Spying a pivot to ghost kitchens, SoftBank’s second Vision Fund pours $120 million into Ordermark
“We’re building a decentralized ghost kitchen,” is a sentence that could launch a thousand investor calls, and Alex Canter, the chief executive officer behind Ordermark, knows it.
The 29-year-old CEO has, indeed, built a decentralized ghost kitchen — and managed to convince SoftBank’s latest Vision Fund to invest in a $120 million round the company announced today.
“We have uncovered an opportunity to help drive more orders into restaurants through this offering we have called Nextbite,” Canter said. “Nextbite is a portfolio of delivery-only restaurant brands that exist only on UberEats, DoorDash and Postmates.”
After hearing about Nextbite, SoftBank actually didn’t take much convincing.
Investors from the latest Vision Fund first reached out to Canter shortly after the company announced its last round of funding in 2019. Canter had just begun experimenting with Nextbite at the time, but now the business is driving a huge chunk of the company’s revenues and could account for a large percentage of the company’s total business in the coming year.
“We believe Ordermark’s leading technology platform and innovative virtual restaurant concepts are transforming the restaurant industry,” said Jeff Housenbold, managing partner at SoftBank Investment Advisers, in a statement. “Alex and the Ordermark team have a deep understanding of the challenges that independent restaurants face. We are excited to support their mission to help independent restaurants optimize online ordering and generate incremental revenue from under-utilized kitchens.”
It’s an interesting pivot for a company that began as a centralized hub for restaurants to manage all of the online delivery orders coming in through various delivery services, like GrubHub, Postmates and Uber Eats.
Canter is no stranger to the restaurant business. His family owns one of Los Angeles’ most famous delicatessens, the eponymous Canters, and Ordermark started as a way to manage the restaurant’s own back-of-the-house chaos caused by a profusion of delivery-service orders.
Now, instead of becoming the proprietor of one restaurant brand, Canter is running 15 of them. Unlike Cloud Kitchens, Kitchen United or Reef, Ordermark isn’t building or operating new kitchens. Instead, the company relies on the unused kitchen capacity of restaurants that the company has vetted to act as its quasi-franchisees.
While most of the restaurant concepts have been developed internally, Ordermark isn’t above the occasional celebrity sponsorship. Its Nextbite service has partnered with Wiz Khalifa on a delivery-only restaurant called HotBox by Wiz, featuring “stoner-friendly munchies.”
The first brand Canter launched was The Grilled Cheese Society, which took advantage of unused kitchens at places like a Los Angeles nightclub and mom-and-pop restaurants across the East Coast to build out a footprint that now covers 100 locations nationwide.
It’s perhaps the growth of the HotBox brand that shows what kind of growth Nextbite could promote. Since the brand’s launch in early October, it has grown to a footprint that will reach 50 cities by the end of the month, according to Canter.
In some ways, Nextbite couldn’t exist without Ordermark’s delivery aggregation technology. “The way that Ordermark’s technology is designed, not only can we aggregate online orders into the device, but we can aggregate multiple brands into the device.”
For restaurants that sign up to be fulfillment partners for the Nextbite brands, there are few additional upfront costs and a fair bit of upside, according to Canter. Restaurants are making 30% margin on every order they take for one of Ordermark’s brands, Canter said.
To become a part of Nextbite’s network of restaurants the business has to be vetted by Ordermark. The company takes cues on what kinds of restaurants are performing well in different regions and develops a menu that is suited to match those trends. For instance, Nextbite recently launched a hot chicken sandwich brand after seeing the item rise in popularity on different digital delivery services.
Restaurants are chosen that can match the menu style of the delivery-only brand that Ordermark’s Nextbite business creates.
Behind those menus is Guy Simsiman, a Denver-based chef who is in charge of developing new menus for the company.
“We’re building things that we know can scale and we do a lot of upfront vetting to find the right types of fulfillment partners,” said Canter. “When a restaurant signs up to become a fulfillment partner, we’re vetting them and training them on what they need to do to … We’re guiding them to become fulfillment partners for these concepts. There’s a whole bunch of training that happens. Then there’s secret shopping and review monitoring to monitor quality.”
While Nextbite may be the future of Ordermark’s business, its overall health looks solid. The company is about to cross $1 billion worth of orders processed through its system.
“We are laser-focused right now on helping our restaurants survive COVID, and the best way we can do that is by doubling down on the incremental revenues of the Nextbite business,” said Canter when asked where the company’s emphasis would be going forward.
Nextbite is something we’ve been developing for a while now. We took it to market at the end of last year prior to COVID. When COVID kicked in every restaurant in America needed to be more creative. People were looking for alternative ways to supplement the loss in foot traffic,” he said. Nextbite provided an answer.