Dive Brief:

• Keatz, a Berlin-based cloud kitchen company, has raised about $13.5 million in new funding, on top of the nearly $8 million it raised last May, which will be used to expand its footprint across Europe, according to TechCrunch.
• Keatz was launched in 2016 and now operates 10 cloud kitchens across Europe. Currently, its roster includes eight delivery-only brands, which all prepare their food in shared kitchens.
• The kitchens are usually between 330 and 650 square feet and serve a delivery radius of just over a half mile to about 1.2 miles through delivery platforms like UberEats, Deliveroo and Just Eat.

Dive Insight:

Cloud kitchens are popping up all over the place, and for good reason. They enable restaurant operators to experiment with new menu offerings without having to make a massive upfront real estate investment. Occupancy costs can take up 6 to 10% of a restaurant's gross sales, which is a significant chunk in a low-margin space.

Keatz co-founder Paul Gebhardt told TechCrunch that his concept's advantage comes from its ability to prepare food specifically created for delivery. "Delivery food today is often compromised and sold by companies focusing on hospitality and not delivery food," he said. "Nobody at Nandos or Byron Burger designed the food keeping in mind that the food might travel on a Deliveroo bike for another 15 minutes, mostly upside down in a delivery bag.”

The fact that Keatz has received so much funding in such little time shows that investors see the promise of such a concept making a material dent in the industry. Just how much of a dent is yet to be seen, but even major chains like Chick-fil-A and Famous Dave’s are experimenting with these types of fulfillment centers to support their growing off-premise businesses.

Traditional brick-and-mortar brands now have to contend with a growing crop of virtual kitchens such as Kitopi and Food Market, not to mention UberEats, which has more than 1,600 online-only virtual restaurants in the 300 cities it currently operates. More than than 60% of Uber Eats' restaurants are in in the U.S. Kitchen United, which received a $10 million investment in the fall from Google Ventures, has ambitious domestic expansion plans as well, with each kitchen housing between 10 and 20 restaurant brands. The Halal Guys and Wetzel’s Pretzels have both signed on as Kitchen United partners. 

Although the ghost kitchen concept is growing in the U.S., there is a significant amount of runway nonetheless because of the size and scope of the industry. Keatz, however, may have a bigger challenge operating in Europe, where the competition is intense between UberEats and Deliveroo, as well as French startup Taster. 

Uber co-founder Travis Kalanick is also working on a new venture called CloudKitchens. His plan is to expand into Asia and Europe, with a launch in the United Kingdom reportedly coming in the next few months. 

As more virtual concepts emerge and secure funding, expect the tech-enabled space to swiftly evolve. Gebhardt believes the next iteration of the virtual kitchen will look a lot different than it does now, with automated drones delivering robot-cooked food.