Ghost kitchens have been a popular expansion tactic for fast casual brands looking to bolster and diversify their off-premise channels in the wake of the pandemic, but Modern Restaurant Concepts isn't joining the bandwagon.
The restaurant group has tested both of its brands, Modern Market and Lemonade, in delivery-only formats but ran into too many obstacles to pursue the format further, CEO Rob McColgan said.
"Driving awareness without having an actual physical location in a trade area just proved to be more challenging than we expected, and actual staffing and operations in a small format again proved to be more challenging than we were expecting. … That's why you test things," McColgan said.
That doesn't mean Modern Restaurant Concepts isn't looking to maximize diner interest in off-premise meal occasions, however. In the last few months, the company launched a virtual brand called Honest Pizza at its Modern Market restaurants.
"That test is in multiple locations and going very well, and we're currently evaluating expanding it to more restaurants," he said.
The company has grown its digital engagement throughout the past year after launching websites with loyalty programs for both Modern Market and Lemonade.
"From a technology standpoint, it really has been true that if you didn't embrace delivery and off-premise during the last year that you were falling behind," McColgan said. "We were very fortunate that Modern was very well-positioned and that Lemonade was very close behind in being able to take advantage of those sales channels."
Modern Market acquired Lemonade in early 2019, and through that merger Modern Restaurant Concepts was created. Terms of the deal were not disclosed.
Both Lemonade and Modern Market offered delivery prior to the pandemic, as well as mobile ordering through the brands' apps and websites. These options have begun to transform diner behavior on-premise as well.
"We actually are seeing a lot of guests choose to order ahead or order as immediately as they get there through their mobile device, and that triggers the order immediately in the kitchen as though they were being rung up at the point-of-sale register and the food can get made and picked up without them actually talking to anybody or waiting in line," McColgan said. "We saw that a little bit in pre-pandemic [times] but as dining rooms have opened, we’ve seen it more and more."
But McColgan doesn't think the fast casual segment's future hinges on off-premise prowess, despite several major chains investing in these channels to better compete with QSR heavyweights.
"I think the next key sales channel for fast casual is the opening of dining rooms. I actually don't believe in a world where everything is delivery, everything is off-prem[ise]... I don't think the pendulum has swung in that direction forever," he said. "It's important for fast casuals to understand that they can take advantage of people coming into the dining rooms in the format that we have as an option over casual dining."
Hospitality is a critical priority for the company's future, McColgan said, and Modern Market and Lemonade will continue to fine-tune its off-premise offerings while focusing heavily on in-store engagement.
Franchising is also a focus for 2021 and beyond. Modern Market filed a franchise disclosure document (FDD) last year and began to pursue potential franchisees when the pandemic hit, but plans were put on hold for several months through the summer as the company adjusted operations to survive the economic disruption. Modern Market just filed this year's FDD and is in talks with potential operators.
Lemonade is not franchised, but McColgan plans to file an FDD for the brand this year or in 2022. Both Lemonade and Modern Market have licensed restaurants across the Los Angeles International Airport, the Denver Airport and on the campuses of University of Notre Dame and University of Southern California.
The company is hungry for acquisitions within fast casual and other restaurant segments, as well.
"We're constantly evaluating other brands that we can add to Modern Restaurant Concepts," McColgan said. "We're open to looking at all segments, so we're not taking anything off the table. But we know fast casual better than other segments so we’ll probably remain focused there."