May 16, 2022

Alex Canter recalls his first morning working at the family restaurant after graduating from college in 2014, when President Barack Obama made an appearance with hordes of press and the Secret Service blocked off “six blocks in every direction.” Similar scenes aren’t unusual at Canter’s Deli, a Los Angeles icon and hangout for the Hollywood crowd that’s starred in countless films and TV shows itself. While diners are still packing its vinyl booths to have a nosh 24/7 (except on Rosh Hashana and Yom Kippur), celebrity status hasn’t made the 91-year-old establishment immune to the seismic shift that’s underway in the restaurant business. With the rise of digital ordering, restaurants like Cantor’s are increasingly finding ways to adapt their business to consumers’ desire for food on demand, leveraging digital channels to boost sales at any hour of the day. Canter, who’s the CEO of virtual restaurant company Nextbite in addition to being a fourth-generation deli owner, argued in an interview with PYMNTS’ Karen Webster that 90% of restaurants could be making more food and meeting more demand, especially if they leverage their space and resources to prepare foods specifically designed to target consumers’ off-hours wants and needs. For its part, Nextbite creates virtual restaurant concepts that appeal to customer cravings, working with chef and restaurateur Tom Collichio to help restaurateurs — for instance, to serve up recipes from his New York ‘Wichcraft’ sandwich shop, or with rapper Wiz Khalifa to satisfy late-night munchies with Khalifa-inspired menu items — all delivered via popular order aggregators. “We’ve really wanted to help these restaurants to maximize their underutilized kitchens, ’cause every restaurant has these opportunities to sell more food if they had that demand to do so,” he said. “With IHOP, for example, they’re 24/7 at the majority of their locations, but they’re really busier in the mornings than they are at night. So, we’ve designed two concepts for them: a grilled cheese concept and a quesadilla brand that is performing exceptionally well from 9 p.m. to 5 in the morning.” Of course, running a restaurant is not all lulls and waiting around. For busy hours, Canter noted that the company offers an option for restaurants to switch off service on digital platforms to accommodate times when kitchens are at full capacity fulfilling orders from in-store customers. Need for Speed The success of these virtual brand initiatives hinges on the continued popularity of digital ordering. Canter explained that the top factor driving digital ordering is “definitely convenience,” adding that this “is not a trend.” In fact, he pointed out that food-at-home occasions are now competing with grocery occasions, citing the example of the breakfast daypart. Consumers are increasingly ordering delivery for food and coffee in the morning, capturing additional occasions when consumers would once have purchased packaged food or raw ingredients. Indeed, research from PYMNTS’ 2021 How We Eat Playbook , created in collaboration with  Carat from Fiserv and drawing from a survey of a census-balanced panel of more than 5,200 U.S. consumers, revealed a dramatic increase in at-home restaurant meal consumption. The study found that consumers were 31% more likely to order meals for delivery or pickup than to dine on-site. Plus, in the year since that survey, consumers have only grown more accustomed to digital ordering. The Physical-Digital Challenge Canter’s is certainly not the only restaurant making changes to meet the rising demand for digital ordering. Large brands are rerouting their resources toward digital ordering channels, unveiling smaller footprint stores and virtual locations. Yet, while major chains are able to focus their store concepts for new locations on capturing this demand, many restaurants are stuck with physical spaces that were not meant for running major off-premises business. Canter noted that even Michelin-starred fine-dining establishments have “figured out some sort of version” of their food that can be prepared for off-premises consumption. However, those that have attempted a one-to-one transposition of their on-premises menus found that not all items can succeed on every channel. He explained that these restaurants should “pay really close attention” to information about product performance on delivery apps’ dashboards. Supply chain challenges impose additional constraints. Canter described the difficult position in which many find themselves. As prices of certain items skyrocket and other ingredients become nearly impossible to obtain, they are forced to decide whether to remove menu items permanently or temporarily, potentially damaging customer loyalty, and whether to raise prices, which could further alienate diners. Even more pressing than these challenges, he argued, is the difficult labor market. “It’s been harder than ever to keep kitchen staffed, and turnover … is just making it so unpredictable [to] keep consistent hours and to keep delivery apps going,” he said. Filling in the Gaps Ultimately, the advantage of Nextbite’s virtual brands is that they enable restaurants to make better use of under-utilized kitchen space and drive sales in under-trafficked dayparts. In addition to grilled cheese and quesadilla brands, another example of this strategy is the company’s partnership with YouTuber and internet celebrity Cody Ko, Dessert Club. By targeting the dessert occasion, the brand drives sales outside of typical mealtimes. “[This] will be running out of the back of a network of underutilized kitchens across the U.S.,” Canter said. He added that, given the fixed costs restaurants are paying for rent, for their existing staff, to keep the lights on and more, these brands allow restaurants to “push more food through these kitchens,” driving more revenue from their existing investments. And for those wondering: Obama’s deli order? “He was actually on his way to a lunch right after, so he didn’t have a full meal at Canter’s, which was unfortunate, but he did eat some chocolate-chip rugelach and was on his way,” Canter said. ——————————