The pandemic resulted in the sweeping adoption of technologies within the restaurant industry as delivery and touchless solutions came to the forefront. Ghost kitchens also rose to prominence allowing restauranteurs to build capacity to support customers without significant capital expenditures and while making minimal labor investments. Kitchen United is an operator of multi-brand ghost kitchens in a number of cities throughout the US. By leveraging technology to streamline logistics, operations, branding, and ordering, the Pasadena-based company partners with restaurant brands to offer at least 10 different cuisine options for takeout or delivery at each of its food halls. Consumers can mix and match to order from any of the options in one single order with one bill, ensuring that a variety of taste palates will be satiated. Currently operating 15 locations in cities like LA, NYC, Scottsdale, and Austin, Kitchen United plans to expand to 500 locations nationwide, in various formats, within the next five years. Restaurant brands that are partnered with the company include White Castle, Jersey Mikes, Panera Bread, The Halal Guys, Grimaldis, and Han Dynasty. While most ghost kitchens operate covertly behind the scenes, Kitchen United’s hub locations called Mix are found in high-traffic neighborhoods with recognizable and prominent locations.
LA TechWatch caught up with Kitchen United Chief Business Officer Atul Sood to learn more about the business, the company’s strategic plans, latest round of funding, and much, much more…
Who were your investors and how much did you raise?
Our $100M Series C fundraise includes some of the world’s preeminent financial and strategic investors. The new investors include Alimentation Couche-Tard / Circle K (TSX: ATD), The Kroger Co. (NYSE: KR), Restaurant Brands International (NYSE: QSR), B. Riley Venture Capital, a subsidiary of B. Riley Financial (NASDAQ: RILY), Simon (NYSE: SPG), Phillips Edison & Co (NASDAQ: PECO), and The HAVI Group. Additionally, strong participation continued from all existing institutional and strategic investors: GV, various funds managed by Fidelity Investments Canada ULC, RXR, DivcoWest, Cali Group, GoldenArc Capital, General Global Capital, and Rich Product Corporation. Lastly, Kitchen United founders, Harry Tsao and John Miller, Kitchen United CEO, Michael Montagano, and two-time NFL Super Bowl MVP Peyton Manning, who each made significant investments in the round. On completion of this round, the company’s total raise to date reaches approximately $175M.
Tell us about your product or service.
Kitchen United MIX is the future of takeout & delivery and the nation’s first “Multi-Restaurant Ordering” to-go experience. It’s the only destination that allows foodie fans who love variety to order meals from 10+ restaurants, all on the same bill. Our to-go food halls are home to 10+ restaurants in Pasadena CA, Scottsdale AZ, Chicago The Loop, Austin TX, San Jose CA, New York NY with more locations opening across the nation.
What inspired the start of Kitchen United?
Kitchen United was inspired by the opportunity to allow restaurants to scale their business in a cap-ex light and labor-light manner. The founding team and early employee base came from a background in the restaurant industry and had a deep understanding of the challenges that restaurants were facing. As the pioneer in the space, we had to envision a model that would work – something that would prove itself out in the coming years.
We’re different than many of our competitors in that we are centrally located, have a focus on the pick-up consumer, are available in multiple formats (grocery stores, malls, etc.), and work primarily with large national brands.
What market you are targeting and how big is it?
We’re entirely focused on the North American market with a look toward major metropolitan cities. We currently have a number of sites in LA, Chicago, NYC, Dallas, and other cities.
What’s your business model?
Our business model is two-fold. We charge a fixed occupancy fee that differs depending on the trade area and size of the kitchen. Further, we charge a percentage of sales that go through our channel.
Kitchen United’s proprietary technology enables customers to order from multiple prepared food and consumer goods brands on the same ticket and with the same delivery driver, all synchronized to maximize efficiencies and costs.
How are you preparing for a potential recession?
We have been carefully opening new sites in new formats without expending significant resources to learn what works through rapid testing. As a result, although our growth has sometimes been slower than some others in the industry, we’ve been considered every step of the way, from hiring to site builds to technology spend. This approach is paying dividends as our investors realize we’ll be judicious with their money and have faith that we’re highly focused on outcomes, not just headlines.
What was the funding process like?
Despite the souring economic climate, we were successful with our fundraising efforts due to our longstanding relationships with many of the strategic investors who participated in this round. As a result, we were able to raise the amount of money that we initiated efforts with and at the valuation we expected.
What are the biggest challenges that you faced while raising capital?
When capital markets started to turn earlier this year, we did have a few investors who were skittish about deploying capital. Thankfully, our proven unit economics, scale plan, quality of management team, and development roadmap were able to reassure investors that we were the real deal.
What factors about your business led your investors to write the check?
It’s important to note that we’ve had commercial relationships with many of our investors for some time now, some going back years. What we’ve demonstrated through that time period is a consistent, methodical, and unit-economic-driven approach to growth. We recognize that we’re building this business for decades to come. With that in mind, we have been fortunate to partner with some of the companies that have been leading their industry sectors for decades already. We believe that our approach has resonated because they see the long-term potential in this industry segment and have developed confidence in our model, our restaurant customer base, our leadership, and our values.
It’s important to note that we’ve had commercial relationships with many of our investors for some time now, some going back years. What we’ve demonstrated through that time period is a consistent, methodical, and unit-economic-driven approach to growth. We recognize that we’re building this business for decades to come. With that in mind, we have been fortunate to partner with some of the companies that have been leading their industry sectors for decades already. We believe that our approach has resonated because they see the long-term potential in this industry segment and have developed confidence in our model, our restaurant customer base, our leadership, and our values.
What are the milestones you plan to achieve in the next six months?
We aim to open several additional sites across multiple formats. Further, we will be announcing major, multi-unit partnerships with several enterprise brands, bringing on a new CMO, and investing more in our technology.
What advice can you offer companies in Los Angeles that do not have a fresh injection of capital in the bank?
This funding environment is challenging. Focus on the core differentiators of your business, conserve cash, but keep investing in people. The way leadership manages a company’s core asset – its people – during challenging times builds long-term trust and loyalty in an employee base when conditions improve. Be prepared for another two years of cash flow and conserve cash. Stay hopeful.
Where do you see the company going now over the near term?
The company also plans to expand its footprint to 500 sites in the U.S. in the next five years, from its current 15 locations. Focus markets are Los Angeles, New York City, Chicago, and Texas.
We intend to double down on our current business efforts, which include a focus on our grocery initiative, our technology stack, and our traditional site development roadmap.
What is your favorite restaurant in LA?
We’re a big fan of DogHaus, headquartered in Pasadena. They have everything from dogs to burgers to chicken sandwiches on the menu and a delightful beer garden.
