Dive Brief:

• Waitr has partnered with Virtual Dining Concepts to offer dozens of VDC's virtual restaurant brands, which include MrBeast Burger, Guy Fieri's Flavortown Kitchen and Buddy V's Cake Slice, on its delivery app.
• The partnership also includes a referral agreement allowing Waitr's existing restaurant partners to add VDC's virtual brands to their operations.
• This deal reflects the virtual restaurant brand category's recent growth. Fifty-seven percent of consumers say they would try a virtual restaurant even if it was operated by a restaurant they didn't like, according to Datassential.

Dive Insight:

Restaurant operators that have the kitchen capacity to add a virtual concept could benefit from doing so through a delivery partner like Waitr as they can lean on that company's infrastructure. Such partnerships may also help scale the fledgling virtual kitchen space, which has attracted attention from investors.

The Waitr/VDC partnership appears to create new opportunity for both companies. Waitr operates in small and medium-sized markets that may not have access to large virtual brands like MrBeast Burger. The move also bolsters Waitr's push to diversify. The company partnered with Nextbite last year to offer delivery from Nextbite's virtual brands, and has expanded into alcohol and cannabis verticals.

"Waitr has opened up new markets for us so that we can offer our very popular brands in areas where we previously didn't have much of a presence," Trish Giordano, VDC's co-founder, said in a statement.

Simultaneously, Waitr's restaurant partners now have a chance to add virtual options to their kitchens and access a new revenue stream in the process. Waitr said it will initiate discussions with its partners to create such options.

Larger delivery companies have been dabbling with virtual brands for years. Grubhub partnered with Robert Earl, founder of Planet Hollywood, to launch Branded Virtual Restaurants, which Grubhubs says provides turnkey options for existing partners like PaulyD's Italian Subs and Tyga's Chicken Bites. Uber Eats and Rachael Ray teamed up in 2019 to open a virtual restaurant that was only available on the Uber Eats app.

Grubhub touts the incremental profitability of adding virtual restaurants on its website. Adding a new revenue stream without adding more overhead, with the possibility of winning new customers, is an attractive value proposition. VDC just launched TikTok Kitchen Brand, for example, and MrBeast Burger sold its first million burgers in less than three months with no storefronts.

There are challenges to this growth, however. Virtual brands could crowd an app like Waitr's or risk cannibalizing existing brands. Several virtual brands have also seen sales fizzle after initial diner interest.