A food delivery man crosses the street in Times Square in Manhattan on March 17, 2020 in New York City.
Johannes Eisele | AFP | Getty Images
As the coronavirus pandemic roils the restaurant industry, one ghost kitchen company is leasing shuttered eateries and hiring 1,000 employees to meet consumer demand for food delivery.
C3, a food hall and virtual kitchen subsidiary of hospitality company SBE Entertainment Group, is accelerating its growth as demand for its food doubles during the coronavirus pandemic.
"We definitely have seen a fundamental shift in consumer behavior, and we've accelerated not just our locations, but a completely different business line, which is leasing restaurants that are dark in communities that need restaurants and food," SBE Entertainment CEO Sam Nazarian said.
C3 is moving into three empty restaurants, with plans to open five virtual restaurant brands in each within the next four weeks.
"It's an interesting solution to what we believe, post-Covid, when a lot of restaurateurs will not be able to survive, and these restaurants will be going dark," Nazarian said.
Also known by a variety of other names, like virtual or cloud kitchens, ghost kitchens are an evolution of the restaurant model that is meant for off-premise dining only. These spaces allow restaurants to prepare food solely for delivery. Virtual restaurant brands are only found on third-party delivery apps, like DoorDash or Grubhub.
Simon Property, the largest U.S. mall owner, and hotelier Accor partnered with SBE to launch C3 — or Creating Culinary Communities — earlier this year. Accor has a 50% stake in SBE.
As retailers across the country are shrinking their footprints, Simon has had to look to other businesses to fill space in its properties. The mall operator has also been using its investment arm as a real estate operator to put money into some of the concepts that it hopes to work with for the long term. Some of its investments include in fitness chain Life Time, boutique club Soho House, online retailer Verishop and scooter company Bird.
The consortium's ghost kitchens are located in undesirable, yet convenient locations, such as mall parking lots and hotel kitchens. It has also signed leases with Travis Kalanick's CloudKitchens, a rival ghost kitchen company. C3's virtual restaurant brands were created with top chefs like Masaharu Morimoto and Dani Garcia for higher-end meals that can withstand 30-minute delivery routes.
C3 is recruiting 1,000 employees to help it open 138 ghost kitchens by the end of 2020. Furloughed employees from SBE's other businesses will be given priority. The company was aiming to open only 85 locations this year when it announced its launch in February.
Some openings have been moved up, thanks to mandated dining room closures. An SBE-operated restaurant in midtown Manhattan that was slated to open in May has been converted into a ghost kitchen that hosts two of its virtual restaurant brands. C3's delivery-only brands include Sam's Crispy Chicken, inspired by the chicken sandwich of the same name by SBE's Umami Burger, and sushi restaurant Krispy Rice.
While the pandemic accelerates SBE's plans for its ghost kitchen subsidiary, it is too early to tell if the consumer shift toward ordering third-party food delivery is occurring at the same pace or if the trend will be permanent. Grubhub said Monday that its number of daily average orders had risen 10% so far in April.
—CNBC's Lauren Thomas contributed to this report.