15 "unknowns" that we wanted to solve for to prove that our idea had traction
A series of 50 posts in 50 days - Day 8/50
I recently outlined what we want to build over the long term with our “virtual food halls”.
Our Vision Vision (summarized)
Launch a virtual food hall in Columbus, OH
Create and run ~4-6 brands from that virtual food hall (all proprietary)
Build more of these around the Columbus market
Scale that out to different geos (Indianapolis, Cleveland, Nashville?)
While its fun to get excited about the long term upside of this space and this vision, we were overwhelmed as to how we get started.
Simply getting to a virtual food hall with multiple concepts requires:
Multiple concepts identified, and menus/brands crafted
Strong individual unit economics or the ability to scale economics across brands when combined
A social presence for these brands
Real estate in proximity to the customers we seek to serve
A kitchen designed for takeaway operations
Feedback from customers and validation that there was upside
A tech stack to facilitate all the above
Funding
and thats just scratching the surface! We quickly realized that creating 1 successful concept was going to be hard, let alone 4-6.
We also didn't have a clear picture of individual brand economics, or the economic efficiencies we would gain from running multiple concepts together.
We didn't know how operationally challenging this would be. We had no idea how hard it was to attract customers or capture digital real estate.
We had a hunch for which demographics we wanted to serve, but no validation that we were right. It was all assumption based.
And without any of the above, there was no chance we could make a compelling case to receive funding. We had some money, but we couldn't do all the above with just our own savings.
On funding, i'm specifically referring to banks or outside investment. And even if we DID somehow receive funding, there were still so many unknowns and risks in what we were doing.
What if we lock into a 5 year lease and theres something fundamentally wrong with our model?
What if we build a custom kitchen in the wrong neighborhood which stunts our ability to grow?
What if customers just simply don't want this?
What if we hate running virtual kitchens?
Coming from the software world, my immediate reaction was "We need to proof of concept this". So we asked ourselves
"What are the unknowns that we want to figure out before we start making expensive decisions?"
15 unknowns we’re going to try and solve for:
Is our hypothesized location the right location for us to make a long term bet?
Are people excited about off-premise dining, especially as "the world is opening back up"?
How long does it take to go from idea -> launch?
How hard is it to grow a social presence?
What are the economics of a single delivery brand in a leading category (Burgers, Chicken, Pizza)?
How streamlined can we make a single virtual brand operation?
Based on 6, how many concepts do we think we can layer into one location?
How hard is it to capture digital real estate and the attention of our customers?
How feasible is it to convert customers from 3rd party apps to more margin accretive channels?
How many of our customers will be delivery vs. how many will be takeaway?
How long does it take to mature a brand (go from 10 orders /day to 100 orders? 100 to 200? etc)
How much money is needed up front to invest in each brand, and what is the target payback period?
Which marketing tactics deliver the most value and should be scaled up?
How many customers become repeat customers vs. one-off customers? (What is the % with >1 order?) -> Put customers in cohorts of 1 order, 2-3 orders, 4-7 order, and >10 orders
What things did we not even think about that are actually critical to success?
We had an initial hypothesis on each of the above that were based on logic, competitors, things we had read, interviews with other operators... But every market and each different virtual kitchen operating model can be different, so we wanted DATA to validate our thinking.
This quickly turned into an all day conversation to figure out "How can we answer the above using assets and skills we currently have, in a cost effective way".
More on that tomorrow.