Why Is NYC Kellogg’s Diner Selling Food Under 18 Different Restaurant Names on Delivery Apps?

Casey Lewis was scrolling through Seamless looking for a bacon, egg, and cheese sandwich when it occurred to her: “What are all of these random ass breakfast offerings?” Lewis has lived in Williamsburg for years and describes herself as a regular user of Seamless, but on April 6 she noticed a slew of new businesses listed on the delivery app: All Day Breakfast, the Best Breakfast Company, Anytime Breakfast Sandwiches, and others. “The names were so generic,” she says. “Something seemed off.”

It turns out all three of the businesses — and more than a dozen others — are tied to the same address in Williamsburg, which belongs to the neighborhood’s decades-old 24-hour diner Kellogg’s. Lewis, who tweeted about the head-scratching detail earlier this month, isn’t the only one who’s confused.

At first glance, the businesses tied to Kellogg’s might resemble ghost kitchens, but they’re actually part of a newer class of online restaurants called “virtual brands,” according to Scott Landers, founder of delivery consultancy Figure 8, whose clients have included restaurant chains like &Pizza and Mexicue.

While ghost kitchens operate out of separate commercial spaces that don’t have a physical dining room, virtual brands operate out of brick-and-mortar restaurants that already exist. Companies come up with the brands — which usually consist of just a logo, a name, and a short menu — then license them out to restaurants and bars, who execute the recipes and package them for takeout and delivery.

National restaurant chains like Chili’s, TGI Friday’s, and Denny’s have been operating virtual brands for months, but now smaller, independent operators are getting on board. Take Anytime Breakfast Sandwiches, one of the businesses Lewis encountered on Seamless. The virtual brand delivers its food from multiple restaurants across the city, including Skylight Diner in Manhattan, Brooklyn Bagels and Cafe in Staten Island, and Kellogg’s Diner in Brooklyn.

Profit Cookers is one of several companies creating and licensing virtual brands to restaurants right now. The Florida-based company comes from founder Kirk Mauriello, a restaurateur who formerly worked at virtual restaurant group Virturant before launching Profit Cookers in January. He’s since licensed out his portfolio of 23 brands, which make everything from burgers to breakfast burritos, to almost 50 restaurants and bars nationwide. Kellogg’s Diner is one of them.

“The best restaurant for this is a diner,” Mauriello says, “because they already make everything.” Part of the pitch is that restaurants may already be making dishes similar to what’s offered by the virtual brands they take on, and in some cases it’s possible to use the same ingredients for multiple concepts.

For a restaurant like Kellogg’s, which serves hundreds of items across a menu with more words than some privacy agreements, signing on was a no-brainer. “We were looking for ways to pick up our delivery business,” says Irene Siderakis, owner of Kellogg’s. So far it’s working.

Siderakis partnered with Profit Cookers in February, running 18 of the company’s virtual brands out of the 24-hour diner. Since signing on, she’s already posted around $40,000 in additional sales, according to Mauriello, in part because the brands operate with expanded hours and delivery radiuses. Kellogg’s stops taking orders on its personal delivery apps after midnight, as the restaurant uses its own delivery drivers.

Its virtual brands accept orders around the clock, and she credits the new business as one reason the restaurant has been able to stay open 24 hours, while so many other late-night businesses have had to scale back their hours during the pandemic. “It’s bringing in revenue that we need to survive right now,” she says.

Companies like Profit Cookers often look to partner with older restaurants that might not have a significant online presence, Landers says. They’re betting on the idea that it’s easier for restaurants to leverage another brand, which might bring the name recognition of operating in other boroughs or cities, than building their own from the ground up. In exchange, the companies takes a cut of each sale — 10 percent, in the case of Profit Cookers — and raise the cost of online orders to increase profits for restaurants.

A bacon, egg, and cheese sandwich ordered from Rise and Grind Cafe, a virtual brand at Kellogg’s not associated with Profit Cookers, might cost $20, while a similar sandwich is priced at $7.45 on the diner’s in-person menu. “Restaurants should not be selling their food at the same price online as in-person,” Mauriello says. “You’re paying for convenience.”

The brands are putting money into the pockets of restaurant owners at a time that’s sorely needed, Siderakis says, but they come at the cost of some transparency for consumers, who may think they are placing an order from a physical establishment. Across Uber Eats, Grubhub, and Doordash, only the latter app notifies customers when they are ordering from a virtual restaurant. A disclaimer can be found at the top of the ordering page — “This is a virtual brand” — although it’s located on slide three of a four-slide carousel with promo codes for discounted delivery. There’s no additional context about how the virtual brands operate.

“There are real concerns with traceability and accountability,” Landers says. “Who owns that order? Is it the restaurant that made it? Is it the [company] that created the brand? Is it Grubhub who delivered the order?”

Virtual brands are required to abide by local health and safety regulations and delivery app merchant agreements, but none of the aforementioned apps limit how many virtual brands an individual restaurant can operate or how many dishes each brand is required to serve to be listed on their platform, so long as each concept is “unique” and “not a duplicated menu,” according to a spokesperson for Grubhub.

The world of virtual brands has few rules, and third-party delivery apps have little incentive to enforce them. According to Landers, delivery companies have a vested interest in seeing these virtual businesses succeed. “Every additional virtual brand that signs up for delivery expands their digital footprint,” he says, while new orders boost the bottomline for delivery apps through commissions and marketing fees.

Mauriello says he’s along for the ride. “People don’t really care where their food comes from as long as it’s a commercial kitchen,” he says, and by the numbers, he might have a point. Less than four months in, Profit Cookers is already working with 46 restaurants across 10 states, with each businesses posting an average of $20,000 in sales from the virtual brands, the virtual restaurateur claims. “This is only going to become more prevalent,” he says.