General Catalyst leads $40M round for Local Kitchens, a different kind of restaurant kitchen startup
Reading Time: 3 minutesAt a time when companies are shuttering their cloud and ghost kitchens, Local Kitchens is proving its tech-enabled multi-brand restaurant concept is a business model that can work. And it grabbed $40 million in new Series B funding for its efforts.
Jon Goldsmith, Jordan Bramble and Andrew Munday, all former DoorDashers, started the San Francisco-based company in 2020 to offer dishes from local restaurants and nationally recognized chefs to consumers in Northern California.
Local Kitchens operates in a similar manner to cloud and ghost kitchens, which are shared workspaces for restaurants to cook meals, often exclusively for delivery. The company developed a digital format to manage mobile app orders for multiple brands from a single kitchen.
However, CEO Goldsmith insists the company is not a ghost kitchen (which is, perhaps, not surprising, given how out-of-favor the category has become). Here’s how he describes the difference: Local Kitchens operates the restaurant locations itself — there are 12 now. This means the company employs the people cooking the food and works with partner restaurants and chefs to train them on their recipes. It also offers dining room service rather than just delivery to provide a more human connection.
That model enables the company to achieve 50% more sales per person per hour than traditional restaurants, Goldsmith said.
In San Francisco, the company is working with local brands, including Sushirrito and Boba Guys, and with nationally recognized chefs like Mason Hereford, founder of New Orleans sandwich shop Turkey and the Wolf. Bon Appetit named it the ‘Best New Restaurant in America’ in 2017.
Since its Series A in 2021, Local Kitchens grew 5x and achieved unit-level profitability. Plus, 1 in 10 households in the San Francisco Bay Area have tried the service, Goldsmith said.
‘We’ve become a weekly habit, especially for guests who don’t feel like cooking,’ he said. ‘A family or couple can order from Local Kitchens and find something for everyone.’
Not every company in this industry is doing this well. It wasn’t too long ago that the cloud and ghost kitchen concept was flying high, buoyed by the global pandemic when everyone was stuck at home yet wanted food delivered.
In fact, that industry was doing so well that it was poised to make up more than 20% of the restaurant industry by 2025. Startups also attracted capital from top investors over the years, like SoftBank and Andreessen Horowitz.
But that’s not happening as planned. After restaurants opened again, the concept became difficult to maintain. Even by big fast-food chains like Wendy’s.
Meanwhile, Kitchen United, which raised some $150 million in venture-backed funding and was touted as a ‘one-time ghost kitchen leader’ by Fast Company, decided to sell assets to Sam Nazarian-led lifestyle hospitality company SBE in March.
Local Kitchens defying those odds and wanting to expand into new communities in Los Angeles and beyond California, made it a good bet for General Catalyst. The firm doubled down on the company, leading the $40 million Series B and a previously unannounced follow-on to its Series A round.
Kyle Doherty, managing director at General Catalyst, said ghost kitchens initially ‘promised to drive pivotal change in customer value and efficiency.’ However, issues like inauthentic menus, poor quality control, questionable preparation methods and unsustainable unit economics prevented certain business models from gaining a strong foothold in the restaurant industry post-COVID.
By creating what Doherty called ‘a new category that’s in our view reflective of the ideal dining experience,’ Local Kitchens has ‘the perfect blend of prioritizing what consumers need and using innovation to fix restaurant challenges and inefficiencies.’
General Catalyst was joined by other existing investors Human Capital, Pear VC and Stanley Tang, co-founder of DoorDash, who joins the company’s board of directors. This brings Local Kitchens total funding to $75 million.
‘Stanley has been a friend and a mentor to us,’ Goldsmith said. ‘He’s also been involved with Local Kitchens since the beginning of the company, and we’re excited to have him officially join the board.’
Reference: https://techcrunch.com/2024/06/25/local-kitchens-general-catalyst-40m/
Ref: techcrunch
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