How Amped Bucked the Ghost Kitchen Curse
Sweetgreen & Papa John's financial results, industry trends
There’s a big difference between a well-run commercial kitchen and a run-of-the-mill ghost kitchen; we sat down with Amped Kitchens Founder Mott Smith to get the skinny on what makes his business — and those of his many clients, including the likes of Chef Jose Andres — thrive. But before that, we’ve got some important financial results on the salad and pizza fronts.
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This week’s edition is brought to you by Woolpert.
Today:
Automation Shows Promise for Sweetgreen
Deep 3PD Ties Drive Papa John’s Sales
Chart Time | Industry Trends in 2024
Mott Smith Shares Amped Kitchens’ Secrets
OPERATIONS | Automation, Not Passes, Driving Sweetgreen Sales
Lunchtime bowl-hawker Sweetgreen released its FY 2023 results, showing strong improvements. Revenue for the year hit $584 million, up 24% YoY. Same store sales crept up 4%, while the company opened 35 new locations, and digital revenue mix sat at a healthy 59%. That was good enough to slim its net loss to -$113.4M, down from -$190.4M the year prior. Its Adjusted EBITDA (see, it’s a tech company!) dropped from -$49.9M last year to just $-2.8 million this year… so close!
The Big Picture: We watch Sweetgreen closely because it tries to be as much a tech company as a salad slanger. Its techiest bet, the automated Infinite Kitchen, seems to be paying off. CEO Jonathan Neman noted its robotic-infused locations showed 10% higher average tickets than normal locations, improving throughput, accuracy and turnover. Evidently that’s enough to recoup the half million in additional incremental costs associated with an Infinite Kitchen buildout. The company is less happy with the results of Sweetpass, its annual membership, which the company recently retooled to include more pricing tiers. While membership rose 25% in the second half of the year, the company doesn’t yet see it driving enough new sales.
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FINANCE | Papa John’s Breaks $5 Billion in Worldwide Sales
Pizza pusher Papa John's International may be smarting from its recent breakup with board member Shaquille O’Neal, but the world’s third largest pizza chain can comfort itself knowing it sold a heck of a lot of food last year: $5.04 billion, up 5% from ‘22. North American comparable sales rose 1% while International dropped 3%; total revenue climbed 2% to $2.14 billion. The company is working to fix up its int’l operations by buying up many of its underperforming franchisees. It’s also giving franchisees a near-term leg up by lowering their marketing spending requirements from 8% to 6%.
The Big Picture: Papa John’s claims its biggest strength comes from its deep ties with the 3PD platforms, from which it grew 50% in sales volume last year, despite the headwind of Domino’s partnering with Uber Eats. “We're benefiting from almost five years of partnership with these aggregators,” said CEO Robert Lynch. “We sell more per unit with aggregators than anybody else of the major national delivery chains. Aggregators are not growing as quickly as they were four years ago, but… we’re still going to take share and benefit from that growth. We have big plans to continue to thrive in that marketplace.” That may be true, but Domino’s sure looks to have had stronger growth last year…
CHART TIME | The Restaurant Industry in 2024
With the U.S. foodservice sector projected to hit $1 trillion in sales in 2024, the National Restaurant Association has put out a compendium of other interesting industry factoids. A few other fun facts: 41% of restaurants are minority-owned, 7 in 10 are single-unit ops, 76% of restaurateurs think tech gives them a competitive edge and 81% of unenrolled consumers say they’d join a loyalty program if offered.
INTERVIEW | Amped Kitchen’s Mott Smith’s Non-Traditional Path
MODERN DELIVERY: Let’s start with a bit of bio and background; what were you doing before starting Amped Kitchens?
MOTT SMITH: Nothing traditional! I played bass in a touring rock band, worked as a journalist, and directed planning for a multibillion-dollar school construction program.
I started my development company, Civic Enterprise, with my business partner Brian Albert back in 2003. We both love cities, food and creative businesses. Urban real estate had gotten too corporate and sterile, and we wanted to provide an antidote.
We aimed to build places that could be platforms for people to express their creativity and climb the economic ladder. It's almost like playing bass – you set down a groove so others can solo.
MD: What led you to start Amped, what was the “aha moment” where you saw a problem to solve?
MS: It was 2012–the tail end of the Great Financial Crisis. It seemed like everyone was starting a food company.
The problem was, most had no idea how to follow commercial food rules, and health departments didn't have the resources to train, permit, and inspect all these new businesses.
A friend boiled down the impacts: L.A. was full of great artisanal bakers, for example. But few had their wholesale license, which is what they need to legally sell product to restaurants and markets. To get a wholesale license can cost $200,000-$500,000 and take 12-18 months, even if you already have a kitchen space. So most were stuck at the starting line, unable to really grow their businesses or reach all their potential customers.
This was the aha moment. We wanted to create a building–the place that ultimately became the first Amped Kitchens — where small food companies could make stuff and sell it legally everywhere instead of being stuck in the direct sales world.
MD: How would you describe what the company offers?
MS: At the most basic level, we offer commercial kitchens that help our customers get their businesses off the ground quickly, and scale at their own pace. We also bundle services and amenities — cold, dry and frozen storage, and a forklift-certified crew to help with shipping and receiving and keeping the building clean and sanitary.
More abstractly, Amped is a place where smaller food companies can grow without putting their lives in the hands of a contract manufacturer. We help them compete on a much more even playing field with the big companies.
MD: What are some of the biggest differences between the commercial kitchen spaces you operate, and say a space more geared towards ghost kitchens?
MS: Amped is bigger, more versatile, more service-intensive and more production-oriented.
At one end of the spectrum, there are hourly kitchens like The Kitchen Terminal in Redondo Beach or Crafted in Downtown L.A. Both are wonderful and run by great people. They are ideal for earlier-stage companies who don’t produce full-time yet.
Then you’ve got ghost kitchens — buildings with, say, 10-20 delivery-only restaurants. The biggest operator is CloudKitchens, founded by Travis Kalanick of Uber. (DoorDash Kitchens is another well-known one.) Ghost kitchens are chaotic, fast-paced environments with people running bagged items from hot lines to a hand-off area, where drivers grab their orders and go.
And there’s catering kitchens – low-service buildings for caterers and sometimes food truck operators. Usually there’s no flesh-and-blood management onsite, and in that sense, maybe they’re the true “ghost kitchens.” (Laughs) The buildings are pretty bare-bones and not the cleanest, but they work for certain businesses.
Finally, you’ve got Amped. Amped offers a much wider range of spaces (from 150 SF to 4,000+ SF), palletized storage (for companies producing at higher volumes) and high-level health and safety protocols that help our clients meet wholesale standards like USDA, SQF and others.
MD: Who are some of the companies that have operated out of Amped Kitchens?
MS: So many we love! Beyond Meat piloted the Beyond Burger out of Amped. Robert Egger (with Chef Jose Andres) ran the L.A. Kitchen out of Amped. Everytable was with us in their early days. Breakout consumer packaged goods (CPG) brands like Zab’s Hot Sauce, Tea Drops, Chubby Snacks, Must Love and more have been Amped staples in recent years.
MD: When you’re trying to sign on a new customer – what are the biggest value propositions that resonate with them?
MS: We’ll get you started super quickly, in top-quality space, with help from our dedicated onsite team. We hold your hand during permitting and, with years of experience and a deep professional network, you’ll get the support you need to ramp successfully.
MD: What kind of policy changes would you like to see that would allow more food businesses to thrive?
MS: Love this question. Regulators need to weigh risk and reward better – to eliminate processes that don’t improve outcomes but still cost businesses a ton of money. For example, today, if you change out equipment under a cooking hood – even when there are no requirements to update your fire suppression or HVAC systems – L.A. still makes you get a Fire permit, a mechanical (HVAC) permit, etc., and go through inspections. This is crazy! It adds thousands in cost and months of time that small businesses really can’t bear – for no actual work. We need common sense. Don’t make us get permits just because there might be construction; only require permits when there is construction!
MD: What are some unexpected developments you’ve encountered while scaling the company?
MS: The biggest was how many large companies ended up at Amped in addition to the startups we set out to serve. In retrospect, it makes perfect sense – if Amped can save a small company hundreds of thousands of dollars and months of permitting time, why wouldn’t a large company want that? That’s why Beyond Meat, Soylent and others have come to Amped alongside the smaller companies who are just getting their legs.
MD: Any final thoughts, or advice to other folks in the space?
MS: If you’re considering a commercial kitchen, be clear about your priorities and your needs.
If you’re selling hot food, you want a great retail location, no more than 10-15 minutes from your customers. Look for a ghost kitchen in a solid location–preferably with a hybrid in-person food hall. That’s key – when you can sell on-premises, you’ve got optionality and upside that just isn’t available in a delivery-only ghost kitchen.
If you’re looking to do self-manufacturing, look for quality and capacity to scale. Sometimes people pick locations to minimize their downside risk – how much could I lose if I don’t succeed? But smart operators think more about the upside – can I sustain 2X or 3X growth without moving to a different building? And what if I get a massive order tomorrow? Do I have enough on-demand storage? Is there someone to help move my pallets on and off the dock? When my sink leaks, will someone take care of it so I don’t have to miss a beat in production? Most importantly, does my space give me the confidence to say “yes” to my next life-changing order from a dream retailer?
Meet Mott, and many of Amped Kitchens’ amazing delivery-oriented clients, March 28-29 at Curbivore. Today’s your last day to snag tickets for just $195!
A Few Good Links
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