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Resurrecting Pandemic-Shuttered Restaurants As Ghost Kitchen Spinoffs

John Terzian and Brian Toll are co-owners of the h. wood Group, which operates a range of restaurants and nightlife venues mostly based in and around Los Angeles. Early in the pandemic, they shut down their LA restaurants to spin off delivery-friendly versions of those concepts, powered by a ghost kitchen model.

BRIAN TOLL: It has definitely been a wild ride out here. I can remember back to February, when we had a Super Bowl party in Miami. There was word about this pandemic in China. Every other day it was like, “Oh, it’s getting closer. It’s coming here. What are we going to do?” But it seemed like it was far away and wasn’t going to affect us.

We got back to LA. We were very busy in February. It was a good month. Then all of a sudden, out of nowhere, a few places started to shut down. It seemed like the pandemic was real. It was here. What were we going to do? Then the decision was made for us because the government basically shut down all of LA, ahead of some other states. It was quite a whirlwind at that point.

We had 500 employees. Some of them had been with us for 10 years. We had to essentially lay off the entire company. We really didn’t want to keep paying people with such uncertainty. It seemed like the right decision at the moment—to make sure there was an h.wood when everything opened back up—was to lay people off, come up with a big plan, and bring everyone back.

Restaurants run with very slim margins. We really don’t keep cash in the bank. Our executive team decided that, short of being able to open, we would come up with a bunch of delivery concepts and pivot into a whole new world for us. We brought back everyone that needed to come back for those concepts—our culinary team and our marketing team, just a small group. When the PPP money and all those types of things came through in April, we brought back everyone we could, which was nice. It felt like getting the gang back together.

We started having these calls with all 12 of our managers and a bunch of our chefs. It felt like we were moving toward something. We got to open up for about a week at The Nice Guy and Delilah, just to have it all shut down once again.

We’ve always had delivery out of The Nice Guy. But for us, our venues are all about the experience and the vibe. We have great food, but I think there’s so much more than that. So much goes into our places that people really appreciate the attention to detail. It’s hard for that to translate to delivery. We also have a really high price point at The Nice Guy and Delilah, so it’s not at the top of people’s list from places on Postmates. So we figured that doing delivery was not going to get us very far at The Nice Guy or Delilah. We needed a cheaper price point.

Mama’s Guy is a spinoff of The Nice Guy. It’s our same sauces, but we came up with some sandwiches and a cheaper price point that would make more sense for delivery. And we did the same with Lilah’s for Delilah. We took some of our biggest movers on the menu at Delilah and spun off something from those.

JOHN TERZIAN: We have so many ideas and food concepts. This is a really good way to see what resonates and what does well with people.

BRIAN: Close friends of ours own ghost kitchens, and they’ve been trying to have us do something there for probably a year now. We had been so busy with our own concepts and working on expansion that we said, “Maybe if we come up with a good idea.” But we kept pushing it off. When we had nothing else on our plate because of the pandemic, it was a great time to put together some concepts and launch them.

JOHN: It’s interesting to see that while people are creatures of habit, they get really excited to see new things. We have noticed adding concepts or adding food is an extra way to draw people in. We can do a lot with packaging and marketing for ghost kitchens. There are several ways to do it, rather than just the old version of delivery.

Delivery food from Lilah’s, a ghost kitchen spinoff of the shuttered Delilah restaurant. Photo: Courtesy h.wood Group.

For example, we launched delivery at Lilah’s with an old-school drive-through for the first two days. We did a temporary buildout in the parking lot next to Delilah. You pulled up, you had your order, and we ran out and delivered it to you. It was a way for us to market the new concept. Everyone’s out there doing similar things with delivery. Anything you can do to be slightly different, give slightly more of a touch and feel, is going to make an impact.

Our goal is to be the go-to every night of the week, so we have options at different price points and different items. With Mama’s Guy, we mix and match the pastas and sauces. It’s much more geared towards eating at home or wherever you are, versus being in an establishment.

BRIAN: Of course, you’re kind of at the mercy of these delivery apps. We learned very quickly that by the time you paid the fees, there was very little money left over. We had to adjust pricing and do different deals with them. They’re now limited on what they can charge, but it’s still a very large portion, which factors into what we can do.

We’ve also run into issues where the drivers just don’t show up, or they get something wrong, and then the customers are calling us complaining when it’s not under our control. Part of what made us successful before the pandemic is our white-glove treatment. That’s hard with delivery because a lot of people can’t reach out to us directly—they have to go through the apps. And we still have other people texting us large orders because they just don’t want to use the apps.

As frustrating as these apps are—and they really do drive us crazy—they actually do send customers. Some people are obviously just going on Postmates because they have Postmates, but I think a lot of people are scrolling on there and seeing what’s available. That’s how they find new restaurants. For me, it’s sort of like OpenTable and reservations. They’re also very frustrating to work with, but they do send new business. So it’s almost a necessary evil.

I think we could add a few more ghost kitchens in our current space. If we were to add Chinese food or something completely different from the other concepts, that would be more challenging. But we’re working on a vegan concept right now called Beautiful Foods, so we have a lot of the ingredients already. We’re working on a chicken tenders concept right now. Again, we have a lot of the ingredients in-house, so that will be easy.

We’re running five concepts out of one kitchen right now. We’re going to replicate all of those out of a ghost kitchen in Koreatown, because right now our delivery radius is limited. But once we have this new kitchen open, we’ll be able to service Downtown, Hollywood, and Koreatown. That’ll give us a whole new group of people in LA that we can serve.

Once you have the concepts and the marketing and the branding and the recipes all done, it’s pretty easy to replicate in a new kitchen. In that new space, it’s just a matter of making sure the right equipment is in place and getting the staff over there. I don’t think the customer would actually know the difference in kitchens. If you live in Hollywood and you order, the delivery platforms are going to send you to the closest one.

JOHN: We were thinking about all this before COVID. The pandemic just sped everything up and let us be a lot more aggressive about it. I think we’re going to be in this situation for a while. It seems like every state is different at the moment, but speaking about LA and California, we’re essentially at a stay-at-home situation besides outdoor dining, which is extremely limited.

Even if restrictions get lifted tomorrow, I think that for probably 12 months, people are going to be very cautious. We’re going to have to keep the quality high and the consistency high in our food delivery, because there’s going to be others doing more and more delivery as well. There’s going to be a lot of competition.

But dining at restaurants is never going to go away. I think it’ll come back. It’s going to take strong, entrepreneurially minded operator-owners to survive. Right now it’s hard to see, but the operators and owners that make it through this are going to come out stronger.