Tech | Visa | Scholarship/School | Info Place

General Catalyst leads $40 million round for Local Kitchens, a different kind of restaurant kitchen startup

As companies shut down cloud and ghost kitchens, Local Kitchens is proving its tech-enabled multi-brand restaurant concept is a viable business model, and it has raised $40 million in a new Series B round of funding.

Jon Goldsmith, Jordan Bramble and Andrew Munday, all former DoorDashers, founded the San Francisco-based company in 2020 to deliver dishes from local restaurants and nationally renowned chefs to consumers in Northern California.

Local Kitchens operates similarly to cloud kitchens and ghost kitchens, which are shared workspaces where restaurants cook food, often exclusively for delivery. The company has developed a digital format that manages mobile app orders for multiple brands from a single kitchen.

CEO Goldsmith, however, insists the company is not a ghost kitchen (perhaps unsurprisingly, given how unpopular the category has become). Here’s how he describes the difference: Local Kitchens operates its own restaurants — 12 at the moment. That means the company employs its culinary staff and works with partner restaurants and chefs to train them on recipes. It also offers meal delivery, rather than just food delivery, to provide a more human connection.

Goldsmith said the model enables the company to generate 50% more sales per person per hour than traditional restaurants.

“One of the advantages of this model is that we are more efficient in terms of sales per man-hour,” he told TechCrunch. “That means we can really reinvest in hiring great people, paying them well and training them well. In this model, eight brands come from one kitchen, which is critical to ensuring food quality.”

In San Francisco, the company is working with local brands like Sushirrito and Boba Guys, as well as nationally recognized chefs like Mason Hereford, founder of New Orleans sandwich shop Turkey and the Wolf, which Bon Appetit named a 2017 “Best New Restaurant in America.”

Since its Series A funding in 2021, Local Kitchens has grown fivefold and achieved unit-level profitability. In addition, Goldsmith said that 1 in 10 households in the San Francisco Bay Area has tried the service.

“We offer this service every week, especially for those who don’t want to cook,” he said. “A family or a couple can order from Local Kitchens and there’s something for everyone.”

Not all companies in this industry are doing well. The concept of cloud and ghost kitchens was all the rage not long ago when the global pandemic was raging and everyone was stuck at home but wanted food delivery.

In fact, the sector is growing so well that it’s expected to account for more than 20% of the restaurant industry by 2025. Over the years, startups have also attracted capital from top investors like SoftBank and Andreessen Horowitz.

But things didn’t go as planned. Once restaurants reopened, the concept became difficult to sustain. Even for major fast-food chains like Wendy’s.

Meanwhile, Kitchen United, which had raised about $150 million in venture capital and was hailed by Fast Company as “the one-time ghost kitchen leader,” decided in March to sell its assets to Sam Nazarian-led lifestyle hospitality company SBE.

Despite these difficulties, Local Kitchens’ desire to expand into new communities outside of Los Angeles and California made it a good fit for General Catalyst, which doubled down on its investment in the company, leading a $40 million Series B round, as well as a previously unannounced follow-on Series A round.

Kyle Doherty, managing director of General Catalyst, said ghost kitchens initially “promised to drive critical change in customer value and efficiency.” However, issues such as inauthentic menus, poor quality control, questionable preparation methods and unsustainable unit economics have prevented certain business models from gaining a foothold in the post-pandemic restaurant industry.

By creating what Doherty calls “a new category that we believe reflects the ideal dining experience,” Local Kitchens has “the perfect combination of prioritizing consumer needs and using innovation to solve restaurant challenges and inefficiencies.”

“Even as delivery growth has proven to be a long-term trend, customers are still forced to sacrifice the joy of dining out and choose between high-quality food and great service,” Dougherty told TechCrunch. “Local Kitchens is achieving what other delivery models can’t — satisfying customer experience preferences, achieving unparalleled efficiency, and creating a solution that satisfies consumers, chefs, and local communities alike.”

General Catalyst joins other existing investors Human Capital, Pear VC and DoorDash co-founder Stanley Tang, who joins the company’s board of directors. This brings Local Kitchens’ total funding to $75 million.

“Stanley is a friend and mentor to us,” Goldsmith said. “He has been involved with Local Kitchens since the company’s early days, and we are thrilled to have him formally join the board.”

#General #Catalyst #leads #million #Local #Kitchens #kind #restaurant #kitchen #startup

Leave a Reply

Your email address will not be published. Required fields are marked *