‘Dark Kitchen’ Brands Still Need to Focus on Virtual Hospitality

With the rise of digital ordering, many of today’s restaurant customers no longer expect to have an in-person relationship with all the brands they purchase from.

On the one hand, this trend provides a valuable opportunity for restaurants to reach new consumers via digital channels without needing to sink the capex into new brick-and-mortar stores. On the other, it can make it harder for brands to build the deep, lasting customer relationships that they are used to building inside of their dining rooms.

Geoff Alexander, president and CEO of Chicago-based Asian-style restaurant brand Wow Bao, which is available via hundreds of virtual locations in addition to a handful of brick-and-mortar stores, discussed in an interview with PYMNTS’ Karen Webster the challenges of maintaining relationships in digital spaces.

“The most important thing in the virtual restaurant space is trust, and now you don’t know where your food’s coming from, so you’ve lost that connection or that trust,” Alexander said. “When you’re in the dining room, you can … talk to your guest. You can take care of their needs. You can build relationships. In the virtual dining segment, that doesn’t exist as much, and it’s up to us as operators to find ways to connect and make the guests feel good eating in their house.”

Hospitality in the Virtual World

In an effort to build these relationships, Wow Bao announced Thursday (May 19) the launch of its new Bao Bucks rewards program, in partnership with Software-as-a-Service (SaaS) customer experience management (CXM) solutions provider Paytronix. According to the news release, this is the first virtual kitchen rewards program.

Alexander alluded to “something pretty cool coming out” in coming weeks that will enable the program to build in exclusive access for loyal customers and “create and build community,” adding that the loyalty program enables ongoing communication with customers to build trust.

A little under a third of all consumers use loyalty programs each month, according to research from the March/April edition of PYMNTS’ Digital Divide series, “The Digital Divide: Regional Variations In US Food Ordering Trends And Digital Adoption,” created in collaboration with Paytronix. The study, which drew from a survey of more than 2,500 U.S. adults in February, found that 30.2% of all consumers had used a loyalty program in the prior 30 days.

Read more: New Research Shows That Regional Dining Quirks Matter In Tailoring Restaurant Offers

Given that restaurants are in the business of hospitality, Alexander argued that programs such as these can bring that ethos to digital platforms.

“Everyone can define hospitality differently,” Alexander said. “To me, it’s making people feel good and valued.”

Connecting the Pipes

The syndicated kitchen model Wow Bao has built enabled the brand to expand rapidly. When PYMNTS spoke with Alexander in February 2021, he shared that the company had opened 150 units between April 2020 and the end of that year. Since then, the number has multiplied fourfold.

Related news: Chicago-Based Restaurant Chain Bets On Future Of Delivery

Alexander attributes that rapid growth to how easy Wow Bao has made it for other restaurants to prepare the brand’s foods, with the only requirement being that they are able to steam the products to get them ready to serve.

“That ease of execution and that consistency factor is what allows us to move at the pace we’ve done,” Alexander said. “I don’t know anyone who can do 600 restaurants in a two-year span, and we’ve been able to do it very quickly.”

Additionally, rather than struggling to get the items out to each of these operators, Wow Bao simply sells the products to food industry redistributor Dot Foods, which in turn sells them to distributors, from which restaurants purchase the items, with Wow Bao offering guidelines of suggested menu prices.

Alexander said this model enables businesses such as coffee shops and ice cream shops — which have already sunk the cost into their kitchens, but which typically have extended periods of slow business — to make additional sales throughout the day (and throughout the year).

The company is also now applying this model to a new plant-based chicken virtual brand with Skinny Butcher, an alternative poultry company, which Wow Bao’s majority owner Valor Equity Partners finances. The chicken brand has a somewhat higher barrier to entry, given that it takes more to prepare the foods.

Weathering the Storm

Looking ahead, Alexander predicts that artificial intelligence (AI) and automation will transform the industry in the years to come. He cited voice ordering at the drive-thru, drone delivery and robotic kitchen assistants as examples of the kinds of innovations that will carry the industry through the labor challenges putting pressure on operators today.

“No matter what crisis happens, the hospitality industry feels it,” Alexander said. “But we are the most resilient industry, and we come back. We innovate, we evolve and we come back better after every single crisis.”