines the significance of having a unique product and a robust supply chain. Listen on as we reveal the recipe for success within the virtual restaurant landscape, underscored by innovation, resilience, and strategic partnerships!

Transcript

Speaker 1: 0:00

We're here at Create this week and recording some very special podcasts for Nations Restaurant News. We're going to be interviewing eight different executives from restaurants and also from the Ambassador Community to explore different themes of each of the chapters of the path of digital maturity.

Speaker 2: 0:52

Alright, live at Create. Here we are with Jeff Alexander, jeff from WowVow. Jeff, it's one of the few people who made both delivering the digital restaurant books One and two. I mean that is how digital WowVow is.

Speaker 3: 1:06

I'm trying really hard to make number three Fingers are crossed.

Speaker 1: 1:09

Do you know? There are already bribes coming from people to say listen, we've had enough of Alexander, but we have it, jeff, which is why you're on today. So thanks for being here.

Speaker 3: 1:17

That's exactly right. I'd rather be in the book.

Speaker 2: 1:21

We are very excited to talk about WowVow and specifically, I think, as I think, about the brand, it's heritage coming from the Luson Pinion Group being a brick and mortar and then moving into the virtual world and then now, beyond the virtual world, the middle-CPU world. There's just so much that's happened with WowVow and we're excited to talk with you about it today, particularly as it relates to the world of Ghost Kitchens and virtual brands. Okay, here we go.

Speaker 1: 1:47

Now, before we get to our standard set of questions here, Jeff, we've got to ask you Ghost Kitchens, Virtual Brands They've been a little bit in the news this year and I've heard how you've responded to some of this in recent conferences, but would like to get your sentiments out on the podcast as well. Our Ghost Kitchens there, the virtual brand, still makes sense in this post-COVID world.

Speaker 3: 2:06

Okay. So it's very important that we understand when I talk about the virtual space, I'm very passionate about it for a number of reasons and I think that in the last few months, with the news that's been coming out, my passion is being mistaken for anger. What I believe is I believe, yes, to go to your question the answer is virtual restaurants are going nowhere. Delivery is going to continue. Delivery is extremely important for the industry and for restaurants to survive, and the virtual restaurant space has so much evolution in front of it and continued innovation is going to be coming that I'm extremely, extremely excited and happy and bullish on how it's going to become.

Speaker 3: 2:42

I've said this a few times and I still believe that we are really like the second inning of virtual restaurants. I hope we go into extra innings and it goes on for a long time. And the reason why I say that is what's going on in the press. The press has taken a one-sided story, I believe, just like press does. Somehow it's been forgotten about the fact that virtual restaurants during the pandemic helped pay people's rent, keep restaurants open, keep people employed, did a lot of good, but also created an incubation system for new chefs to create new concepts, and all of that has somehow been forgotten, and I think that if we can get back to why people are doing this, it can get embraced and you'll see so much more come our way.

Speaker 2: 3:27

Yeah, I think that's very true. There are so many good things about them. Now they do have some tricky things too, and I think of all of the virtual brands we've seen, wauwau have navigated around those things the best right, and so I think, in particular, the news has been very focused on consistency of execution in restaurant, and it feels like Wauwau was designed from the get-go. Deal with that consistency and make sure that execution was the same no matter who was doing it or where.

Speaker 3: 3:56

Right? Well, look what's important about the virtual space and with even opening your own restaurant. Number two is consistency and training. The thing that we have to remember is that, literally from March of 2020 to, let's call it, january of 2023, right, so 30 months, maybe some brands went from zero to 2000. We went from zero to 700. I mean, that is absurd growth. If you go pre-pandemic, it's said to any restaurant chain outside of maybe young brands, mcdonald's and Starbucks, that you're going to grow in 30 months from zero to 700. What's your worries? Probably CEOs would have been like we're not going to do it and put the foot down and said I refuse to do it when you have that kind of growth. And the reason why that growth happened was twofold. One, ease of execution right, it wasn't human capital, there wasn't leases, there wasn't equipment right, it was all virtually done. And the need is what sped it up? Of course, there's going to be issues. We're absurd to think there's not going to be problems If you open up number two restaurant. You're going to have issues. Everyone says the hardest thing in the world is going from one to two.

Speaker 3: 5:04

What's important is to find good partners to represent your brand and to recognize they're not doing something right and to be willing to correct the mistakes on the frontline. What happens a lot in every group, in every industry, in every business, is the person at the top of the food chain wants something to happen. For instance, if sanitation is the most important thing that you want to clean restaurant, I guarantee you all of your restaurants are clean. If sanitation is like number seven on your to-do list, your restaurant is probably dirty because number seven for that CEO is probably number like 14 to 18 for the manager who's working. So those partners, that people signed up from a virtual space who cared about making sure the virtual restaurant was successful, did it right. Now for a while about to go back to your question is yes, our product. We have co-packers who help us do it. We're able to have national distribution of it and from day one we said to people all you have to do is boil water and have steam and you really can't mess up our product.

Speaker 2: 6:03

So you're saying I can do it.

Speaker 3: 6:05

I'm saying that I burn water and I can do it. You literally cannot do it, but you could do it in your dorm room in college. You could do it out of your garage, out of your own house. I mean, it's that it boil water and you have product. Some of these other concepts are a little more difficult, or they're not even difficult. It's just about caring.

Speaker 2: 6:22

Yeah.

Speaker 3: 6:22

And it's amazing to me how you can have a restaurant that has 30 menu items and we all know there's one menu item that no one ever buys. But when they finally make it, either they make it with care and it's right or it's always getting complaints right. It's always one of the two. You have a virtual brand. It might be the type of thing where you're only making three of those at night or six of those at night. So what is the consistency factor there? And that's why so many other brands have had problems and we've been very fortunate because of our product.

Speaker 1: 6:51

Today you're in host kitchens, you're in ghost kitchens. Congrats on the Walmart CPG deal. I mean, well, I was everywhere, but the root and branches of this brand started in brick and mortar. Why was that important and how has it helped you guys get that head start?

Speaker 3: 7:05

Well, the brand just celebrated 20 years this past August. So you go back 20 years ago. There wasn't anything but brick and mortar, right? No one was thinking about restaurants and CPG and no one was thinking about virtual at that time. So that's why we've been able to constantly improve our systems, our training, and when we got the idea to launch the virtual and this is back November of 2019, we were already in airports, we were already in college campuses, we were already in sports stadiums, we were already in music venues, so we had a way to train people across the country and we had distribution of the products. So we understood the operational side of it.

Speaker 3: 7:44

And when we launched in January of 2020, we launched with one location. We didn't turn on our second location till March. So we had two months of data what was working, what wasn't working, what do we need to tinker with? Then it was like off to the races and there were some people who just get it right and we learned from those who were doing a wrong and we now created a whole new system of how we retrain, how we recertify. I don't think we've really gone on a plane for maybe four restaurants literally four visits in the last 40 months it's all been done virtually for us and we made it wow, wow. So we've been able to secure, you know, to keep a level of quality. That's been very important for us.

Speaker 2: 8:22

That's really incredible, and so are you using a lot of restaurant specific tech tools to do that, or are you able to get off the shelf tech tools that would work in any industry to train people?

Speaker 3: 8:32

Yeah, that's a good question. So we were using an online training tool called Showpad, which was never designed for this. We used it in-house for everything we were doing and we just kept adding to it. We just did a partnership with the scoops. We're in the process of developing the material right now, so we're hoping in about six weeks we're going to launch it out to everybody.

Speaker 3: 8:51

Then sort of, what's available to you? Zoom? We use Zoom for a lot of stuff, but it really comes down to what I've learned is you have to have the relationship with the operator and you have to really open a dialogue. What's working for you, what's not? How can we help you? What are we seeing? What are we hearing? We just partnered with Marquis to help us with reviews. They're coming in. One of our partners wants to now launch us with Ovation so they can start getting feedback. So we have some really good partners who want to keep elevating the relationship as well as the response. They're going to get the most sales and I think that's great that they have this stuff built in-house.

Speaker 3: 9:29

We don't really have any relationship with integrators for the third party. I'm sorry. We have a great relationship with Chowley because that's who we use for our three brick and mortar. But now we're with Olo and Audermark and Otter and we don't have relationships with any of them. But we're the middle person between the restaurant and the integrator and the restaurant wants us to deal with the integrator and the integrator wants to deal with the restaurant because they're the client. So there's great technology out there. It's really about having the relationship with each of the entities to make sure you can get the most out of each of the technology pieces.

Speaker 2: 10:00

And when you talk with restaurants who are interested in carrying WoWOW, how do you help them assess their readiness for a virtual brand? Do they have the capacity? Do they have the capability? How do you help them think about answering that question?

Speaker 3: 10:13

Yeah, and that's a really good point. So when we launched this back in 2020, our menu was probably about 60% of the size it is now, and everything was on the menu of Steam Easy you could boil water, you can do it and that question hat was do you have a steamer, do you have an open flame, like what are we working with? Then we started to expand the menu based on people who've been with us for a long time. They wanted more menu items because they thought it was bringing more customers. We wanted to get higher check averages. Now it got out of the steam factor and we got into egg rolls which are fried.

Speaker 3: 10:46

So then not everyone is a fryer. We work with red mangoes, which is an ice cream store. Right, there's no cooking equipment at all. So then we started developing turboshaft technology of what our items could work in there. Then we partnered with another group who had a rationale, so now we had to test our food in a rationale of them to see what would work. So it's more about what equipment do you have, and either we've already know it can work or let us go back to our drawing board and see if we can make it work for you.

Speaker 3: 11:10

The important thing is the integrity of the product, right? We're not just trying to put food into any old equipment and serve it, because we need our product, which is our brand. And this is the hardest thing about the virtual space. We are allowing someone else to impress and affect my brand and there are other virtual brands out there who have allowed people to do it and they've negatively impacted the brands, and that is a terrible thing to happen. That is, you know. I mean it's sort of like can you imagine if Apple lets somebody else go run an Apple store and just ruin it Like that would be a terrible thing. The stock market, what would happen? And we are entrusting people with our brand. So it is our responsibility to constantly get people to represent the brand correctly.

Speaker 1: 11:53

There's a lot of synergies to franchising in this space, of course, but I'm curious when it comes to the different types of models that are out there. Can we make a point in the second book to really emphasise there are different types of ghost kitchens, there are different types of virtual brand companies? Help us understand the differences that exist out there, because I think that's important to the last point you just made.

Speaker 3: 12:13

Yeah, you know what's interesting is. I'll get back to your question, but it made me think of something. Uber Eats came out six months ago and they were killing 5,000 virtual restaurants. What's interesting about that is one of the reasons why they killed it is they were saying it was bad reviews. Outside of our top three reviews that are negative, one of them is always canceled orders, and Uber made a big point. If your orders are canceled, you have a high cancellation rate. We're going to turn it off.

Speaker 3: 12:39

Integration causes cancellation. When integration fails, when POS fails all of this virtual space is based on Technology platforms DoorDash, uber, rubbub. If they fail, you get bad cancellation rates and then Uber's turning you off and they don't realize that there are things that cause that is out of the operator's hands, right? So when you talk about the different, the different spaces, about the virtual and the Cloud and the kitchen and the host and the ghost and the dark, there's factors that are outside the realm of any operator make it successful now In the virtual space.

Speaker 3: 13:15

To get back to your question now, people were creating their own Mexican restaurant and then creating a virtual brand calling it's something totally different. Yep, right, sort of the exact same menu. Yep, okay, I Look at it a little differently than how it's been portrayed. If I own a taco place, just tacos, and now I'm gonna launch Alexander's tacos and you order from Alexander's tacos, is that really a negative Like? Did I pull one over on you? Shouldn't you do your homework? Like, if you're gonna order food, don't you want to know where the food's coming from?

Speaker 1: 13:46

to be fair, I'm probably gonna order from Alexander's tacos and just tacos. It's just the name. It's just. The name is different.

Speaker 3: 13:51

But then you, if the pictures look great in the food and the food's good, right, does it really make a difference? Like I don't. I can't really wrap my head around why it's such a negative Because it's increasing revenue for the restaurant. Who's struck? I mean, we're in Chicago and on my three brick and mortar is two are in business districts. We're still at 40% capacity in the business district 40% capacity. My rents did not drop 40%. So if I have to find a different way to create more revenue and somebody's gonna buy it, I don't see the negative.

Speaker 3: 14:25

Now, if I'm lying about stuff, if I'm trying to hide stuff, I'm doing this negative connotation behind it. I get that side of it. Well, when you, you right now, can shop online for anything, you don't know if it's coming from a Fourth-grader is making bracelets at their house or you're buying it from Tiffany's, I mean, yeah, right, you don't know the quality of what you're buying. It's up to you as the consumer Right buyer, beware to interfere. And look, I'm not trying to say that it's okay to serve crap. I don't want your listeners to think that that is not what I'm saying. But I don't see why it's bad for people to want to survive. You can go into Old Navy right, owned by gap, or was old my gap, I don't know if it is any more right clothing store and it used to be clothing. You go to the cash register. Now it's all candy, right, it's? I pod stuff or not. I probably guess I fall stuff. It's like all this stuff that's not their main business. Why is?

Speaker 1: 15:19

that okay.

Speaker 3: 15:20

Is it okay Because you're in the building and you know you're buying this from that, as opposed to it's out the back door and you don't know like it's? You're utilizing your space to be successful and you're not utilizing your space to be successful to put money in your pocket. You're trying to make ends meet, trying to pay your rent and keep people employed, right, I mean, when you go into the, the ghost situation now, right, the cloud kitchen to the world, the kitchen unites, even though I know they're moving away from the space, right, where they have multiple kitchens that you can rent. What's happening in that world is it seems like it's acceptable for you to run multiple brands out of it because you never had a storefront to begin with.

Speaker 3: 16:01

I remember in 2017, we visited cloud kitchen in LA. We actually opened up in there and there was a guy who had a 200 square foot pizza concept and he had 32 tablets and I couldn't name 32 delivery companies. He changed, he made four different doughs, but he used the same pepperoni, the same sausage, he had different sauce, different sauce and different dough and everything else is the same and he ran four pizza concepts and in 2017, no one cared. People care because the press attached themselves to this and I do think there's a responsibility to the consumer.

Speaker 1: 16:33

There must be something that's attributed also to the fact that because you have the supply chain that's a factor a national supply chain that can really make sure that you don't get to a situation where the bowel buns run out. The different models of how virtual branded restaurant customers are out there today are different as well. Any comments around what is the right kind of model for restaurants to think about embracing this If they're on board with the idea of utilizing surface capacity, how do you find the right kind of company?

Speaker 3: 17:00

Well, you shouldn't be part of WoWBOW, no, but the answer is. The answer is very simple. It has to be important. It's a business. It's a business and it needs to be treated as a business. You need to care about the guest who's going to have food in an hour that's going to taste good and look good and be right. If you don't care, if you're just putting food into a packaging and hoping it makes it to the bag and that it's going to be good when it gets there, you shouldn't do it.

Speaker 2: 17:24

Right, it's very Yoda of you?

Speaker 3: 17:26

Well, it's not even Yoda.

Speaker 2: 17:27

Do or do not. There is no try. Yes, you are either Anas or you are not Emma.

Speaker 3: 17:30

Right, right, there is no try, do or don't do. You did the quote better. But look, all I know is there's real money to be made and there's real positive outcomes from that money. That can be done to help your business and your community and your employees. Why you wouldn't take it seriously, why you wouldn't explain to that manager's on that shift or that cook who's working there and I get it. They're shorthanded, the manager's also, the host and the kitchen's missing somebody and the kitchen manager went home. I get it. And I would say to that if you have 40 menu items, I guarantee you eight of them don't sell, I guarantee it. So turn on eight virtual, only that will sell. And now it's not additional work for the cook. Or just make sure that cook cares about the food. Bonus them right, reward them, get a good rating, high five across the kitchen, like it's a business. Like I said earlier, if it's important to the boss, it will work for everyone else.

Speaker 2: 18:30

I think the other thing that Wauwa has done so differently obviously the supply chain, the training and consistency of partner and the right people very, very important. But the other thing that's, I think, very different about Wauwa is that the food is differentiated and one of the neatest things I think about virtual brands is that they enable the rapid rollout of new styles of food to much in America that maybe it would have taken five or 10 years for that style of food or those concepts to get to those places. To what extent do you view product differentiation, brand differentiation, as part of the Wauwa win?

Speaker 3: 19:04

There's two reasons why Wauwa has been successful in the space. The first is we exist Right Again, we just celebrate 20 years. You can Google us, facebook us, social us, like. We have a story and we exist. The second reason is because we have this food that most people cannot cook. Right, we're not another burger concept, wing concept, pizza concept that everyone can just turn on tomorrow, another taco that everyone can turn on. We are a Chinese food that most people cannot cook, chinese food when the vision is you need walks, you need heat, you need skill, you need certain ingredients. When you go into most major metropolitan and you open up an app third-party delivery and you go to pizza, you might do six or seven thumb scrolls, depending on the major metropolitan. You might have one or two Chinese food scrolls. You go outside of major metropolitan and you go to suburban, you might be on four or five pizza, but you might not even have a thumb scroll for Chinese food. So our competitive set is much smaller, which is absolutely helpful to win of what we're able to do.

Speaker 2: 20:05

Yeah, so on that third party apps, part of the reason that you are so visible in those apps and we call it above the fall of the main age, they literally just aren't other choices to fill that screen out.

Speaker 3: 20:18

Yes, and I have to say I hear my culinary people in the background saying there's a third reason why I'm so successful it's because we have great foods. Let me throw it out there. But yeah, thank you. If you open up your app and you look and we look, we buy keywords, search words. Chinese food doesn't go to pizza, burger or chicken. If I bought the word chicken because we have teriyaki chicken, orange chicken, right, curry chicken, I'm gonna be in there with all the fried chicken sandwiches and grilled chicken salads, right, so I can't buy that word. But none of those people can buy the word Chinese right, or potsticker or dumpling or right. My words really go to the only the people serving our type of cuisine, which, again, we're always above the fall I love that Vending machine CPG.

Speaker 1: 21:05

the importance of the supply chain seems to be critical with all of this. How does it work? How do you make it work for?

Speaker 3: 21:10

you guys. We have great partners to make sure our supply chain is not initial. We're constantly working on a relationship with Dot Foods, we're constantly working on relationship with Cisco, us Foods, gordon Food PFG, and we partner with everybody. And I think what's important to realize is everything whether you're in the audience, the food or hospitality industry, everything is based on relationships and during the pandemic, we were already in distribution. That's very key to know that we were already in there, because a lot of businesses the Cisco, the Dot Foods, us Foods wouldn't take on new product. But we were in.

Speaker 3: 21:46

But what happened was there were layoffs going on, so everybody was overworked and underpaid and tired or whatever, and we've worked on building relationships with each of those partners and then what happened was, as people started coming back on board, they wanted to work with us because they heard good things, because we were respectful.

Speaker 3: 22:04

Then our co-packers that we work with have been great. As we continue to build out new items, new products, we visit regularly to all of our people to make sure that the job is being done and, just like anyone else in the world, nobody likes to do the same thing every day. So if you're bringing new ideas and you have a question about how we can improve and what we can do it keeps those people inspired right. Education and motivations is the key to everything and if you take that thought, that mindset, to your employees, you want to educate and motivate them. To your consumer, you want to educate and motivate. And then your partners, because they're not getting educated and motivated, they're just doing job on the scenes. It builds a relationship as a whole really in a community way.

Speaker 2: 22:50

Well, one last question. I was created inside Leta Center TV. For people who don't know Leta Center TV group, it is just an absolutely amazing restaurant group in Chicago, mostly dinin restaurants, mostly a little bit higher end, great experience. And WoW is very different from the rest of the Leta Center TV group and I would go so far as to say historically you could point at large companies and say they're not so good at innovating something as disruptive from within as WoW, as a virtual brand has been. Frankly, even WoW at the very beginning as a brick-and-mortar fast-pull was what do you think made it possible inside such a large restaurant group to innovate something so different and so new.

Speaker 3: 23:35

So Leta's like to build big restaurants that do very big volume. And Rich Melman, our founder, our chairman of the board, he's not really interested in his repeating a brand. He's like, okay, I did that, let's go do this now. Oh, I tried that, let me go do this now. And so I think that's very disruptive, right. Most people would say, oh, this thing's a home run, let's go do a gazillion of them. He's like, nope, I did it, I want to get a new partner and new chef and try something different. The other thing that makes Leta so successful I'm gonna PR. People are gonna call me, I don't know. It's 120 or 160 restaurants are inside the umbrella right now. Inside the company they're about 72 partners. So what happens is the partners run the brands right.

Speaker 3: 24:18

Leta's is an umbrella company that we all, you know, are proud to be part of. We're all have the same mindset, we all think the same. But you are responsible for your individual restaurant or your concept, right, and when you are responsible that you think like an owner, you think like an entrepreneur, you think outside the box because you want this to be successful. There's no one saying, okay, everyone, tomorrow, five dollars off on door dash like. That's not how we operate, especially when you have many different cuisines. It doesn't work for that.

Speaker 3: 24:45

So when you get involved with any of our concepts, it's really it's an education and how to run a business, and you're allowed to try things. You're allowed to fail. The rule is you have to learn from the failure. It's also how big is the failure right? You're not going to be given a blank check to go. You know, turn something on, that's going to break anyone's bank account, but you're encouraged to have ideas. And when you're surrounded by very successful people Rich Melman, our founder, kevin Brown, our CEO, rj Melman, our president you have people as resources to say I want to try this, I have this idea, and either they've been there, done that, or they've a network of people who they can reach out to to help guide you. And that is what really attributes Lettuce's success to relationship building, which is really what Lettuce is always thinking about.

Speaker 1: 25:35

Thank you for being here today On behalf of myself and Meredith. We always appreciate your support in helping us with our book promotion, helping us be able to get the word of WellBow out there. But congratulations to you and the team for tremendous growth. And what's the target for next year? How many WellBows are going to be out across North America?

Speaker 3: 25:50

You know right now we're going to end this year with about close to five, maybe 6,000, grocery stores. So we're working with. My goal next year is to be 15 to 18,000 doors, freezer doors. We want to see that grow. And we're talking right now to a bunch of hotel operations. We're talking to some very large amusement groups.

Speaker 2: 26:07

Yeah, I would love to see. I would love to see WellBow product at the most yes. I love it. I love it. Well, it's easy, it's portable, Right, it can be why wouldn't you take that and just walk through the amusement park?

Speaker 3: 26:20

You don't need to ask me that question. That is not a question. Why wouldn't we? I think, yes, we should, because get like Celine Basoul over here on your podcast, ask him why we don't have WellBow or Walt Disney's. You know, minions over here, bring the mouse, yeah.

Speaker 1: 26:35

We'll get straight onto it, jeff. Thanks for being on the show. Thanks again, appreciate it, thank you. The Digital Restaurant podcast is available for you to follow and subscribe wherever you listen to your podcasts, watch us, rate us and subscribe to the Digital Restaurant on YouTube, and follow along on all our social media digital restaurant channels. Thanks for listening.