How virtual concepts are blowing up overnight

Brands like MrBeast Burger and Wow Bao have become cheat codes for growth.
Illustration: Restaurant Business staff

In the matter of one day in December, a previously unheard-of burger brand became bigger than Shake Shack. 

MrBeast Burger, a virtual concept tied to YouTube star Jimmy Donaldson, launched in nearly 300 locations across 35 states on Dec. 21. Thanks to his legion of subscribers, restaurants quickly sold out of his “Beast Style” burgers and fries. The MrBeast Burger app vaulted to No. 1 in the Apple Store. And restaurateur Robert Earl gained a few more gray hairs.

“It took my gray hair that was only about a 15th of my head to about half,” said Earl, whose Virtual Dining Concepts company is behind MrBeast Burger.  

Virtual concepts are brands that have no brick-and-mortar location of their own. They exist only digitally, as apps or on third-party marketplaces, with the fare produced by actual restaurants for delivery or takeout. Not surprisingly, they’ve exploded during the pandemic as restaurants seek additional revenue streams and more consumers take to delivery apps. And for the companies going virtual, they’ve become a kind of cheat code for expansion.

In one day last month, Asian fast-casual Wow Bao launched virtual branches in a dozen locations; last week, it did 40 in one day. 

“If you ever told me that we were going to do Wao Bao in Fargo, N.D., I don’t know if I would have believed it,” said CEO Geoff Alexander of the Chicago-based chain.

Wow Bao now has a virtual network of 150 locations in 85 cities, both through its own Dark Kitchen initiative launched last year and a recent partnership with host kitchen company Franklin Junction. It plans to hit 1,000 by the end of 2021.

“I don’t think anybody in the world has gone from 0 to 150 in nine months,” Alexander said. 

Well, anybody except MrBeast.

Virtual Dining Concepts, founded by Earl and his son Robbie in 2019, has about a dozen brands. A handful are celebrity-backed, like Mariah’s Cookies (as in Mariah Carey) and Tyga Bites (as in rapper Tyga).

Restaurants that add one of the brands pay no fee and can see a 30% profit margin, according to its website; the company takes a cut from each order.

Earl, who founded Planet Hollywood in the ’90s and once ran Hard Rock Cafe, is well-versed in the power of celebrity as a marketing engine. But even he seemed surprised by the platform MrBeast provided—thus, the gray hairs. 

“Starting any new business is stressful, but we had a very interesting push-pull,” he said of launching the brand. “We could’ve started with less units and grown, but once MrBeast tells his followers, who are—I can’t even explain them—they’re just so devoted that once he tells them about a new business, we ran the risk of upsetting so many if we didn’t have some geographic penetration.” 

About 40% of MrBeast Burgers are in brick-and-mortar restaurants operated by Earl Enterprises, such as Buca di Beppo and Bertucci’s. The rest are inside other chains or independents.

“[Partners] have done testimonials like, ‘I was about to close my doors forever, and now i’m hiring extra staff,’ which gives us a great kick,” Earl said. “So we’re constantly looking for concepts that understand virtual and understand the future.”  

For Wow Bao, it’s a familiar brand name, rather than a famous person, that has propelled its virtual growth. When the chain launched in Idaho, “the story was, ‘Chicago’s iconic Wow Bao has come to town,’” Alexander said. “I mean, that is priceless brand equity right there.”

It also helps that Wow Bao’s menu of bao, potstickers and bowls requires only a steamer to produce.

“You can’t screw up my food,” he said. “If you overcook my food, it’s just hotter.”

And then there’s the simple fact that virtual concepts are a cheaper—and less risky—way to grow.

Nathan’s Famous took itself virtual in April, along with a newly developed chicken wing concept called Wings of New York. Through partnerships with ghost kitchen providers like Reef and a few mom-and-pops, its virtual presence now stands at 75 locations.

“There’s no way, with our resources, even with the demand, that we would have been able to open 75 brick-and-mortar restaurants,” said James Walker, Nathan’s SVP of restaurants, on a recent episode of RB’s “A Deeper Dive” podcast

Wings of New York, which serves jumbo wings, tenders and waffles, now has 12 locations and will launch up to 17 more this month.

“Almost every day of the week, I’m signing agreements for Wings of New York,” he said.

The hot dog chain had a little over 200 traditional U.S. locations in 2019, according to Technomic, meaning its virtual branches have extended its footprint by about a third.

Wow Bao’s physical-to-virtual ratio is even starker: It has five stores in Chicago and six in airports. It would like to continue growing that number, particularly in airports, Alexander said—but the focus is clearly on virtual for now.

“We are looking for other opportunities, but I will tell you, we think we’ve found something that is pretty special,” he said.

Wow Bao’s partners can expect to generate $2,000 in additional sales per week from the brand, with about 30% to 40% going to the bottom line, Alexander said; some are doing $7,000. Partners pay an initial $500 fee, and Wow Bao makes its money from markups in the supply chain. 

Virtual Dining Concepts would not reveal sales figures, but Earl said demand for MrBeast Burger has remained strong since that big first day, with a high percentage of repeat customers on its app. 

MrBeast Burger now has agreements for 500 locations, and Earl expects to have 2,000 by 2023—which would make it roughly the size of Hardee’s. He sees virtual concepts as the future of the industry, even after the pandemic is over and dining rooms return to full capacity.

“I submit to you the new model is going to be: Maximize your brick-and-mortar dine-in, maximize your brick-and-mortar to-go business, and then look for opportunities in the virtual world,” he said.

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