Dive Brief:
- DoorDash launched a shared to-go-only commissary kitchen, called DoorDash Kitchens, in Redwood City, California, according to a press release emailed to Restaurant Dive.
- The concept offers delivery, pickup and group orders from local and national restaurants such as Nation’s Giant Hamburgers, Rooster & Rice, Humphry Slocombe and The Halal Guys. It offers infrastructure, maintenance, marketing and last-mile logistics to restaurants. It will work closely with merchants to co-design the space.
- To celebrate the grand opening, DoorDash is waiving delivery fees for DoorDash Kitchens' restaurants. Delivery will be available across seven Bay Area markets, while pickup is available to 13 suburban markets.
Dive Insight:
DoorDash’s entry into the virtual kitchen space marks further growth of a new competitive category for delivery companies. Earlier this month, Grubhub launched a virtual restaurant with Bon Appetit, called Bon Appetit, Delivered, featuring the most popular dishes from the magazine and its digital properties. The company also partnered with Lettuce Entertain You in August to launch a Whole30-branded virtual restaurant.
Uber Eats jump started things last year with its plan to have 2,000 such kitchens open globally, and just launched a virtual kitchen in partnership with Rachael Ray. Deliveroo also provides its own virtual kitchens. DoorDash has experience in this category. The company previously opened a commissary kitchen to four delivery-only restaurants in Silicon Valley in 2017.
The evolution into virtual kitchens makes plenty of sense for these companies that already have delivery infrastructure and logistics in place. Further, they have an abundance of data to know what consumers in a market are looking for in their delivery orders.
DoorDash Kitchens will enable its restaurant partners to test new menu items for less money, as well as expand their reach and their delivery/pickup channels without a significant real estate investment. The latter is a particularly big advantage for these restaurants, as the Bay Area has some of the highest operating costs in the country.
DoorDash's decision to waive the delivery fees to mark the grand opening should also provide its restaurant partners with an early exposure boost. A new report from Kinetic finds that DoorDash service and delivery fees are $5.85, higher than both Grubhub and Uber Eats.
This announcement comes at an interesting time in both the delivery space and the virtual kitchen space. DoorDash's market share of delivery transactions grew from 27% to 35% during the first half of September, while Uber Eats slipped from 29% to 25% of spend and Grubhub fell from 30% to 22%, according to an Edison Trends report. A successful expansion into the virtual kitchen category could provide DoorDash with even more market share.
Meanwhile, the virtual kitchen space continues to grow, with investors opening up their wallets to support the growth. Last month, Kitchen United secured $40 million in funding for expansion, and 2ndKitchen recently raised $1.35 million in funding. These investments along with delivery giants expanding their virtual kitchen footprint proves the competition in the category is about to get really interesting.
