Kristen Barnett on the ‘Anti-Ghost Kitchen’ Ghost Kitchen
Business Lunch
In this Business Lunch I explore the world of ghost kitchens with Kristen Barnett, founder and CEO of Hungry House.
When I think about ghost kitchens, I am brought back to an earlier time when a single, nondescript commissary kitchen in Midtown Manhattan was steadily churning out a number of concepts. Brands like Leafage and Butcher Block come to mind. Fast-forward a few years, and ghost kitchens have almost become synonymous with the brands themselves. KitchenUnited, Virtual Dining Concepts, and REEF trend in food circles alongside their operating partners, from national chain Panera to celebrity-backed Mariah’s Cookies.
Enter Kristen Barnett, a former management consultant turned food executive who has held leading roles at DIG and Zuul. She is creating Hungry House, the next iteration of the ghost kitchen and so-called ‘anti-ghost kitchen’ ghost kitchen. I caught up with Kristen to discuss what is ‘anti’ about Hungry House, why her IP strategy is a winner, and what’s next.
Tell us about your background and how you got to this point.
I originally started off as a management consultant. I really thought I was going to have a more traditional business career. I was working at the Boston Consulting Group here in New York, and then I actually got super sick. I have chronic Lyme disease, so I was kind of dealing with it off and on through those years and it just got to a point where I was continuing to feel sick and I was using tons of antibiotics to treat myself, but it was a terrible kind of cycle. I finally turned to dietary change and essentially went raw vegan and had a medical miracle happen in three weeks. I went from barely being able to walk to walking with no pain. Needless to say, that switched the way I thought about everything in my life, and I decided to dedicate my career to food and making good food at scale.
That’s what took me to Dig Inn. I started there in 2016 when it was 10 units. During 3.5 years there, the company tripled in size and I was able to, as it goes in startups, lead various departments through growth. I ran supply chain, I ran the menu development team, and then my last role was overseeing their ghost kitchen and food delivery business. So that’s where I really got introduced to the world of food. I saw this crazy stuff happening with UberEats, DoorDash, and Grubhub. Our delivery sales were exploding, and I didn’t know how or why. Consumer behavior was changing. Ultimately, I launched a ghost kitchen for DIG, a whole new brand, a whole new menu. We were operating out of the basement of one of the locations.
After that project was out in the world, I left and decided to check out greener pastures. I landed at Zuul as Chief Operating Officer as they acquired a tech company, and I led the development of the proprietary tech stack there. They were acquired this summer by KitchenUnited, and so that moment was a perfect juncture for me to really jump off and address a lot of the pain points in the ghost kitchen industry that I thought existed. I was just super excited to go my own way and continue to focus on good food at scale but through the lens of technology and what’s possible now with ghost kitchens and virtual brands. And so that led me to Hungry House.
Can you provide us with an overview of the ghost kitchen industry?
I think that ‘ghost kitchens’ are somewhat of an industry catch-all phrase when in reality the models are quite varied. There are many different pieces of the value chain in the ghost kitchen ecosystem, but ‘ghost kitchens’ fundamentally refers to cooking food solely for delivery.
Within that category you have infrastructure providers that provide space to restaurants to cook food only for delivery. So that would be like CloudKitchens and KitchenUnited, which have the independent restaurant operators who are within different cooking bays, which are within an overall commissary facility.
Then you have a restaurant that can be a ghost kitchen. Maybe they’re cooking a new concept out of their kitchen only for delivery. Maybe they don’t have a storefront at all, but they’re operating as an independent operator that is selling food for delivery.
And then you have virtual brands which are new, exciting intellectual property plays that sit on top of all these models. That works because now you can cook any food from any location and sell it through the marketplaces that are just online for customers. So virtual brands can be executed by a restaurant looking to earn incremental revenue, or a virtual brand can be executed by an operator that is not even an existing restaurant, but solely dedicated to executing brands themselves. An example of that is REEF Technology, whose kitchens cook food for anything from Wendy’s to other brands.
That final category is where Hungry House plays. We’re like a ghost kitchen operator that’s actually cooking food for brands specifically. There aren’t that many companies doing this yet. There’s REEF, which is huge. There’s All Day Kitchens and Local Kitchens, which are both San Francisco based. And then there’s Hungry House as well, I would put us in that category. The whole mission is to sell food for other brands and leverage that intellectual property to build a hospitality business executing those food brands simultaneously from one kitchen.
What are some of the challenges in the ghost kitchen industry today?
I think the models of ghost kitchens are evolving, and I think we’re starting to see some winning and losing formats or even just winning and losing strategies.
One challenge that became obvious to me early on at Zuul is just how difficult it is for an operator cooking their food solely in a dark kitchen environment to acquire local customers. They lack the storefront to drive that awareness, and people can’t even search for that restaurant on the apps. Driving awareness is super important, and removing the storefront makes that hard. I think we all underestimated the power of the storefront as a great marketing tool.
Another challenge is the negative impact of delivery commissions. I think that’s become wildly obvious to everyone, not to mention complete lack of control over your data. It’s hard for restaurants to fix a problem when something goes wrong; when a customer has an issue, how do they get in touch? If you’re launching a new product, how do you actually market to customers? None of those things are really possible with the third-party apps. Also, if a DoorDash is 100% of your revenue, or all of these apps are 80% of your revenue in a ghost kitchen format, the chances of reaching profitability at your location is far more difficult because you have so much of your revenue coming with a 30% price tag attached.
The final thing that I noticed, which isn’t necessarily a challenge but just a symptom, is virtual brands launching through networks like Virtual Dining Concepts, or NextBite, or with REEF. I started to notice a lot of homogeneity among those concepts. It was solely like burgers or chicken wings. There’s got to be a thousand virtual chicken concepts out there. Obviously the reason for that is there are significant constraints when licensing a concept across many restaurants and many locations with the type of growth that you can achieve, and you’re trying to mitigate quality issues and make sure things are consistent. So having something you can just drop in a fryer and toss in sauce is going to be your best hope of doing that. However, I just felt like it was jamming up the apps with a lot of the same concepts. It wasn’t pushing the culinary needle forward, and I felt like it wasn’t bringing anything new to customers.
So those are some of the themes that started to come into the picture over the course of 2020 and the first half of 2021 that were exciting for me to address in the model of Hungry House.
How about the Hungry House model? How does Hungry House address these issues?
With Hungry House, what we fundamentally do is partner with up-and-coming chefs, digitally native brands, and people who are strong online voices. We bring to life their signature menu items and cook them in our kitchens, selling the food online for pickup and delivery.
The way that happens is we work with these chefs to license their brand and menu. They go through an intensive onboarding process where we pick which menu items are going to be most successful in a pickup/takeout/delivery format. Then we work with them on a cohesive media campaign to launch the product and tell their followers that now they can gain access to the cuisine. We feature their whole story and their specific menu on our native web platform. What is so important to us is Hungry House is actually honoring the story of the food, even though it is a somewhat virtual format, by providing a deeper content layer and connection for customers versus if we were to just list these and throw them on the third-party delivery apps.
And so, fundamentally, our brand, values, and what we do are focused around sustainability, quality, transparency, and diversity. These are some of the things I do feel have been missing from the industry, and we are looking to flip it on its head with everything we do at Hungry House.
Who brings in the diners? Does Hungry House help with marketing, or is it mostly the brands?
For us, what was really important was one of those first problems I called out, which is customer acquisition. We thought about it through two lenses. First, what can our partners do for digital acquisition, whether it’s someone placing an order for delivery to their home or through our web platform for pickup? Second, what are we doing for acquisition with our storefront?
What that means is we’re doing our part with the real estate selection, actually having a place that says ‘Hungry House’ with kiosk ordering. We can also build that hype and local market awareness through the partnerships we have with these chefs that are well known voices. So we really look to tackle it from two angles which means that we get to hack the digital acquisition while still having a more traditional brick and mortar approach to our local market.
Who are the brands that work with Hungry House? Who fits the Hungry House model best?
In our initial set of partnerships, it was super important for us to send a very strong signal to the ghost kitchen and food community about what type of food we are cooking here at Hungry House. I worked really hard to curate a selection that shows how we are focused on a diverse set of voices with a very strong culinary angle to what they do. This means the partners trust us, and it lends that credibility to the Hungry House model from Day 1.
You have Martha Hoover who is a six-time James Beard nominated restaurateur and chef out in Indiana, where she has an incredible smashburger concept. Smashburgers are blowing up in New York, and there aren’t many in Brooklyn, so we felt like it brought a lot of quality that Brooklynites would value in terms of our meat and homemade cheese sauce and house made aioli. So I felt like that was a really good fit.
You have Rawlston Williams who’s got an incredible reputation in the New York food community as a Caribbean chef. He’s from St. Vincent and the Grenadines. He’s a Bon Appetite video chef and contributor, and that has been an amazing partnership in terms of the ecosystems he plugs into.
And then you have someone like Woldy Kusina who’s been running a lot of successful pop ups throughout Brooklyn. He sells out of his Bibingka drops that he does on his Instagram, so we knew there was a proof-of-concept in terms of demand for his very modern Filipino food. His food is honestly just mind-blowingly delicious. His sauces, everything. For me, working with him has been exactly like the ethos of what we want to do, which is partnering with a chef who so many people have been following and watching and waiting for him to do something big, and now we can give him access to more scale in a bigger platform to do even greater things. Not to mention his food is actually so damn good. Everyone should have access to it, and it’s been a really beautiful partnership working with him.
Tell us about long-term concepts versus short-term. How long does a brand stay on the menu?
We have varying lengths in our brand partnerships based on their own unique goals.
For Martha Hoover’s Apocalypse Burger, their team is out in Indiana, and they want us to give them as many years as we’ll let them have. If we’re executing, they want to go at this for the long haul.
Other chefs and brands have their unique and individual goals. So it varies, and I think that it will continue to have a varied structure as we move forward with both bigger celebrity partnerships and smaller pop-ups. Fundamentally, the organizing philosophy of Hungry House is to create a dynamic media and storytelling environment while simultaneously executing delicious food. What that means in terms of partnerships is that there are a number of different ways for us to drive the ecosystem, and I’m purposefully letting it be a little bit more open ended so we can accommodate different goals for different people when there’s a fit.
We generally feel like any type of partnership that can deliver excitement about food and someone’s story will not only impact them positively as a brand, but whoever else is in the Hungry House ecosystem as well. So that’s why we’re open to different formats. We think it can bring in a new customer base, a new audience, and hopefully they like what they see and choose to stick around for future collaborations.
One interesting effect of the ghost kitchen model is that it expands who can have a food brand. People with recipes and some marketing ability can have a food brand where it would have been much harder to do so before, and a lot of these people may not want to run a food brand indefinitely. How are you addressing this and how does revenue split between Hungry House and the brand?
This goes back to your original point of Instagram influencers maybe not wanting to be long-term involved in managing a brand, so the way you can think about what we do is that it’s really a licensing deal.
We are operating end-to-end. We’re not renting out our space. We operate as a restaurant, we cook the food, and its the Hungry House team sourcing and executing those dishes every single day. And so for a brand, it’s an incredibly light lift on their part. They’re posting photos and telling people about it, maybe coming in to help us tweak the plating on a dish if we want their buy-in or working on a new menu item, but its very, very simple. And so our model is a royalty that we pay back to the chef for all the sales on their items, and we keep it very simple.
Hungry House has been live for about 1 month now. What have you learned in that month and what's been a surprise?
What’s been super surprising to us is that when you make a really good burger people will eat it for lunch and dinner. We did not expect office workers to go so crazy for burgers!
More than that though, it’s been really interesting to see how much people immediately adopted kiosk technology in a food environment. I didn’t know what to expect in terms of people’s comfort level with kiosks, and there has been a really positive reception. Some people are specifically saying ‘I actually like that I don’t have to talk to someone to place my order, I can just plug it in and then there is someone there if I need help’. So that’s been very interesting, just how positive the reception of the model is where we’re doing in-person but still in a very tech-forward, low-labor model. That’s been very positive in terms of how we want to structure our locations going forward.
The other interesting thing is the strength of the walk-in and pick-up business. For my team, I alway said that is your number 1 priority when it comes to your revenue because it’s the highest margin revenue. It’s been so strong that we haven’t had to focus on delivery as much as we thought we would initially. That’s part of the ecosystem we’re building out in a bigger way in 2022 as we grow the team and have more time and capital to invest in those systems. For now its been an incredible reception where we have a massive lunch rush and that’s just been beautiful.
Covid led to lots of experimentation in the ghost kitchen industry. This is good: You want people trying different models, and you want competition. At some point, though, people converge on one or a few ways of doing things. What does that look like, and how does Hungry House fit in to the competitive landscape?
In terms of industry trends, we’re going to see that the more successful operators in dark kitchen environments are probably going to be the large-scale chains that have existing demand wherever they are. In general those are going to be models that really thrive in dark kitchen formats because the demand simply always exists.
Other than that, I do think that celebrity and influencer partnerships are going to be a bigger and bigger part of any brand, whether or not it’s a pure play virtual brand or a restaurant chain partnering with them. It could be small multi-units, but trying to get into those partnerships and having more cohesive brand promotion with a person that has a platform. I think we’re going to see more and more of that after the major proof point of the Mr. Beast launch in 2020.
Those are two things that I think are going to happen. Other than that, I do think more and more people are getting into celebrity-backed things and leveraging social media through the lens of food, so I think we’re only at the beginning. However, that being said, I think there aren’t a lot of operators into which you can deploy this intellectual property and ensure it’s going to be executed well. So I also think we’re going to see a lot of corrections and streamlining of those models and ideally partnerships with Hungry House or other ghost kitchen operators are going to be very valuable partnerships to any brand and in high demand. I am already seeing it just in the amount of chefs who reach out to me. If you can have someone cook your brand that you trust, you will be in very high demand.
The big delivery companies are looking at this space (e.g., DoorDash Kitchens), and they certainly have a lot of capital to make a play. What are your thoughts on this?
I’m definitely seeing DoorDash go more vertical in an attempt to capture more of the value chain. Obviously, profitability is elusive for most of these third-party companies, so I think that is what they are thinking about and they see it as a big opportunity.
Am I threatened or how do I look at it? I think Local Kitchens should be more threatened than Hungry House because we have a very different intellect property strategy. DoorDash Kitchens thus far is really only working with tried and true restaurant brands that have a proof-of-concept, existing recipes, and you can just replicate the model and that’s that.
They also are coming at it from a technology perspective. A lot of the people on those teams aren’t necessarily the hardcore hospitality people who have the finger on the pulse of what’s going to be good. That’s where I think Hungry House sits at this really interesting nexus of food tech, thinking about scaling digitally and what that ecosystem means for brands and hospitality. But we also sit right in the middle of a thriving New York food scene. One of my advisors is the former Editor-in-Chief of Food & Wine, and Woldy and all these chefs are super plugged-in. I think that’s a very unique combination where we can deploy a lot of the learning and advancements in technology that we’re leveraging as a company but into a food community that maybe wouldn’t necessarily think about ghost kitchens. I think we have a very interesting vantage point and perspective on intellectual property to hopefully capture what are the next great ideas and also the sheer number of amazing chefs on Instagram that have built huge followings in the last 20 months.
How many Hungry House facilities now and how many brands?
One location. Four and then one is our own. We have a CPG partnership too.
Do you want to expand on your own and enlist folks to develop more of that side of the business?
No, our own brand is House Specials, which is just recipes from us that help us cross-utilize fresh product and limit waste in the kitchen while also filling gaps in the menu. It’s the creative outlet for my team, which is really important to preserve. Other than that, it’s a place for customers to be able to depend on staying relatively consistent or only changing slightly season to season versus what happens with the rest of our partnerships where we might just say goodbye to a whole concept. So that’s where we can provide continuity but also reduce waste. In terms of our other partnerships, I am only looking at enlisting chefs when it’s someone who is a big name and is going to be one of our brands; otherwise, the rest is going to be done in-house.
What are your growth plans and where next?
I believe in the power of focus. For us, 2022 is going to be very much focused on proving out this model and ecosystem in New York. We’re going to be opening a few additional locations throughout Manhattan so that we can go to any brand or influencer and say ‘hey we have all of New York covered’ from a food delivery zone perspective. We’ll be building out the core team to help us run and grow that, as well as finally building out a mobile app to better strengthen our content ecosystem and allow our chefs to highlight their stories.
You can learn more about Hungry House here.