‘Dark kitchens’ – a new force to be reckoned with in SA take-away delivery market

Ghost or so-called dark or virtual kitchens are a well-known concept in many overseas destinations. A Cape Town based start-up is pioneering the concept in South Africa and have announced the launch of Darth Kitchens. The company has secured seed capital in excess of R5m to date with a further R30m for expansion. With investment house Silvertree Holdings, co-founder of UCOOK, David Torr and the co-founder of OrderIn, Heini Booysen, Darth Kitchens is hoping to rapidly scale the model over the next few years. Booysen told Biznews that South Africa is an exploding market for take-away food deliveries, and is following the global trend of preferring to order meals that can be dropped off instead of going to restaurants. Judging from the recent announcement by supermarket group Checkers that they will be launching a one hour grocery delivery service, we don’t only want it all, we want it now. – Linda van Tilburg

I’m talking today to the co-founder of a company called Darth Kitchens, Heini Booysen. Tell us about the concept of Darth Kitchens?

We were being a little bit playful with the name; we are all Star Wars fan. So, we thought like dark kitchen, dark side and Darth Vader came up. So, essentially a dark kitchen is; I mean it’s also called a ghost kitchen, cloud kitchen, there are so many names for it. It’s essentially a restaurant without a front of house. What it does, is it takes away most of the risk associated with restaurants which is high rents, CapEx, décor, front of house staff; all of that stuff goes away and you can create a lot of multiple brands and cuisines out of the same kitchen essentially because it’s not customer-facing. And then you access the customer purely through the delivery apps and the delivery platforms like UberEats or in South Africa it is Mr D Food and OrderIn. Out of this one single kitchen; you can create multiple brands and you can basically play them off against each other. So, you can have a low-end burger brand; you can have a high-end burger brand. It doesn’t really matter if they cannibalise each other as you own them both. So essentially the customers can only access us through the delivery platforms; so the delivery apps.

We have our first kitchen, it is a 400 square metre production kitchen and we have multiple chefs in there, and kitchen staff and they create different cuisine types. So we have pizza; we have burgers; we have health bowls; we will have Asian and sushi coming soon. So, the real benefit is that you can create multiple brands but it’s all coming out of the same kitchen. Customers on the other end open up their UberEats app or whatever app they use and they will see five or six or seven different restaurants and they may or may not know that it’s coming from the same location.

So will you actually be using the brands, in other words would they be ordering Nandos but you guys are actually making it?

Heini Booysen

It won’t be Nandos; we will be creating our own brands; so we will have for example a chicken brand that may compete with Nandos and they can order from that. And the beauty of this is that you can be quite flexible. You can change your menu items; you can change prices fairly easily without having to go and reprint menus or change the sign at the front of your restaurant because everything is virtual and digital, and you can change it within minutes.

If you’re in a place like London, Deliveroo and Just Eat are so big. Is it big in South Africa? Do people order in?

Yes. So in fact, I know a little bit about this because I was one of the co-founders of one of the food delivery apps, OrderIn. I founded OrderIn in 2012. Back then it was literally the first online ordering site in South Africa. Mr D Food who is the local player was still, you know, call-centre based and not really online. Since then things have changed rapidly. In about 2016, Uber came into the market; UberEats launched and the market just massively exploded. So, I’ve been kind of in the forefront of that growth and have seen the rapid adoption of this delivery apps and now it’s just growing immensely. I mean it’s still growing at around 100% year over year in South Africa. A year ago, I decided and it was actually Deliveroo where the seed came from because I saw Deliveroo placing the first dark kitchens in London. They would take containers and place them under bridges in London where there maybe weren’t sushi places.

There’s quite a lot in parking lots as well.

Exactly, and I mean that and the fact that I was very much on the cusp, feeling the customer service pain on the delivery side where a lot of the restaurants in South Africa thought of take-out or delivering food as an afterthought. So they didn’t really spend a lot of time on what food travels well or what packaging is the most functional food for delivery. So, you could order your Thai curry from the most beautiful Thai restaurant down the road, but it will come in a styrofoam box and a plastic bag. You know it’s absolutely terrible. So, we decided that number one: we’re going to create cuisine types ourselves and really focus on quality. And number two: we’re going to really focus on the packaging. Making it functional; deliver food well and in a good condition but also making it aesthetically pleasing, as well as sustainable. So we’re trying to stay away from plastics as well.

And how big is the market in South Africa?

So, last time I checked; it is probably at least a million orders a month across all of the delivery apps. It’s probably a million orders being processed per month. And I think the total market is more than a billion rand by now.

How many of these apps are available in South Africa?

The two large ones are UberEats which is owned by Uber and Mr D Food which is owned by Naspers, the big African media conglomerate and OrderIn is the third one and that’s pretty much it. There will be another app entering the market in a month’s time called BoltFood, which is a European player.

Read also: Uber turns up the heat on its food delivery service

So you would be working with all those platforms?

Yes. So we work on all those platforms. And actually one of the key things for us, is the technology that we implement. So, if you think of it this way; for a normal restaurant to receive an order from UberEast. UberEats gives them a little tablet and the tablet receives the order. Now, if I’m on four different platforms and I have 10 different cuisines or brands, that means I would need to have 40 different tablets to accept these orders on. And that’s not really humanly possible to manage. So we’ve used tech to integrate with the delivery platforms. And that means when the orders come in; it seamlessly goes to our kitchen and the staff can prepare the food. And it’s fully integrated.

So how acceptable is this for customers that they’re getting a different brand of food or aren’t they sort of stuck to brands they want; Kentucky Fried Chicken or Nandos, that they want what they know?

Very good point. So in the early days of the food delivery side a couple of years ago; it was definitely like that. So I would say about 80% of all the volume was driven probably by 20% of restaurants and even mostly the large well-known chains. But that has changed quite a lot over the years. It’s probably about 50/50 now and people are becoming much more discerning where they order from and they would like to try new things, new brands. The way that the platforms actually present you as a brand, helps people discover you much easier. So if you open up your UberEats you’ll be immediately shown; Hey! You normally order pizza; this is a new pizza place. Why don’t you give it a go? So, we use the platforms as a marketing tool to get the brand out and then all we need to do on our side is make sure we deliver on quality and the packaging, and hopefully we have a returning customer.

Darth Kitchens

So what is your key selling point?

So the selling point is number one, the cost savings we have as a dark kitchen. As I mentioned we don’t have the high retail rents; don’t have the high capex. We can be very competitive with our price. But then we get in very high quality chefs. I mean they are all from ex-Michelin star restaurants. So what they do is they create take-out food but with a little bit of a cheffy twist; so slightly more, you know, quality ingredients. Instead of a normal bun for your burger you might have a brioche bun. Instead of mayonnaise, you might have a miso aioli and all of these things attract customers. They would expect with those kind of quality of food that the price would be much higher. But because of our price competitiveness, we can launch alongside the competitors. So we can compete on price but our quality is better. And then we top it off with fantastic packaging that just makes the whole customer experience so much better. So once they’ve tried it; hopefully they’ll come back.

There’s a market for this in South Africa; people who are looking for better quality food?

Oh absolutely. I mean I think the adoption has really shown that now. Quality doesn’t even need to be expensive. So we have for example two burger brands; we have a low end, very easily accessible price point burger and then we have a high end, more of a gourmet burger and both of them are adopted quite strongly on different sides of the market that’s maybe more or less price sensitive. So we try and cater for all cuisine types, all price points; so that we can hedge against seasonality through the month, through the year. Even lunch versus dinner. And in that way we can maximise sales to all the brands.

So where’s the company now. You have managed to secure seed capital? 

Yes we have. We have seed capital and we’ve built our first kitchen with that. We’ve built a team and we’ve launched our first brand. We’ve got about five in the market now, here in the CBD of Cape Town. And we are really seeing that the concept has proven itself very quickly. So the idea is that early next year we will start scaling this rapidly and essentially you can open up a kitchen every five kilometres. That’s basically the radius of a delivery hub on these delivery apps. So, wherever you have a delivery hub in South Africa; you can essentially open up a new kitchen.

So you eventually want to be in Johannesburg and the other CBDs as it won’t really work in the “platteland”?

So, that’s also the bonus of coming from OrderIn. I kind of know where are all the delivery hubs are in South Africa. What location is the best in terms of customer access and there is at least 40 to 50 different delivery zones in South Africa and they are in the places where you would suspect; Cape Town Johannesburg, Pretoria, Durban and then in the smaller cities; there’s one or two maybe per city; Bloemfontein, Port Elizabeth, so all of these are potential places for kitchens and we will just plug-and-play the different brands depending on where we are.

So, a vegan brand might do very well in the Cape Town CBD. It might not do as well in a small city like Bloemfontein. So there we would maybe launch a different brand and we have the luxury to do that. So the idea in terms of scaling is to just grow within Cape Town in the first half of next year and then immediately go to Joburg and Pretoria.

Are there places outside the CBDs, like Soweto on the road map?

Yes, Soweto is definitely on the cards. It is a massive market there. And we want to launch there, especially our chicken brand, which will probably do very well there and some of our burger brands. We are collaborating with UberEats, which launched into Soweto a couple of months ago and seen huge traction there.

Read also: Naspers’ Prosus gets set to throw egg rolls in Europe’s big food fight for Just Eat

Are you going to run all your own kitchens or are you eventually going to open dark kitchens for other people?

That’s a good question. We have actually been approached by a few national and even international brands who are saying; can we get some of your kitchen space. You can lease that to us. It’s a slightly less compelling economic or business model for me because you would be becoming a landlord. So that’s not really what we are interested in but never say never. If the opportunity presents itself from a large brand to use some of the space and we get some additional revenue, then why not. But that’s certainly not our first point of call.

What do you say to people who say, No, we need to get people off their butts and off their sofas and you are encouraging the couch potato syndrome?

I am absolutely encouraging it. That is unfortunately where things are going. Since we started OrderIn in 2012; we never grew by less than 100% year on year. So, this is not a wave that’s going to go away. I would rather catch the wave than swim against it.

Or provide healthy food as well?

Yeah exactly. It’s about getting quality food, so I mean take-out has a bad rap. You kind of think; you know pizza is unhealthy for you. So we have a health brand called Fluent and it’s really quality health food, that I would eat simply every day, if I could. And that’s what people normally do; with their crazy lives; we don’t have a lot of time to make food or cook long or go out. Let’s just quickly order in for a meal and get something healthy, quick and refreshing, and good to go and that’s where it’s going. So yeah there is no point in fighting against it.

Well, good luck. It sounds like a startup that could go places, good luck with your expansion plans and we’ll see how South Africans adopted Darth Kitchens.