The Rise of Celebrity-Backed Virtual Restaurants

In 2017, Uber Eats started to offer a few “ghost kitchen” options—virtual, delivery-only restaurants with no physical storefront or dining space that leverage existing kitchens to make their food. Today, just six years later, the app alone hosts "tens of thousands of virtual restaurant storefronts" and so does nearly every other delivery app. According to a joint report by Grubhub and the market-research firm Technomic, 41% of independent restaurants are operating virtual restaurants. So, how did this trend take over the restaurant business so quickly?

TenderFix™, a collaboration between “Stranger Things” star Noah Schnapp and virtual restaurant company Nextbite, is one of the latest entries into this space. 1851 Franchise spoke with Schnapp to learn more about how this new concept came about, his larger entrepreneurial goals and more. 

The TenderFix™ Concept

Inspired by his love for chicken sandwiches, Schnapp told 1851 that his ultimate goal with Tenderfix was to provide customers with easy access to delicious chicken sandwiches and tenders, which are available any time, late at night and even on Sundays. TenderFix also offers plant-based options.

“It’s important to me to have something on the menu for everyone, so we have tenders, sandwiches, sliders and delicious plant-based options for delivery nationwide from your favorite apps, which is really something that continues to see growth with 'flexitarian' eaters,” Schnapp told 1851.

The 18-year-old actor, who enrolled last year at the University of Pennsylvania’s Wharton School, has been dipping his toes into the business world for a while now. Schnapp also is a founder of TBH, a snack company behind a sustainable version of Nutella made without palm oil.

“I have always had a passion for entrepreneurship, hence why I am studying it at Wharton Business School,” said Schnapp. “TBH was my first entrepreneurial endeavor, and Tenderfix is the next step. I have a passion and love for food, so to combine my passion for food with this startup was a natural next step.”

While brands such as Insomnia Cookies and Raising Cane’s were also started by college students in their dorm rooms, Tenderfix has been able to leverage its virtual status to launch nationwide overnight. TenderFix by Noah Schnapp went live last month through about 1,000 IHOP locations, which prepare the orders delivered through apps such as Grubhub, Uber Eats and Doordash. 

Celebrity-Driven Virtual Brands

As virtual restaurants gain traction, so too has the trend of celebrity-backed concepts. Since these are new concepts trying to stand out amidst the massive sea of dining options, they require major marketing power to build and maintain a customer base, which is why so many celebrities are being asked to join in on the trend. 

In December 2020, Youtuber MrBeast launched MrBeast Burger, with 300 stores across the country. Thanks to the influencer’s massive following, the launch was a viral sensation both from a consumer standpoint and a business standpoint. Since launching, the ultra-popular virtual chain is reported to have brought in over $100 million in revenue.

Wiz Khalifa is another celebrity who has opened, and recently rebranded, his own version of a ghost kitchen called Packed Bowls. Like TenderFix, it is a Nextbite creation. 

George Lopez also launched a collaboration with Nextbite, called George Lopez Tacos, which currently has 80 locations open nationwide. Other celebrities such as Mariah Carey, Tyga, Mario Lopez, DJ Pauly D and Guy Fieri have also thrown their hats in the ring. 

While Schnapp cites these other concepts as interesting brands that have made their mark in the industry, he says that, in addition to his love of chicken sandwiches, his primary inspiration to start TenderFix™ was about more than just tapping into a trend. It's about good business. 

“Those are unique concepts, but I think TenderFix™ is great in that it not only is scalable, but also offers the top protein of choice for America, chicken, in either regular form or plant-based,” Schnapp said.

How Virtual Concepts Could Disrupt Traditional Franchising

As the virtual restaurant landscape experiences rapid growth, virtual restaurant brands are making a significant impact in the franchising sector. These brands may emerge as extensions of existing restaurant franchises or as entirely new virtual franchise entities.

Numerous well-established, dine-in restaurant franchises such as IHOP have been quick to identify the immense potential of virtual restaurant brands. These franchises and their franchisees already possess the necessary physical locations, kitchen facilities, staff and commercial expertise. With ongoing supply chain disruptions, along with the opportunity to leverage existing resources, personnel and expertise to explore new revenue streams with minimal additional capital investment, presents an appealing option for both current and prospective franchisees.

When it comes to Tenderfix™, the concept is designed strictly for IHOP franchisees, ensuring the brand can “seamlessly be added into operations of the restaurant, and to leverage similar equipment and cooking techniques,” an IHOP spokesperson said in a statement.

Other Nextbite brands Thrilled Cheese and Super Mega Dilla are also run out of IHOP locations. These helped the company grow its Q4 2022 off-premise business to 22% of sales, with delivery accounting for 14% of this mix. 

How Franchisees Can Get Involved

Many of these virtual brands are available for licensing. That means existing restaurant owners, franchisees, and mom-and-pop business owners can diversify their portfolio and potentially increase revenue by utilizing the celebrity-endorsed and social media-fueled brand recognition. 

“Entrepreneurs are realizing that people like myself are offering them a ready-made brand,” Robert Earl, founder of Virtual Dining Concepts, told 1851 in 2021. “We have done all the work creating the brand, the recipes, the vendor partnerships and the menu. We give an independent restaurant a national platform they can use to dominate a particular area, usually coinciding with the third-party delivery markets. It is really a relationship between their kitchen, our company and the delivery provider.” 

Although there are no franchising fees, the combined commission paid to the company and the third-party marketplace can be as high as 40%. On the other hand, since these restaurants can be operated out of an existing kitchen, the only additional operational costs that owners need to pay are for the food, packaging and platform fees. 

All in all, the overhead costs and total risk of licensing a virtual brand is much lower than traditional franchising, which creates a huge advantage as investors look for any way to generate a quick return on investment (ROI).

The Future

The rise of celebrity-backed virtual restaurants has undoubtedly caught the attention of the public, and not every response has been completely positive. For example, some critics have complained about a lack of transparency on the actual delivery apps, which makes it hard to tell if the restaurant you are ordering from is real or not. While DoorDash labels concepts as “virtual,” Uber Eats and GrubHub do not. Still, this miscommunication may just be a natural growing pain as both consumers and delivery apps adapt to the shifting landscape. 

Overall, time will tell whether virtual concepts become a mainstay of the restaurant industry at large. Schnapp says he remains open to the idea of opening a physical restaurant one day, depending on the future of the brand.

“We will see!” Schnapp said. “I think for now we really are excited to see the immediate launch that has taken off, and help bring that chicken flavor to everyone at their doorstep."