Virtual Brands – no bricks or mortar

Virtual Brands

By virtual brand I mean a brand that has no bricks and mortar exposure. It merely exists as a “brand” on an app and, should you place an order, some food delivered to you in a bag. Virtual brands appear to be of interest to two types of operator. The first consists of operators who actually have a bricks and mortar brand (maybe more than one). Examples are pub operators, and casual dining operators such as The Restaurant Group, but smaller operators are also included. The second group is operators who only have a virtual brand. The motivations for both of these groups are broadly the same, but with slight tweaks. For example, a virtual brand from a bricks and mortar operator allows it to drive greater volumes through its existing kitchen space (and thereby reduce unit costs and increase profitability).

The Effect

But for both types of business, the main purpose seems to be to build revenue – probably more so in the case of a virtual brand that has no bricks and mortar presence. This confers the (currently theoretical) benefit of the potential opportunity to build a brand that can ultimately have a very large geographical reach –even international. But the important question for builders of virtual brands is: are you in it primarily (or only) for the income – or to build a brand? And, as I have said quite often before, it is very difficult to build a brand when your exposure is limited to being viewed on an app and then as a meal in a bag. It seems that the real drivers of virtual brands are the delivery companies. Put simply, it allows them to move further into the value chain.

Meal Ordering

They already exert huge influence over meal ordering (via an app rather than via the “traditional” instore ordering experience) and meal delivery (replacing wait staff with a rider). They also exert control over communication between the “order taker” and the kitchen -and control over the priorities,and speed of operation,in restaurant kitchens. Deliverers, through their marketplace appsknow what customers order, when and how much –and this knowledge allowsdeliverers to identify what should be offered on their apps –and puts them ina powerful position to influence operators to create virtual brands to exploit that knowledge. In turn, this allows deliverers to exert “ownership” over the brand and by havingthis control, the deliverer is in a position to switch the virtual brand from one operator to another, with the benefit of increased commission rates such control bestows on the deliverer.

Thank you for reading part of the Monday 22nd February 2021 Weekly Briefing and full edition can be found at Weekly Briefing Report.