Ghost kitchen startup CloudKitchens has reportedly fired staff and closed warehouses to shrink expenses.
The apparent cuts at the company — led by Uber co-founder and ex-CEO Travis Kalanick — are the subject of a Tuesday (Sept. 5) report by the Financial Times (FT), and offer the latest example of the tough funding environment facing startups.
PYMNTS has contacted the company for comment but has not yet received a reply.
Founded in 2016, CloudKitchens offers infrastructure and software to restaurants that want to run virtual locations but avoid the steep cost of a brick-and-mortar brand.
Last year at this time, the company was reportedly taking in millions in funding, as noted here, from investors that included Microsoft.
A year later, CloudKitchens is facing a tougher environment. Its buildings were only at half capacity at the end of the first quarter, with the company failing to win enough restaurant contracts to fuel sales, the FT said, citing sources familiar with the matter.
In addition to job cuts and building closures, the company also appears to have slowed its purchases of new properties, the report said.
However, another source with knowledge of CloudKitchens’ operations said the situation was less grim, arguing the company had secured leases on properties that weren’t yet occupied, and that it would add more kitchen space in the coming year.
The company’s apparent difficulties are happening at a time when startups are seeing their funding opportunities shrink.
Last month brought the news that two-thirds of startups in Latin America had cut staff amid a venture funding drought.
Still, restaurant brands continue to use expertise gleaned from the world of ghost kitchens to give themselves a competitive edge.
For example, PYMNTS reported last week that the Dog Haus hot dog chain had hired Michael Montagano, CEO of virtual kitchen company Kitchen United, as its new chief executive.
“[Montagno’s] expertise is in growing franchises, expanding virtual brands and delivery, and implementing new technologies and marketing strategies,” Dog Haus wrote in its LinkedIn page. “He will lead us by enhancing our technology, expanding our brands, and maximizing our online and in-store strategy, all in effort to add meaningful value for our franchisees and guests.”
However, PYMNTS Intelligence shows that consumers may be frustrated with ghost kitchens themselves. Data from the report “Connected Dining: The Robot Will Take Your Order Now,” found that just 48% of diners were interested in virtual kitchens, with the rest preferring eateries that have physical locations.
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