Dive Brief:
- Cracker Barrel launched a ghost kitchen, called Cracker Barrel Kitchen, in Los Angeles, the casual chain announced Monday. The facility will exclusively deliver the chain's signature dishes through DoorDash, Uber Eats and Grubhub. This marks Cracker Barrel's debut in Los Angeles, and the chain has further expansion in the market planned over the next several months.
- This ghost kitchen investment builds on Cracker Barrel's launch of two delivery-only virtual brands. Chicken 'n Biscuits by Cracker Barrel was first tested in late February, while The Pancake Kitchen by Cracker Barrel was introduced during Q4.
- The launches show the company's increased reliance on off-premise sales, which more than doubled from Q4 2019, according to its Q4 earnings call Sept. 21.
Dive Insight:
Cracker Barrel's debut in Los Angeles through a virtual brand helps it circumvent the city's steep real estate prices —the highest in the country — while testing the waters of a broader rollout.
In its recent earnings call, CEO Sandra Cochran said the company expects to retain at least 60% of the growth in off-premise sales experienced during the pandemic, with plans to draw in even more customers through advertising, awareness building and partnerships with third-party delivery companies, as well as through its virtual brands.
"We believe the work we did to enhance our digital systems and launch our digital store was foundational not only to our continued growth in off-premise, but also to improving the frequency of visits from the core users of the brand," she said.
The company is also planning a loyalty program launch in the second half of the year, which should further drive customers to its digital properties.
Several casual dining chains have added virtual brands throughout the past year as an added revenue stream after a devastating 2020. TGI Fridays plans to expand its partnership with C3 after yielding success with its virtual Krispy Rice brand. C3's digital brands each generate an estimated $1 million per outlet, according to the company. Applebee’s recently launched Cosmic Wings, while Bloomin’ Brands brought its Tender Shake concept national, and Denny’s launched The Burger Den and The Melt Down. Brinker International estimates its It’s Just Wings virtual brand could generate $150 million annually.
That’s not to say virtual brands are a silver bullet. Marketing can pose a challenge if a concept isn’t brick-and-mortar, while third-party delivery apps also feature plenty of competition.
Still, Cracker Barrel must like what it sees from the model so far. The company said it has had success with its Chicken ‘n Biscuits virtual brand and is consequently expanding it to 500 of its more than 660 stores this month. It is also launching The Pancake Kitchen in 100 stores this quarter.
Correction: In a previous version of this article, the number of Cracker Barrel stores Chicken 'n Biscuits will be expanded to was misstated. The brand will be offered at 500 stores.
