Until CloudKitchens launches its delivery service for its brands, it remains difficult for its tenants to turn a profit while marketplaces charge 20–30% of each order. Depending on a restaurant’s ownership (independent vs. chain), these fees could now be waived during COVID-19. Since its opening last year, the Koreatown site has experienced a lot of turnover, including big names like Sweetgreen. According to a model created by Dan Fleischmann, VP at Kitchen Fund, a tenant of a typical ghost kitchen in a tier-1 market would had to have previously generated around $650,000 in sales to break even. Under today’s circumstances, assuming zero delivery commission, that number lowers to roughly $500,000. By comparison, the average Chipotle store does ~$400,000 in online delivery and pickup. Thus, the artisinal Smorgasburg food entrepreneur or food truck operator is likely to find herself excluded from this model.

The Italian Homemade Company is a five-unit fast casual homemade Italian concept based in SF that also operates out of DoorDash’s Redwood City ghost kitchen as well as CloudKitchen’s Internet Food Court. According to GM Mirco Tomassini, delivery is barely profitable at CloudKitchens compared to the success it’s seeing from DoorDash, which waived all delivery fees for its tenants last year. Tomassini seems bullishly pessimistic about it all.

“Ghost kitchens are the future in the way everything is moving forward,” he said. “They are more meant to work for big names, we are niche. We are not like Sweetgreen or Chick-Fil-A.”

Amidst the current crisis, delivery marketplaces like DoorDash and UberEats are now sprinting to onboard non-restaurant customers like grocers and convenience stores as their customers are no longer able to pay their lofty commissions. When the dust settles, the business of delivery marketplaces will have completely changed with the modern dining landscape. Enter CloudKitchens, a fully vertical virtual food court that can cook up anything you can imagine and deliver it to you at a price that’s all-in cheaper than going to the supermarket and cooking it yourself. If Silicon Valley gets its way, we’ll eventually have “kitchenless homes.”

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