The Crumbling of Brick and Mortar Dining

San Francisco sorts out the new frontier: cloud kitchens and virtual restaurants.

In a segment of David Mitchell’s Cloud Atlas set in a futuristic Seoul, a “fabricant” named Sonmi-451 works 19-hour days in a franchised restaurant called Papa Song’s. Sonmi is an enslaved figure, never allowed to experience sunlight, but gradually becoming aware that there might be more out there beyond six corporate catechisms like “Honor thy customer.” 

Putting aside the dystopian sci-fi element, these novelistic flourishes are almost absurdly complex. The highly plausible future in which low-wage jobs for humans are automated out of existence — or, like the neo-automat chain Eatsa, banished behind a wall of screens and cubbies — won’t require oppressed devotees of a rigidly codified religion to sustain it. But it might involve the continued transformation of dining from a set of shared rituals in dedicated spaces to a zone of depersonalized optimization. 

San Francisco lost more than 400 restaurants in 2019, victims of high rents and often onerous bureaucracy. But the more shadowy culprit may be the twin advent of two similar phenomena, virtual restaurants and ghost kitchens. Virtual restaurants are delivery-only brands that operate out of existing restaurant kitchens, as Top Round Roast Beef does with three offshoots inside its 24th Street eatery, while the comparatively Wild West-ish ghost kitchens lack any diner-facing component at all. If you were teleported inside one, you probably wouldn’t know you weren’t in a standard restaurant at all; food is prepared in these places much the same way as in any other facility, using the same equipment.

All these disruptors would be at worst a trivial nuisance if it weren’t for the clash of the delivery titans battling for smartphone dominance and on whom they depend. GrubHub, Uber Eats, Doordash, and the others have seen a steady yet tumultuous rise, with the giants seemingly poised to consolidate or implode. GrubHub absorbed Seamless seven years ago, but the two continue to coexist within the same company. DoorDash bought Caviar from Square last August and filed paperwork for an IPO earlier this year, while UberEats lost nearly half a billion dollars in a quarter (and, later, its CEO). Cutthroat competition breeds its own collaborative efforts, though, as DoorDash, Lyft, Postmates, and Instacart lobbied against the gig-worker protection legislation known as AB 5, and sued — so far unsuccessfully — to halt its implementation. 

Even if they vanquish a pro-labor law, the future could be shaky. Unauthorized deliveries have long been common, as In-N-Out sued DoorDash years ago. Sometimes, though, they metastasize into outright scams. Last month, the one-Michelin-star restaurant Kin Khao reported that a copycat called Happy Khao Thai, operating out of a non-retail storefront on Mission Street, had exploited a vulnerability in GrubHub’s platform that allowed it to flourish for as long as it took for Kin Khao chef-owner Pim Techamuanvivit to get a startling phone call innocently inquiring about delivery. 

GrubHub is no victim here; the company bought thousands of urls that sound like its partner restaurants in order to facilitate deception. But even the more honest, labor-saving alternatives to the fast-casual revolution have not always prospered. Along the way, the humbler Eatsa folded, rebranding as a digital platform called Brightloom. At every level, the field is in flux, and unlike Sonmi-451 hoping to ascend to perpetual vacation once she puts in her time at Papa Song’s, it lacks any semblance of an individual protagonist.

Running Rogue

Even by the standards of anonymous South of Market alleys, Morris Street is an ugly and nondescript corridor. Practically in the shadow of that iconic Coca-Cola sign, it runs for a block and a half before dead-ending, and there aren’t many residential structures. But 60 Morris St., just north of Bryant and south of Interstate 80, is a node of commercial activity. 

It’s part of Cloud Kitchen, the delivery-only location for newish brands that “reimagine fast food” like Starbird Chicken alongside more established entities like Little Star Pizza. Cloud Kitchen’s facility is a ghost kitchen — or maybe a GrubHub-hub — and an endeavor by disgraced former Uber CEO Travis Kalanick, who now has $400 million in foreign investment. If it sounds as though it’s as guarded and high-tech as an Amazon Fulfillment Center, it’s not. Anyone can walk right in and peer at pints of Humphry Slocombe ice cream in a reach-in freezer as orders for non-corporeal brands like Zoodle ² go out the door.

A curiosity for Redditors, it’s also a utilitarian operation with taped-up signs and the general vibe of a small-metro Greyhound station. 

Measured against lagoons of hog feces or warehouses full of caged chickens, 60 Morris is not titanically unsanitary, but clean freaks won’t like the use of numbered lockers from which couriers whose vehicles are illegally parked outside pick up their next orders. Ask anyone who’s undergone a food-handling certification, and they’ll tell you about the “danger zone” between 40 and 140 degrees Fahrenheit in which unwanted bacteria tends to thrive. Whoever runs these climate-control-free lockers needs to call Kenny Loggins.

This is an area of Central SoMa that’s destined for significant redevelopment in the years to come. It’s inside the boundaries of the Western SoMa Community Plan Area as well as the Filipino-led historic district SOMA Pilipinas, so it’s odd that 60 Morris seems to operate so brazenly. But the siting is no accident, since Bryant Street is a four-lane thoroughfare with freeway onramps and easy access to the tech office-heavy environs of SoMa as well as Downtown proper, while in the other direction you can zip down Harrison Street to the Mission. Lunch for 10 people can get from A to B in as many minutes, although it does seem strange for an offshoot of the industry that obliterated boundaries of time and space to be so dependent on location.

Further regulation seems inevitable, because the discontent comes from all quarters. Green-eyeshade-wearing restaurateurs have thin margins to worry about, while labor activists protest drivers’ low wages and people who can afford to take in the bigger picture worry about neighborhood vitality if San Francisco’s thousands of restaurants become food warehouses with cute websites, as Supervisor Asha Safai characterized them to Eater SF. 

In response to the sidewalk-robot phenomenon, San Francisco created an Office of Emerging Technology that launched in January — albeit under the aegis of the beleaguered Department of Public Works. With a Public Safety and Neighborhood Services Committee hearing on virtual restaurants set for Thursday, March 12, S.F.’s Board of Supervisors will tackle the issue, following in the footsteps of New York’s City Council, which may soon force GrubHub and its ilk to report their commission structures to users. The office of Supervisor Matt Haney declined to comment on the record, citing pending legislation, but oversight feels all but certain.

Hard to holdout

Pizza and Cantonese food are the quintessential delivery items. Burgers are arguably just as American if not more so, but almost no one has them schlepped to their house because nobody likes a soggy bun or once-crispy fries that have been In-N-Out-ified. In light of this, not all restaurateurs seem keen on the idea of augmenting profits through delivery.

“I’m trying to create an experience, and coming into the restaurant, I can control so much more,” says Adam Mesnick, the highly opinionated founder of SoMa sandwich shop Deli Board. “It’s about how you value your food, or what your place is in the food industry. I don’t see my place being a faceless, nameless place. I’m not willing to sacrifice that.”

Deli Board started as a catering business, delivering sandwiches from a commissary kitchen, so Mesnick has experience with permitting, wholesale-performance rules, and the like. Consequently, he’s skeptical that working with delivery services amounts to much more than a new avenue of advertising for him.

“I’ve been offered every deal,” he sighs. Sarcastically ventriloquizing the sweet-talkers, he adds, “My business would grow in a bunch of different directions!”

But the audience for his meaty sandwiches is limited, he concluded. And those companies routinely take a sizable cut, making them just another intermediary, another layer, and another problem.

“I never heard of a deal with Caviar that’s less than 20 percent — maybe 17 percent,” he says. “My margins don’t make enough, and my rent’s reasonable. I don’t see how anybody thinks it makes sense. … I have enough trouble just pushing food out in one direction.”

Still, the world wants delivery, Mesnick says. People got connected by iPhones, so there’s a greater connection between food and people and ordering. But even though giants like McDonald’s have partnered with Postmates, it may be possible to do some things internally. 

Charles Bililies, founder of the Greek fast-casual chain Souvla, opened his first virtual restaurant (and fifth location overall) last September. He took that step because of what he calls a “champagne problem”: The other restaurants were doing too much delivery business. So they reallocated space at their Sixth Street commissary, which otherwise centralizes the production of menu items like soup. That enabled much-higher delivery caps that Souvla would otherwise have had to turn down for fear of throwing off the neighborhood-centric restaurants all day, and it still serves everything you can get at any other Souvla. 

“We sent it up to actively cannibalize our delivery business, and it has had no effect on the delivery volumes of any one of our restaurants,” Bililies says. “But now we have a fifth restaurant that does about twice the delivery as any one of our others.” 

Souvla has another advantage, which is that its sandwiches travel well. Although his opinion is by no means objective, Bililies maintains that its salads improve with a bit of wait time because the cold yogurt and warm meat commingle with the kale. Even the items he thought would result in widespread dissatisfaction, like frozen yogurt, have held their own.

“We were initially talking about not making them available, and we came to the realization that if you want fries delivered or frozen yogurt delivered, we’re not in a position to say no and deny the guest,” he says. “More importantly, there’s the broad expectation if you want it delivered, it’s going to be a little melted. If you want fries, there’s the expectation that they’re going to be a little cold. People still order fries and frozen yogurt from us with a great degree of frequency, and the ones I talk to have a bit of a routine: They get the delivery, the frozen yogurt goes into the freezer, and the fries go onto a sheet pan under the broiler. They eat the sandwich, and life is good. That’s kind of how we managed to walk that fine line.” 

The Future of Food

Everyone wants to push buttons. In that sense, working with Cloud Kitchen could become a new pathway to ever-more-expensive brick-and-mortar restaurants, the way food trucks were 10 years ago. Should Cloud Kitchen succeed, working with Travis Kalanick could once again be a boost to people’s careers — assuming, that is, that all his unsavory practices and hostility to women are a thing of the past. The allure of real-time feedback is strong.

“Any real chef is going to want to cook for people and get to say, ‘Hey, how did you like dinner?’” Mesnick says. Conversely, it could merely undercut existing delivery-based businesses until it’s the only game in town. “UberEats is highly successful in the middle of the country. Anybody who delivers a lot of food needs to ask, ‘How am I going to get a fleet of cars and car insurance?’ ”

But this doesn’t fully contextualize the effects of idling or haphazardly parked cars on the cityscape as fewer and fewer people venture out for the intangibly beneficial face-to-face contact of eating out. Delivery might enliven even as it deadens, but not in preferable ways.

Like the viral image of that UberEats courier using the toilet with the branded delivery bag clearly visible under the stall, nothing is ideal. And all of this takes place against the backdrop of coronavirus fears. In all likelihood, novel coronavirus won’t decimate the population and reorder whole social systems the way bubonic plague did, but low-grade panic in an era of media hyper-saturation probably won’t aid an industry that began reeling from widespread cancellations within hours of the city declaring a public-health emergency over COVID-19.  Of course, if ghost kitchens evade regulatory scrutiny indefinitely, all it takes is for one highly publicized incident for the health premium of ordering in to evaporate overnight.

Delivery hasn’t exploded just because of the convenience factor. You can’t even chalk it up to generational shifts whereby city-dwellers under 40 are more affluent and more prone to bingeing Hulu than getting wasted every night. The steadily rising costs to operating a brick-and-mortar restaurant simply meant that “going out to eat in a mid-scale, not-too-fancy, neighborhood restaurant is going to be twice as expensive as you recall from a number of years ago,” Bililies says. “It’s almost like a utility that people come to expect in a city like San Francisco.” 

But even the idea of a utility of a boring cornerstone of daily life — the least-sexy Monopoly properties, if you will — isn’t what it used to be even five years ago, either. Cord-cutting has reduced the primacy of cable, and our venerable electric company is teetering on the verge of nonexistence. Whatever the future of the virtual restaurant as a concept, the verdict for any given brand is likely to be the same as our typical response to a blandly satisfying summer blockbuster that feels like all the other reboots and gets the job done: It delivers.

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