As companies shut down cloud and ghost kitchens, Local Kitchens is proving that its tech-enabled, multi-brand restaurant concept is a business model that works — and it's raising $40 million in new Series B funding for its efforts.
Former DoorDashers John Goldsmith, Jordan Bramble and Andrew Monday founded the San Francisco-based company in 2020 to bring food from local restaurants and nationally-known chefs to consumers in Northern California.
Local kitchens operate in a similar way to cloud kitchens or ghost kitchens, which are shared workspaces for restaurants to prepare food, often for delivery only. The company has developed a digital format to manage mobile app orders for multiple brands from one kitchen.
But CEO Goldsmith insists the company isn't a ghost kitchen (which may not be surprising, given how unpopular the category has become). He explains the difference: Local Kitchens operates its restaurant locations, of which there are currently 12, which means it employs the people who cook and works with partner restaurants and chefs to train them on recipes. And it offers dining room service as well as delivery to provide a more human connection.
Goldsmith said the model will enable the company to increase sales per person per hour by 50 percent compared to a traditional restaurant.
“One of the benefits of this model is that it's more efficient in terms of revenue per labor hour,” he told TechCrunch, “which means we can reinvest in hiring great people, paying them, and training them well, which is really important to maintain food quality in a model where you have eight brands coming out of one kitchen.”
In San Francisco, the company has partnered with local brands like Sushirrito and Boba Guys, as well as nationally-renowned chefs like Mason Hereford, founder of New Orleans sandwich shop Turkey & the Wolf. Bon Appétit magazine named the company “America's Best New Restaurant” in 2017.
Since its Series A in 2021, Local Kitchens has grown fivefold and achieved unit-level profitability. Additionally, Goldsmith said, one in 10 households in the San Francisco Bay Area has tried the service.
“We've become a weekly tradition, especially for guests who don't feel like cooking,” he said. “Families and couples can order from Local Kitchens and find something for everyone's taste.”
Not all companies in the industry have fared this well: It wasn't that long ago that the cloud kitchen and ghost kitchen concept boomed, spurred by a global pandemic that left everyone stuck at home but wanting food delivered.
In fact, the industry is booming and is expected to account for more than 20% of the restaurant industry by 2025. And over the years, startups have attracted funding from top investors, including SoftBank and Andreessen Horowitz.
But that hasn't gone according to plan: After restaurants reopened, the concept became hard to sustain, even for major fast-food chains like Wendy's.
Meanwhile, Kitchen United, which has raised about $150 million in venture capital funding and was described by Fast Company as a “former ghost kitchen leader,” decided in March to sell its assets to Sam Nazarian's lifestyle hospitality company, SBE.
Local Kitchen was looking to weather these challenges and expand into new communities outside of Los Angeles and California, making it a good bet for General Catalyst, which doubled down on its investment in the company, leading a $40 million Series B and a follow-up to a previously unannounced Series A round.
Kyle Doherty, managing director at General Catalyst, said ghost kitchens were initially expected to “bring about pivotal changes in customer value and efficiency,” but issues including inauthentic menus, poor quality control, flawed cooking methods and unsustainable unit economics have meant some business models have failed to establish a foothold in the post-COVID restaurant landscape.
By creating what Dougherty calls “a new category that reflects the ideal dining experience,” Local Kitchens has achieved “the perfect blend of prioritizing consumer needs and leveraging innovation to solve restaurant challenges and inefficiencies.”
“Years after the growth of food delivery proved to be a long-lasting trend, customers are still forced to sacrifice the enjoyment of dining out and choose between high-quality food and great service,” Doherty told TechCrunch. “Local Kitchens is doing what other food delivery models have not: satisfying customer experience preferences, driving unmatched efficiencies, and creating a solution that delights consumers, chefs, and communities alike.”
General Catalyst was joined by existing investors Human Capital, Pear VC and DoorDash co-founder Stanley Tang, who will join the company's board of directors, bringing Local Kitchens' total funding to $75 million.
“Stanley is our friend and mentor,” Goldsmith said. “He has also been involved with Local Kitchens since the company's inception and we are thrilled to have him officially join our board of directors.”
