2020 has been an incredibly disruptive year for the restaurant industry with losses of over $240B in the US market alone. Supply chains have been cut, the way people consume and order food has been turned upside down by the pandemic. These constraints also represent an opportunity for businesses to rethink how customers engage, how to mobilize people and resources to achieve faster results and how to leverage new technologies to their advantage.
In this blog post we analyze Virtual Dining Concept, the business behind the concept of MrBeast’s Burgers, a new business with the potential to disrupt the fast food industry. And ask ourselves, why did it take an insurgent to come up with this new innovative business model when incumbent chains like Mcdonalds or Burger King would have been better positioned to do the same.
In December of 2020, YouTube star Jimmy Donaldson - more commonly known as MrBeast - launched his own burger chain, MrBeast’s Burgers, and opened 300 locations overnight. In a period where restaurants are struggling to stay open, MrBeast’s Burgers is growing at an unprecedented rate - to give you an idea of scale, it took McDonalds 6 years to open 300 franchises.
As a result of the Covid-19 pandemic and its health restrictions, restaurants and their staff are sitting idle, unable to generate sufficient business from delivery. The concept for MrBeast’s Burgers is that those idle kitchens produce and package MrBeast’s Burgers, and use the variety of delivery apps available - UberEats, DoorDash, PostMates - to get them delivered.
What is interesting about this example is that MrBeast is only one cog in a bigger model. Virtual Dining Concept (VDC) is the brainchild of restaurateur Robert Earl (who owns a variety of successful franchises) and is responsible for the success of Mr Beast’s Burgers. Mr Beast’s Burgers is just one of the many celebrity food brands that VDC is rolling out using virtual kitchens.
VDC has found a way to productively use spare capacity of kitchens all over the country, providing these virtual kitchens with ingredients and branding, as well as a home app that centralizes the orders from various delivery apps. In return for cooking and packaging the dishes, the restaurants receive 30% of the overall profits. The value proposition for restaurants is clear: simply by using their own resources more efficiently, they can benefit from increased revenue, without having to invest significantly.
In order for these restaurants to generate enough buzz VDC leverages the star power and existing fan base of notable celebrities. Each food concept is endorsed and branded by a celebrity. From Mariah Carey’s Cookies to the rapper Tyga’s Chicken Bites. VDC is in charge of creating the food concepts while the celebrities promote and market the products for them.
VDC’s innovative business model is also poised to utilize the booming trend of food delivery by leveraging the algorithms of food delivery apps. Restaurants are limited in their ability to deliver through these apps by their geography, as they will only be listed on the apps of customers that are within a certain range, typically around 5 miles. By working with restaurants spread strategically around a city, they can ensure all customers across the city can receive their delivery.
The question is: why did it take an insurgent like Virtual Dining Concept to explore this disruptive business model? Why couldn’t an incumbent fast food chain like Mcdonalds or Burger King have done the same? Why are established players incapable of exploring how their assets could leverage radically new concepts like MrBeast’s Burger? They have strategically placed locations all over the world, they have delivery apps integrated into their order system, they are already familiar with celebrity endorsement, and their brand reach is often global..
The answer is simple, it’s hard for incumbents to explore radically new concepts because they are locked into a successful business model. Their entire organization is streamlined to optimize that successful business model and anything that looks differently is rejected by “corporate antibodies”. At Strategyzer we believe that incumbents need to fight against these antibodies and build an exploration engine that gives innovation sufficient power. Power to explore radically new business models based on their core strengths and existing assets. This is the only way they will be able to fight off disruption from much faster and often better funded insurgents.