Kitchen United has raised $100 million and announced plans to grow from 15 to 500 locations in the coming years, in part with Circle K, a partnership that could rival Kroger.
The Pasadena, Calif.-based shadow kitchen operator said it will also enter stadiums as part of its next phase. The funds, raised from a mix of new and existing investors, would be earmarked for scaling. Kitchen United said the next phase would not require a significant increase in staff, signaling a lean and scalable organization at a time when many restaurant technology companies are announcing layoffs.
At the end of this Series C round, the company’s total fundraising reached approximately $175 million. New investors include Circle K parent company Kroger, Burger King parent company Restaurant Brands International, B. Riley Venture Capital, Simon Property Group, Phillips Edison & Co, The HAVI Group. Existing investors also renewed their support, including Google Ventures, various funds managed by Fidelity Investments Canada, DivcoWest, Cali Group, GoldenArc Capital, General Global Capital and Rich Product Corporation.
Kitchen United co-founders Harry Tsao and John Miller, CEO Michael Montagano and two-time NFL Super Bowl MVP Peyton Manning also made significant investments in the round.
In an interview with Franchise Times sister publication Food On Demand, Montagano said his company’s latest boost solidifies his view that “slow and steady wins this race,” and stressed that it’s especially important that this financial support “comes from people who are in the industry, who know it better than anyone else.
These supporters include existing investors who are doubling down on the future of Kitchen United, but also newcomers like the parent company of Burger King after the first tests of the shadow kitchen space by the fifth largest franchise based in the United States according to the Franchise Times Top 400.
The deal marks one of the largest investments in the restaurant category in recent years, and is particularly notable as capital markets have been constrained across the world, forcing many start-ups to downsize and accelerate their efforts to achieve profitability.
Montagano said the increase is an important validation of the company’s strategy around real estate, technology and a real ability to generate revenue for partners in various models.
“Sometimes it’s our own standalone facility, sometimes it’s in partnership with others, but the bottom line is that location matters, the technology that powers those locations matters, and the ability to drive volume to our partner restaurants,” Montagano said.
Atul Sood, chief commercial officer of Kitchen United, who joined the company in 2017 after serving as business development director, global digital at McDonald’s, said this latest step was surreal after helping the company raise its first half. million dollars several years ago.
“Each time we’ve funded the business, we’ve sought a reasonable valuation based on reality and haven’t tried to outdo ourselves – and this time it’s the same,” he said. “We’ve also been, I would say, cautious and cautious about our growth. We didn’t just launch new installs everywhere we could, we really tested things to see what works and how to make sure the sites are profitable.
He added that a few years ago it could have been argued that Kitchen United were falling behind Reef, which added units much faster over the same span. But Sood said playing the long game was ultimately a blessing, “because we now have the roadmap for those hundreds, and we can do it with confidence with secure support.”
Sood stressed that the company will be careful to grow methodically and “in a way that ensures the future health of the business” beyond the next 12-18 month period.
“We’ve always viewed this as a decades-long effort to really reshape and help nurture the restaurant industry,” he said.
Existing partners double
Details about its new partnership with Circle K convenience stores remain scarce, but Kitchen United’s on-paper potential is vast. As the seventh largest franchise based in the United States, the company has more than 11,300 locations around the world, primarily in North America and Europe.
While no one has realized this vision at scale, convenience stores can be fertile ground for the future of off-premises. Given the real estate, traffic and access, they could become the delivery and charging hubs for electric vehicles of the future. But Montagano said there is a lot of work to get to that future.
“It’s a place where we can’t stand in front of our skis because Circle K has big plans,” Montagano said. “I can tell you we’re super excited about this, and we absolutely believe it has the potential to be as big as our partnership with Kroger.”
In a statement, Kevin Lewis, chief marketing officer at Circle K’s parent company Alimentation Couche-Tard, said, “We see many business opportunities in partnering with Kitchen United as it prepares for significant scale. We believe this company sets itself apart from other industry players with its centralized locations, multi-format offerings, experienced management team, and mature technology stack, which aligns with Circle K’s mission to make lives of our customers a little easier every day as we work together to shape the future of convenience.
Kitchen United’s next growth spurt will also include the stadium category, with Sood saying this is part of its “multi-format approach to ghost kitchens…which will generate many innovative partnerships with partners large and small.”
As Montagano and Sood prepared to board a plane for New York, where NASDAQ was preparing to post the investment in its seven-story tower in Times Square, the CEO said what he finds the most encouraging thing about this cycle is that each of its investors has been a business partner with Kitchen United in one way or another over the years.
“Similar to how we’ve grown methodically as a company, whether it’s our team or our number of installs, the same is true with our investors,” Montagano said. “These are people who know the business, know the leadership team, and know the value we add to their organizations, as well as others, and have chosen to double down.”