Investors poured $18.1 billion into food tech startups in 2020. These 6 companies are cashing in on the trend and bringing AI, robotics, and more to KFC, Wendy’s, Domino’s, and Dunkin’.

03 Flippy wearing White Castle sleeve

Summary List Placement

The pandemic upended the restaurant industry forcing brands who had long ignored their digital game to quickly adopt. Customers are looking for faster and more convenient experiences, and behind the scenes, restaurants are turning to startups to get help get their digital game up to speed. 

Many restaurants are facing an uphill battle. In 2020, restaurant traffic plummeted by 7.8 billion visits, according to The NPD Group.

But even chains that have fared well during the pandemic are increasingly turning to new technologies. Chains like Domino’s, Dunkin’, White Castle, Five Guys, and KFC are partnering with startups to improve operations or find new revenue channels amid the pandemic. 

Previously, “the adoption rates have been tough in terms of technology in the restaurant space, even though there’s been lots of growth,” food-tech analyst Brita Rosenheim told Insider. “A lot of operators still didn’t have websites up until recently. You can’t really survive now without some type of digital interface.”

But, now she said she’s “preaching to the choir” as more operators are open-minded about how certain tech solutions can actually help their business. 

Investors are taking notice as well as restaurant chains. They poured $18.1 billion into food tech startups in 2020, up from $16.6 billion in 2019, according to PitchBook.

“Foodtech is one of the sectors most profoundly affected by the pandemic, which has revealed the weaknesses in the traditional supply chain and accelerated adoption timelines for new technologies,” PitchBook analysts said in a mid-year 2020 brief. 

Here are some of the most notable food-tech startups working with big chains in the US.

Automation, robots

Company: Miso Robotics

President: Buck Jordan 

Funding: $14.65 million (much of it has been through crowdfunding)

Food robots have been around for a few years but haven’t been widely adopted in the US until last year. Facing severe labor shortages and a proposed increase to the federal minimum wage, chains are starting to take a closer look at robots with the biggest experiment to date happening at White Castle. 

The iconic slider chain is testing a robotic fry cook by Miso Robotics. Flippy is frying everything from tater tots to chicken strips.

Before the pandemic, Miso Robotics was hearing from fast-food operators about the multiple challenges they face: rising minimum wage, delivery boom, high operational costs, and labor shortages. 

Yet, it was hard to get any takers for Flippy.

As the pandemic turned into a months-long crisis, Jordan said interest in Flippy has skyrocketed.

Social distancing is nearly impossible in these small fast-food kitchens, he said. 

“Robots are the only solution that can address that,” Jordan told Insider. 

Flippy, who doesn’t call in sick or take breaks, can fry about 10 items at White Castle including french fries, cheese sticks, chicken wings, and onion rings. 

White Castle plans to expand that single location pilot to up to 10 restaurants. More fast-food chains are expected to pilot Flippy later thsi year, Jordan said. 


Company: Kea

CEO: Adam Ahmad

Funding: $10 million in Series A funding in November 2020. Total raised to date: $13.4 million.

Kea is automating one of the restaurant industry’s oldest forms of transactions: the phone order.

The company’s AI-powered chatbots are now deployed at 250 restaurants operated by seven brands including industry tech giant Domino’s Pizza, which is significant given that the pizza chain is known to be a powerhouse when it comes to its own in-house technology. 

Since the pandemic hit, Kea has seen a surge in interest in its technology. It has more than doubled its presence since last March and is adding dozens of new customers a month.

Besides Domino’s, the company currently works with Donatos Pizza, Five Guys, and Primanti Brothers. 

Kea told Insider that missed phone orders cost restaurants 20% to 50% in revenue. The automated bots take phone orders, allowing restaurant owners to redeploy staff to help with hospitality-focused tasks like expediting curbside orders. 

The chatbots take orders, process payments, and can even make suggestions based on past orders. If there’s confusion, customers can ask to speak to a “live” person who can help complete the order.  

By 2022, Kea plans to expand to 1,000 locations.

Increasing restaurant traffic

Company: Brightloom, formerly Eatsa

CEO: Adam Brotman

Funding: Recently raised $15 million through current investors – Valor Siren Ventures and Tao Capital Partners. Total raise to date: $146.8 million, according to PitchBook. 

Solution: This tech startup is bringing the digital marketing power of Starbucks to restaurants and retailers who can’t afford millions on tech teams. Brotman worked as Starbucks’ digital chief when they rolled out mobile/order pickup on its pioneering app. 

Starbucks has agreed to license a portion of its proprietary marketing software to Brightloom, which recently rolled out its Consumer Growth Program. The plug-and-play platform uses machine learning to get-to-know customers by analyzing and categorizing their purchases based on buying habits. 

Restaurants use that information to send personalized emails to customers like offering them a discount for their favorite latte or suggesting something they might like, similar to the way Amazon makes predictive suggestions. 

Brotman said small and midsize chains don’t have the budgets to create this kind of tech. That’s why Brightloom is offering it for a “few” thousand dollars a month. The CEO says owning consumer data is like “digital gold” because it allows restaurants to tailor marketing to increase diner frequency. 

Brightloom’s Customer Growth Platform debuted earlier this month after testing with international Starbucks cafes and Jamba. 

 

Curbside and location-based tech

Company: Bluedot

CEO and co-founder:  Emil Davityan

Funding: $9.9 million 

During the pandemic, many fast food and casual dining restaurants developed contactless curbside pickup options. It’s likely that Bluedot is powering the heart of those transactions from behind the scenes. The startup uses location-based technology to follow the journey of a transaction, from the time it’s ordered to the time a customer arrives at the restaurant. 

“We can understand the location of the customer ordering and really add a lot of value to that journey,” CEO and founder Davityan told Insider. 

Bluedot works with Dunkin’ and KFC. 

“We do a completely frictionless drive-thru experience. So when customers order ahead, we can tell Dunkin when they’re arriving so the food and coffee is hot and ready to go just in time,” Davityan said.

The technology notifies the chains when customers arrive for curbside or drive-thru pickup.

It’s been especially helpful at the drive-thru, which many chains have been using to deliver mobile orders during the pandemic.  

“We on average, shave about 25 seconds off of a typical drive-thru purchase. And that translates to hundreds of millions of dollars for our customers,” Davityan said.

 

 

Ghost kitchens

Company: REEF Technology

CEO and co-founder: Ari Ojalvo

Funding: In late 2020, REEF Technology raised $700 million from Abu Dhabi’s sovereign wealth fund, SoftBank and others. Separately, REEF and Oaktree Capital established Neighborhood Property Group, a $300 million joint venture aimed at acquiring strategic real estate. 

REEF is changing how restaurants leverage the growing ghost kitchen space.

Instead of renting from a commissary like other companies in the space, restaurants license their menu to REEF, which sells their food as a delivery only or pickup product within their network of Neighborhood Kitchens.

These vessels, or mobile food hubs, look like shipping containers and are typically housed inside 4,500 parking facilities operated by REEF.  During the pandemic, REEF hubs began serving food from chains such as Nathan’s Famous, Wow Bao, Aloha Poke, BurgerFi, and Saladworks. 

The company plans to buy more lots in areas that are seeing population booms in the midst of the pandemic. 

REEF is in a crowded space. Ghost kitchens, which gained traction during the pandemic, could become a $1 trillion business by 2030, according to Euromonitor. Others in the space include Kitchen United, DoorDash Kitchens, CloudKitchens, Zuul Kitchens, and Kitopi.

Growth in the sector is so vast that one company has emerged as a ghost kitchen broker: Franklin Junction. The startup matches delivery-only brands with host kitchens.

But large and emerging chains are gravitating towards REEF because they don’t have to hire staff, pay rent or deal with third-party delivery fees. 

Aloha Poke CEO Chris Birkinshaw said REEF’s licensing model is a lower-risk arrangement for the 19-unit fast-casual chain which makes money off of royalties like a franchise agreement. 

“Their model fits pretty neatly with our goals for expansion through franchising,” Birkinshaw told Insider.

Restaurants also use REEF to test markets where they can add new brick-and-mortar locations.

REEF plans to use its funding to grow to 10,000 locations across the country.

 

Drone delivery

Company: Flytrex

CEO and co-founder: Yariv Bash

Funding: Flytrex has raised $10.5 million, according to Pitchbook. 

Under the Federal Aviation Administration’s ongoing pilot drone program, Flytrex and nine other drone companies have been given temporary authorization to test drone deliveries in US airspace. Over the past two years, the Tel Aviv-based logistics company has used its drones to deliver everything from hot dogs to ice cream.

Its biggest test to date started in late 2020 when it began making drone drops to houses about a half-mile from a Walmart in North Carolina. 

The company is also testing backyard drops from a Starbucks near Walmart. That test is unofficial, but important for battle testing beverage delivery when Flytrex is allowed to scale.

Flytrex’s drone can carry up 6.6 pounds of goods while traveling about 200 feet in the air before landing in a backyard. Flytrex’s strategy is on-demand deliveries of restaurant meals, groceries, and consumer goods. 

Each drone can carry about 10 items and travel a max of about six miles round trip. The goal is to deliver on-demand orders from restaurant and retail partners within 15 minutes. 

Bash said once he gets final FAA approval he hopes to have multiple “drone stations” in operation throughout the US by the end of the year. 

 

Originally published on Business Insider : Original article

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