Emerging Restaurant Segments are Mixing Up the Canadian Foodservice Landscape

0
648

The original notion of a restaurant involved the exchange of payment for food set on commercial tables with scant fanfare, but today’s restaurants are more complicated, complex engines whose mechanics would flummox the concept’s originators. Indeed, the very essence of foodservice in Canada has become a mutable thing, its composition updating with every audacious addition. Ghost kitchens, food halls, restaurants where you drive a simulated race car between courses — these are the pieces of the emerging restaurant scene.

As with so much, the change is rooted in technology. Restaurant delivery apps — now fixtures on our phones — were once an ambitious restaurateur’s dream. Now there’s a new announcement every week about a delivery service partnering with a foodservice concept, chef, author or restaurateur. For consumers, this means more delivery options; for brands, it means more opportunity for expansion, lower barriers to entry and more eyes on their signs than could ever have seen them from the road. It also means the opportunity to leverage not only the delivery service’s customer list, but its technology, data and insights.

No wonder Wendy’s is making ghost kitchens — whose business model eschews dining rooms and takeout in favour of delivery-centric locations — a significant part of its expansion strategy, joining the likes of Chick-fil-A south of the border and Cinnabon in Canada.

George Kottas, CEO and founder of Toronto-based Ghost Kitchens Canada, was a ghost-kitchen pioneer. Poised to franchise his new breakfast concept four years ago, he took a call from Just Eats wondering if he wanted in. He did and started experimenting with a 24/7 delivery option. He left one employee in the kitchen and it was a breeze — one menu, one concept. Soon, Kottas approached Uber with a new concept for his breakfast place — he wanted a new store, Greek food, but in the same spot. Uber said no way, it couldn’t do it unless there was a storefront. “I said, ‘Come on, man, let’s innovate, what do you have to lose?’”

Niko’s Greek Grill, an anonymous Greek restaurant operating out of a breakfast diner in the middle of Toronto’s Greektown, was a runaway success. Today, Kottas is marrying ghost kitchens with exclusive Canadian rights to 20 big brands, including Ben & Jerry’s, Nescafé and Cinnabon. By the end of 2020, he will have almost 90 per cent of his Canadian operations — 25 restaurants with takeout but no dine-in options — up and running.

It took time for faith in ghost kitchens and online delivery to get there, says Ryan Moreno, CEO of B.C.-based Joseph Richard Group, who launched 100 restaurants — seven new concepts in 14 existing restaurants in the lower mainland, each with its own full menu — in one day last April. “We already had a restaurant with a kitchen. We have the space, a staff, we’re already paying the lease.”

The ghost-restaurant market in the U.S. is expected to generate US$26 billion next year and third-party delivery apps in the next two or three years in North America are expected to close in on US$100 billion in sales. “This is the new norm,” says Moreno. “People want to be able to go on their phone and say, ‘I want poke,’ and — boom — get poke.”

Still, operations are a challenge, Moreno admits. Third-party delivery apps mean you’re relying on another team to execute and deliver your project. More than that, says Kottas, managing 15 brands means there are 15 supervisors watching you. And then there’s labour. “If you’re a ghost kitchen relying solely on delivery, every penny is crucial. You can lose control very quickly.”

It’s a matter of being flexible, says Moreno — and asking the same of your staff. He was hit with a wall of stares when he told his people its single restaurant was morphing into eight. He learned to say, instead, okay, we’re going to add 50 items on a feature sheet.
“People can wrap their heads around that, they see the opportunity, the additional revenue.” He involved his culinary team from the start, incentivizing them with the opportunity for menu development and the opportunity to prepare foods they never thought they’d get a chance to.

MEETING OF THE MINDS
Food halls have been all the rage over the past couple of years, with retail landlords across the country welcoming this lucrative alternative to vacant Target and Sears Canada spaces. Essentially glorified food courts, these ambient marvels occupy great sprawling acreages of retail real estate in both downtown cores and suburban shopping malls. They’re the North American iteration of an idea born in Europe, where diners can find a wide choice of food and drink options — above and beyond the standard chain-eatery fare — from purveyors whose permanence in the space is more settled than a food truck, food stall or pop-up restaurant.

Pusateri’s Fine Foods opened a food hall on the lower level of Saks Fifth Avenue’s flagship store in Toronto in 2016 and it continues to innovate by adding new dining options. In 2018, Assembly Chef’s Hall, which bills itself as “Canada’s first chef-driven culinary market,” opened, an 18,000-sq.-ft. emporium that houses the culinary creations of 17 top Toronto chefs, restaurateurs and baristas, in addition to a beer hall and a wine bar. More recently, Italian “grocerant,” Eataly, opened a 50,000-sq.-ft. location over three floors at Toronto’s Manulife Centre, the brand’s first Canadian outpost.

Landlord Oxford Properties opened Canada’s first two suburban food halls in the Greater Toronto Area — Market & Co., at Upper Canada Mall in Newmarket, north of Toronto and The Food District at Square One in Mississauga, Ont. — and the company claims sales and foot traffic are up as a result. Last fall, Oxford Properties opened its third suburban food hall at Galeries de la Capitale in Quebec City — the first food hall in the Quebec City market — featuring a RICARDO restaurant.

PLAYING WITH YOUR FOOD
The idea of mixing a meal and entertainment has been around since dinner theatre. But things are really humming in this space now, with barcades, VR lounges and pinball bars dotting the landscape. The category is called FEC — fun/family entertainment centres — and though it’s further developed in the U.S., where brands such as Dave & Buster’s thrive, it’s heating up here, too. In Toronto, The Rec Room (which boasts six additional locations in Canada) is an FEC standout. In 2017, Cineplex converted an old Leon’s building into a 40,000-sq.-ft. complex offering a vibrant social experience for nearby condo dwellers and sports enthusiasts. With its racing simulators, basketball nets, air-hockey tables, live music, comedy shows and VR lounge, the Rec Room is a Chuck E. Cheese for the millennial set. But here’s the real news: it’s got good food. The Rec Room highlights the food piece of the food-and-entertainment equation and distanced itself from the arcades of the past, where eating was an afterthought. There’s a fast-casual outlet at The Rec Room, the Shed, but full-service dining at the ingredient-driven scratch kitchen of Three10. “We could easily work with suppliers, but we’ve taken the stance that it’s important to drive technique and bring quality to our guests — highly conscious millennial consumers who are aware of culinary trends, ethnic flavours and lifestyle choices,” says Christina Kuypers, vice-president Operations and Guest Experience, Cineplex Entertainment.

It’s the same thing at Playdium, Kuypers says, of the amusement brand aimed at teens and their families, where the food is a shock to people expecting cardboard pizza slices and tasteless poutine. “It’s unexpected,” she says, “so it’ll take a bit of time to convert.”

UP NEXT
As much as these restaurant and entertainment businesses are part of the current buzz, Kyle Murray, a marketing professor at the University of Alberta, says he doesn’t anticipate a huge rise in this corner of the market. The “overwhelming change,” he contends, will be in technology and delivery services. And even on this front he’s not bullish, given the delivery model’s emphasis on volume over margins. “Restaurants can have large menus and flip food faster, but they relinquish 15 or 20 per cent of the order to the apps off the top,” he says, shrinking profitability to waste.

Still to be seen, predicts Murray, is how much rope investors are willing to give these companies. “So far, they’ve been able to give them a ton of leeway in the hopes they’ll get market share and become hugely profitable. It’s a real challenge, but no different from the one every other organization that’s faced digital disruption has gone through.”

And so, the evolution continues.

Written by Laura Pratt

This site uses Akismet to reduce spam. Learn how your comment data is processed.