Wendy’s will open 700 ghost kitchens by 2025 with the start-up REEF

Wendy’s announced on Wednesday the opening of 700 ghost kitchens in the United States, the United Kingdom and Canada by 2025 thanks to a partnership with the startup REEF Technology.

Also known as virtual, cloud, or dark kitchens, ghost kitchens are meant to meet the demand for off-premises catering. Facilities fulfill delivery orders placed through third-party delivery applications such as DoorDash. The companies say they’re helping restaurants cut costs by using less manpower and square footage and being in less popular places, like parking lots, in REEF’s case.

Wendy’s CEO Todd Penegor told analysts on Wednesday that its U.S. operations saw their digital sales increase by more than 10% in the second quarter.

Wendy’s and REEF jointly piloted eight ghost kitchens in Canada before developing this development plan. The companies plan to open around 50 of the ghost kitchens this year.

“If you look at the economy, it’s early to say what we can do with the sales of each of these ships, but we expect sales of between $ 500,000 and $ 1 million per unit,” said Penegor.

The average annual gross sales of a Wendy’s franchise restaurant in the United States were $ 1.75 million in 2020, according to franchise backgrounders.

Despite the expected drop in sales for Ghost Kitchen locations, Wendy’s still expects a solid return on investment. This will allow the company to expand further into urban areas, and REEF is responsible for purchasing the kitchens and hiring workers, Penegor said. The startup 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 attract new franchisees because of the lower capital cost.

The agreement makes REEF the first franchisee of Wendy’s in the UK. The burger chain opened its first restaurant on UK soil in decades in June as part of a larger 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 inside shipping containers located in over 4,500 parking lots. By February, the start-up had raised more than $ 756 million, including an investment from SoftBank, according to Pitchbook. Other partner restaurants include BurgerFi and Wow Bao.

Wendy’s shares rose 3.5% in afternoon trading after the company also reported quarterly earnings and earnings above Wall Street estimates and raised its guidance for 2021. The stock has increased 3% this year, giving it a market value of $ 5.02 billion.