Tech

Delivery’s richest CEO Tony Xu has been quietly funding 2 ghost kitchens built by Uber Eats and DoorDash alums — and his bets reveal the next big trend in the industry, experts say

  • DoorDash’s Tony Xu was the second-highest-paid CEO in 2020 with compensation of $414 million.
  • Xu is using his personal wealth to back All Day Kitchens and Local Kitchens in the Bay Area. 
  • Analysts say Xu’s backing of ghost kitchens tracks as these firms boost the overall delivery sector.

All Day Kitchens and Local Kitchens, the latest to join the growing ghost kitchens sector, have a similar mission and a common benefactor. Both aim to serve suburbanites with chef-driven meals. And both are supported by DoorDash CEO Tony Xu, the second-highest-paid CEO in the US.

Additionally, both ghost kitchen operators were created by alums from

Uber Eats
and DoorDash.

Xu’s interest in the businesses is another way to maintain DoorDash’s dominance in delivery, analysts told Insider. While the ghost kitchen model is outside of DoorDash’s core business, backing these operations makes sense for Xu as these startups boost the overall delivery sector.

DoorDash itself has experimented with ghost kitchens in the past, including a handful in the Bay Area that worked with brands like Chick-fil-A. 

A DoorDash spokesperson declined to speak to Xu’s personal investments but did offer a statement on DoorDash’s position: “We’ve seen how new models can help brands grow quickly, and we are excited by the space. We see room for many types of players and look forward to helping merchants find new ways to reach new customers.”  

Investing in ghost kitchens “will only feed growth for the DoorDash online marketplace,” DeAnn Campbell, a retail strategist and senior vice president at consultancy Hoobil8, told Insider. 

Euromonitor food and beverage analyst Michael Schaefer agreed. Investing in ghost kitchens will benefit “the entire delivery value chain” from third-party delivery aggregators, like DoorDash, to ghost kitchen operators.

But why All Day Kitchens and Local Kitchens? 

All Day Kitchens co-founder Ken Chong told Insider that Xu’s investment shows he’s betting on a delivery-focused category that is in “the early innings” of growth. 

Third-party delivery companies have led the way by building courier and driver fleets to deliver restaurant meals, and now groceries, said Chong, a former Uber Eats manager who co-founded All Day Kitchens in 2018. 

Now, everyone in the delivery space “sees how much more innovation has to happen” to drive revenue and be profitable, Chong said. 

“There’s really a sense of innovating together to grow the overall pie,” Chong said.

And that pie is projected to be huge. The ghost kitchen segment could reach $1 trillion by 2030, according to Euromonitor. 

That’s prompted a ton of ghost kitchen models like All Day Kitchens and Local Kitchens to emerge in the past two years.

All Day Kitchens operates 10 satellite kitchens in the Bay Area. The company facilitates delivery from popular San Francisco restaurants to customers in the surrounding suburbs. The satellite kitchens also offer pickup. 

“I think micro-fulfillment as a whole is going to be the next decade of online commerce,” Chong said. 

Perhaps Xu does too. 

All Day Kitchens raised $20 million in fall 2020, a round led by Founders Fund with participation from Xu.

In September 2020, Xu became an

angel investor
in Local Kitchens, a hybrid ghost kitchen co-founded by DoorDash alum Jon Goldsmith.

While DoorDash and Uber Eats focus on onboarding big chains with deep pockets, Local Kitchens bills itself as a “digital food hall” for big-city restaurants looking to offer delivery and takeout in the suburbs.

To date, the startup has built food halls in the Bay Area communities of Lafayette, San Jose, and Cupertino, California. Similar to ghost kitchen company Reef Technology, Local Kitchens acts as the restaurant operator. They hire and train cooks to prepare meals from popular San Francisco-area restaurants such as Curry Up Now and Humphry Slocombe ice cream.  

“It’s incredibly easy,” Goldsmith told Insider in a recent interview. “These local chefs just need to give over their menu and their recipes and then they start receiving the royalty income without having to invest anything upfront.”

Goldsmith said he can’t speak to why his old bosses – Xu and DoorDash’s other co-founders Stanley Tang and Andy Fang – are backing his company. 

But one thing is clear: Local Kitchens and DoorDash complement each other along the food delivery chain, he said. “Our vision is that we’re bringing more food to local communities and DoorDash benefits from that and we benefit from that.”

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