Virtual brand companies offering solutions to Australian chains to increase, Concept Eight boss says
CEO Grant Lee offers insights on what to think about when considering a virtual concept.
The trend of virtual or delivery-only brand specialists offering its own concepts to existing restaurants’ operations will reach Australia’s food & beverage scene, according to Concept Eight’s CEO.
“Companies like Virtual Dining Concepts and NextBite are offering virtual brands in a complete package and I think that will happen in Australia as well, where they offer the marketing, the brand, training, operations support, equipment - it's kind of a one stop shop,” Grant Lee told QSR Media in an exclusive interview.
“I think that's going to grow, because it's too hard for most companies to do it all themselves.”
Concept Eight, a multi-brand QSR franchisor that considers itself an early adopter of the virtual brand concept, said its virtual brands across its 120-plus physical store portfolio grew rapidly. The company saw around 30% sales increases in the last 12 months, primarily driven by home delivery, but also by the new concepts they launched over the past year.
He also observed that other restaurants are dabbling in virtual concepts and “realising that it’s very hard” to make them profitable.
“Unless you have a very strong team who are experts in branding, marketing, operations, supply chain management, packaging, home delivery, technology, and meal development, my advice would probably be to stick to your core concept which made you successful in the first place,” he said.
“Unless you've got a strong core business, I wouldn't attempt a virtual brand.”
Virtual brands he advises, simply need to be complementary to one’s core business.
“Operationally, you need synergies within the kitchen. For instance, you want to be able to use the same equipment if you can rather than getting completely different equipment that no one knows how to use which needs new training. There's also a cost involved in bringing in new equipment. There's also space issues in the kitchen with bringing in new equipment,” he explained.
“Most QSRs have somewhere between 20 and 30 meals to prepare and if you're adding a virtual brand, you may be adding another 20 or 30 meals. To try and do that, with uncomplementary meals, I think, would be a real challenge.”
Widening its reach in premium segments
The company is looking to build on its momentum by expanding itself in the premium Asian, burger and chicken segments. Noodle Box, Lee said, will be a “truly national” brand as they convert all Wok In A Box restaurants in SA and WA. Pattysmiths is expected to have 25 sites by the end of the year, including an opening in Adelaide. For chicken, the company recently opened their Southern Seoul concept in Brisbane’s Kelvin Grove.
Formats-wise, Lee confirmed they are exploring the possibility of doing their own home delivery service and drive-thru for their premium brands - understanding that the consumer now expects ease of access and a multi-channel experience.
“The QSR consumer wants everything their way. They want the choice of dine-in, takeaway, drive thru, home delivery. They want to be able to order their meals via a QSR-branded app, through a delivery partner app, through Google, from a QSR website, kiosk, or point of sale,”
“Further, they want to pay by card, Apple Pay, Android Pay, cash, and soon, bitcoin.”
Concept Eight recently hired a Sydney-based network development manager to lead the charge in growing in the populous city.
On the technology side of things, Lee said the company’s now able to “slice and dice” massive amounts of data to provide both customer and franchise partner insights, attributing it to investing and spending time to work on their tech stack. Lee expressed confidence that they have reached a level where they are using customer insights to drive sales increases, cut expenses and improve their customer experience.
Other main investments include a focus on culture, including staff training and monitoring mental health, a “raft” of monetary benefits and flexible working arrangements along with support for their business development managers.
Lee expects the Australian economy to bounce back strongly once pent-up demand is “unleashed.”
“Most of the landlords around Australia, with the exception of those running malls, seem to understand that 20-odd years of rent inflation are over and they're now in a period of sustained deflation,” he said.
He is also monitoring international freight availability and costs but believes it’s a short-term issue. Home delivery and takeaway, he says, will continue to grow in the next five years.