Wendy’s will open 700 phantom kitchens by 2025 with the Reef start-up

Customers dine at Wendy’s open-air stalls near Union Square in New York City.

Alexi Rosenfeld | Getty Images Entertainment | Getty Images

Wendy’s announced Wednesday that it will open 700 phantom kitchens in the United States, the United Kingdom and Canada by 2025 through a collaboration with start-up Reef Technology.

Also known as virtual, cloud or dark kitchens, phantom kitchens are designed to meet the demand for food outside the restaurant. The facilities complete the delivery orders placed through third-party delivery apps like DoorDash. Companies say they help restaurants reduce costs by using less labor and square footage and being in less desirable locations – such as parking lots, in the case of Reef.

Wendy CEO Todd Penegor told analysts Wednesday that his U.S. business saw digital sales dollars grow more than 10% in the second quarter.

Wendy’s and Reef piloted eight ghost kitchens in Canada together before making this development plan. Companies expect to open about 50 of the phantom kitchens this year.

“If you look at the economy, it’s quick to say what we can do with sales outside of each of those ships, but we expect sales in the range of $ 500,000 to $ 1 million per unit,” Penegor said.

The average gross annual sale for a Wendy’s franchise restaurant in the United States was $ 1.75 million in 2020, according to franchise release documents.

Despite lower expected sales for phantom kitchen locations, Wendy still expects a solid return on her investment. It will allow the company to expand further into urban areas, and Reef is responsible for the acquisition of kitchens and the hiring of workers, Penegor said. The start-up will also pay slightly higher royalties – 6% of gross sales in the United States compared to the 4% rate charged to other franchisees.

Penegor also said the program could be a great way to bring in new franchisees because of the lower cost of the investment.

The deal makes Reef the first Wendy franchisee in the UK. The hamburger chain opened its first restaurant on British soil in decades in June as part of a wider plan to expand its global reach.

Founded in 2013 as ParkJockey, Reef started out as a parking garage operator but has since branched out into ghost kitchens in shipping containers located in more than 4,500 parking lots. In February, the start-up raised more than $ 756 million, including an investment from SoftBank, according to Pitchbook. Other restaurant partners include BurgerFi and Wow Bao.

Wendy’s shares rose 3.5% in mid-afternoon trading after the company also closed reported quarterly earnings and revenues that surpassed Wall Street estimates and increased its 2021. forecast the stock is up 3% this year, giving a market value of $ 5.02 billion.

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