A few years ago, established restaurant companies were creating new eateries to appeal to younger consumers. That trend hasn't slowed down, but now those spinoff brands exist in only cyberspace.
Virtual brands are restaurants available only on third-party delivery apps. Their creators use existing restaurant kitchens to whip up orders from a menu that was designed for off-premise customers. Pizza, chicken wings and burgers are popular options because they all travel well and don't usually require extra equipment to make.
While virtual brands were becoming more popular before the pandemic, the boom of takeout and delivery orders during the health crisis has led many more restaurant companies to take the plunge. For many companies, virtual brands were one of the few bright spots for the businesses during lockdowns. In the 12 months ended March 2021, U.S. restaurant digital orders grew 124%, according to the NPD Group.
However, some industry experts think the field is becoming too crowded. Many virtual brands have similar concepts and menu offerings, and marketing can be tough without a brick-and-mortar location to help build a reputation. Delivery sales are also expected to moderate as consumers return to dining on premise.
Here are the restaurant companies that have launched spinoff virtual brands:
Bloomin' Brands
Outback Steakhouse parent Bloomin' Brands debuted Tender Shack in Tampa Bay, Florida, a year ago, cooking the chicken tenders and sandwiches in its Carrabba's Italian Grill locations. By February, it had launched nationwide with more than 750 restaurants making its food.
In April, Bloomin' CEO David Deno told analysts that sales at Tender Shack had softened some as Bloomin' Brands' dining rooms reopened. The company is looking to ramp up the virtual brand's marketing to bring back customers.
"We do believe that the $75 million annualized sales goal is attainable, but we have some work to do on that," Deno said.
Brinker International
Chili's and Maggiano's Little Italy owner Brinker International launched It's Just Wings in June 2020. A year later, as the company closed out its fiscal year, its U.S. sales exceeded $170 million. More than 1,000 Brinker restaurants are cooking the virtual brand's chicken wings, and some international franchisees have even begun operating It's Just Wings.
On the heels of the success of It's Just Wings, Brinker has also created a Maggiano's spinoff, Maggiano's Italian Classics. More than 250 restaurants are making the virtual brand's orders, roughly five times the number of locations for the flagship brand. Brinker is forecasting that its footprint will reach 900 locations by the end of June.
"This one will be a slower roll for a couple of reasons," CEO Wyman Roberts said on the August earnings call. "It's a little more complex. And since we're back to fully operational dining rooms, we're being very intentional about the experience for our operators and our guests."
Applebee's Bar and Grill
The Dine Brands restaurant partnered with Uber Eats in February to introduce Cosmic Wings, a concept built around breading chicken wings with crushed Cheetos. The launch was nationwide, with nearly 1,300 Applebee's restaurants cooking its Fried Cheetos Cheese Bites. Ten weeks into the launch, restaurants were averaging $330 per location every week in Cosmic Wings sales.
The brand was slated to expand to DoorDash's delivery app as well. However, chicken wing shortages — stemming in part from the rise of virtual brands focused on the food — have led to an indefinite delay in those plans.
"We anticipate meaningful incremental demand with this expansion, and we want to ensure sufficient supply to properly satisfy this demand," Dine Brands CEO John Cywinski said on the company's latest earnings call. "In the meantime, I'll hold off commenting further on Cosmic Wings' results until we pull this lever with DoorDash, hopefully at the end of Q4."
Wingstop
The chicken wing shortage and higher prices pushed another restaurant chain to get creative: Wingstop. This June, the company pivoted from chicken wings to thighs with its new virtual brand Thighstop. Customers can place their orders for delivery or carryout in 1,400 locations nationwide via DoorDash or on Thighstop.com.
But Wingstop has grander plans for Thighstop. CEO Charles Morrison said in late July that the company plans to integrate Thighstop's menu into Wingstop restaurants. The initial idea to launch Thighstop as a virtual brand was meant to introduce consumers to eating more of a chicken than just the wings.
"Right now, it's just about maximizing volume and using that to really free up the opportunity to get much better pricing on chicken long term," Morrison told analysts.
Chuck E. Cheese
Pasqually's Pizza and Wings launched in March 2020 as lockdowns shut down the Chuck E. Cheese's arcades and pizzerias. Named after a member of the chain's animatronic band, Pasqually's pizza has thicker crust, more sauce and different cheese blends than a Chuck E. Cheese's pizza.
Pasqually's didn't help Chuck E. Cheese's parent company CEC Entertainment escape filing for Chapter 11 bankruptcy in late June 2020, but it did provide a revenue stream for the business as its other sales dried up. Sherri Landry, chief marketing officer of CEC, told QSR Magazine in July 2020 that the virtual brand accounted for 10% of sales. Because CEC is a private company, it does not report its financial results.
Hooters
For Hooters, virtual brands are an easy solution to its not-so-family friendly reputation. The restaurant company, which is privately owned by Nord Bay Capital and its adviser TriArtisan Capital Advisors, opened three different virtual brands during the pandemic: Hootie's Burger Bar, Hootie's Bait and Tackle and Hootie's Chicken Tenders. While the names are close, most unassuming consumers probably wouldn't tie the virtual brands with Hooters.
Hooters doesn't report financial results because it is privately owned.
Denny's
Denny's rolled out two virtual brands, the Melt Down and Burger Den, earlier this year. The Melt Down specializes in handcrafted sandwiches with a menu that uses about 70% of Denny's pantry items, while Burger Den's menu focuses on Denny's classics and new signature items. Burger Den's orders are fulfilled in 1,100 restaurants nationwide, while the Melt Down is available at roughly 700 locations, with more on the way.
CEO John Miller told analysts in early August that the company is seeing average incremental sales growth of 3% every week from Burger Den and Melt Down. The Melt Down is generating average weekly sales per restaurant of $1,200, while the Burger Den locations are seeing $600 on average per week.
BJ's Restaurants
BJ's Restaurants started testing a virtual brand called Slo Roast in the fourth quarter as its digital off-premise sales surged during the pandemic. As of late July, about 30 of its restaurants in California and Texas are filling Slo Roast's orders.
The new brand's meat-centric menu includes BJ's slow roast and baby back ribs, although CFO Gregory Levin said on the company's latest earnings call that the next step for testing will involve tweaking the menu. The company is also looking to have its restaurants fully staffed before it ramps up Slo Roast. The crunch in the workforce has meant that many bars and eateries are running short staffed.
Jack in the Box
Jack in the Box partnered with musician and TikTok star Jason Derulo for a limited-time spinoff brand, One in a Milli, after he gained another million followers on the social media app. The meals were available for delivery only from Uber Eats in Los Angeles over the span of two weeks in June.
The menu featured some existing Jack in the Box items, like its Tiny Tacos and new Triple Bacon Cheesy Jack, as well as new ones inspired by Derulo's over-the-top TikTok meals, such as the Bacon Churro Milli Shake.
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