Dive Brief:

• Kitchen United, which operates six ghost kitchen locations in the United States, will acquire Zuul, a ghost kitchen operator in New York City notable for its delivery software, the company announced Monday.
• Zuul was one of the first ghost kitchens to operate in the New York City market, a region Kitchen United is poised to enter later this year.
• This deal marks one of the first acquisitions of a ghost kitchen operator by another.

Dive Insight:

Kitchen United said the business strategies it shares with Zuul made the New York-based company an attractive target for its first acquisition. Kitchen United, which started in California, has mostly focused on opening ghost kitchens in major urban centers, including Chicago and Austin, Texas. Zuul operates a ghost kitchen in Manhattan and makes software to streamline large deliveries.

Earlier this year, Zuul launched ZuulOS, an operating system designed for ghost kitchen management that allows operators to set up virtual food halls. The rollout of ZuulOS followed the success of ZuulMarket, which aggregates deliveries to large buildings and allows for multi-brand batch orders, according to the company website. 

Atul Sood, chief business officer for Kitchen United, said Zuul's software offerings were one of the factors that attracted his company's attention.

"What we saw as we were reviewing their technology was a lot of great feature opportunity, where we add features that were already embedded in ZuulOS to our platform and make it more robust," Sood said.

Zuul, according to Sood, will be folded into Kitchen United's branding.

The acquisition will smooth Kitchen United's entry into the New York City market. According to a press release, Zuul's location in Manhattan will serve as Kitchen United's first facility in the city, with a second location opening in Manhattan this October.

"Our market understanding is improved by their team," Sood said. “They have a really deep knowledge of the market in New York."

Zuul's acquisition could mark a turning point in the ghost kitchen space. Operators have attracted large amounts of money in the past two years and signed deals with existing restaurant brands. CloudKitchens, headed by former Uber CEO Travis Kalanick, received $400 million from Saudi Arabia's Public Investment Fund in 2019. Last week, Reef Technology announced a deal to open 500 ghost kitchens with 800 Degrees Pizza. Most firms have pursued expansive partnerships, but there have been few high-profile mergers or acquisitions in the relatively young market.

This deal may be a sign that ghost kitchens are reaching a stage of market maturity where consolidation is more likely. Sood did not rule out the possibility that further acquisitions of small ghost kitchen operators would be part of the company's strategy.

"There are a number of successful localized ghost kitchen operators around the country that have started in the last few years," Sood said. "It will be important for us to be open to partnerships like this one as we continue to expand to more geographies."