Summary List Placement
Before the pandemic, the restaurant entrepreneur Jason Chen began devising a ghost-kitchen company to support the rapid rise of delivery business at his franchised TGI Fridays and Texas Roadhouse locations in Taiwan.
The CEO and founder of Bayshore Pacific Hospitality launched JustKitchen in early 2020 just as the coronavirus began spreading around the world. But unlike US ghost-kitchen facilities Kitchen United, CloudKitchens, and Reef Technology, Chen’s JustKitchen operates under a more efficient “hub and spoke” model to ensure the speedy delivery of meals in big urban markets.
The strategy calls for portions of the meal order, such as proteins, to be cooked and flash-frozen ahead of time at a main commissary or hub. Then, a tiny “spoke” kitchen finishes the meal for ultrafast food delivery. The model has worked so well that on Thursday, Chen is taking his company public on the TSX Venture Exchange, a Canadian exchange geared to early-stage businesses. (Many of JustKitchen’s board members hail from Canada.)
JustKitchen plans to use the IPO proceeds to expand its ghost-kitchen operations to Hong Kong, the Philippines, and Singapore. Later this year, JustKitchen — whose pre-IPO valuation is $30 million — also plans to launch at least two Asian brands as delivery-only concepts in the US, albeit with some help from American operators Kitchen United and CloudKitchens.
But JustKitchen faces fierce competition in the US.
National chains and independent restaurants have been launching delivery-only concepts across the country for a couple of years. Ghost kitchens and virtual food halls are also on the rise as the pandemic has fueled a flurry of business models that cater to delivery-only food brands. Cowen now forecasts that restaurant delivery sales are expected to rise from $48.7 billion in 2020 to nearly $61 billion by 2023.
Virtual chicken concepts have been especially popular. Applebee’s, Chili’s Grill & Bar, and the parent of Outback Steakhouse have all introduced chicken-wing or chicken-tender concepts in the past year.
But Chen said he’s not interested in chicken wings.
He told Insider that he plans to bring “the authenticity” of Taiwanese flavors to North America by introducing a variety of virtual-only brands from Taiwan, including a dumpling concept and a braised-pork-rice chain called Formosa Chang.
“I think this is probably the quickest way to get into the market,” Chen said of partnering with American ghost kitchens to bring new concepts to the US.
“Anybody that’s been to Taiwan or grew up here will recognize the brand,” he said of Formosa Chang. The chain has been around for 60 years.
JustKitchen’s ‘hub and spoke’ model is fueled by machine learning
Chen’s Bayshore operates 26 restaurants in China, Hong Kong, Taiwan, and Singapore, including Dan Ryan’s Chicago Grill and Amaroni’s Italian. Since 2015, delivery orders generated from Bayshore-owned brick-and-mortar concepts have increased by double digits, he said.
JustKitchen’s executive team includes Kai Huang, a cofounder — he’s also the creator of the video game “Guitar Hero” — and Kent Wu, who founded the perishables delivery service Milk and Eggs in Los Angeles.
The ghost kitchen operates a 16,000-square-foot commissary in Taiwan, “where the majority of the cooking happens” for the company’s delivery-only brands. That includes a delivery-only menu from Three Coins, a Michelin-star Cantonese restaurant in Taipei, as well as a mix of more than a dozen in-house brands and US concepts, such as Texas Roadhouse, TGI Fridays, and Smith & Wollensky.
JustKitchen uses machine learning and predictive modeling to figure out which meals are the most popular in different neighborhoods. This allows the hub to optimize operations by calculating how many meals, and which kinds, are sent to each spoke.
For example, BodyFit is a health-oriented virtual brand created by JustKitchen that is popular in business districts with a lot of offices. BodyFit bento meals are prepared and sent to “spokes” that cater to “the lunch crowd,” Chen said. Using that data helps reduce food waste and ensures that each spoke kitchen is operating efficiently.
Chen said that once JustKitchen tests the waters in the US with Kitchen United and CloudKitchens, he’ll look into possibly bringing his “hub and spoke” ghost-kitchen model to big city markets where it might make sense, such as New York, Los Angeles, and San Francisco.
“I do think, geographically, it lends itself to a few confined cities,” he said.