Life After COVID: Welcome to the World of Hybrid Restaurants

The virtual offshoots

Though Smokey Bones is an outlier in its drive-thru, it has also embraced another hybrid component, one that continues to proliferate across the industry: digital brands.

During the pandemic, when dine-in business was low, if not nonexistent, some restaurants opted to launch new menus under separate brands. This tactic not only allowed them to maximize kitchen space in the face of lower volumes, but to also introduce fresh menu items and perhaps lure new patrons.

At Smokey Bones, that situation culminated in two new concepts. Launched in fall 2020, The Wing Experience and The Burger Experience each specialize in their eponymous dish. The company has always positioned itself around meats, even going so far as to call itself a “protein candy store,” so adding these specific brands was well within Smokey Bones’ menu wheelhouse.

“Our approach to ensuring that the virtual brands are executable is finding the sweet spot between products that we are already excellent at preparing and creating enough distinctiveness that they’ll be interesting and exciting for the consumer to try,” O’Reilly says. “We found that sweet spot with both of these products. For example, it would be harder for us to launch a pizza virtual brand because it does not fit that model for Smokey Bones. That is not a category of products that we currently are producing.”

In a quest to attract new customers, The Wing Experience and The Burger Experience do not call out their connection to the original brand, but this is hardly a universal approach. In developing the virtual concept Bodegga by Snooze, the parent company sought to capitalize on its established reputation.

“When we’re coming up with that name, … we were intentional and wanted to tether it to the mother brand and try to bring along the equities that Snooze has,” says chief marketing officer Andrew Jaffe.

That’s not to imply that Bodegga wasn’t designed to attract new customers, but it also wanted to give existing guests a new dining occasion through morning offerings that were ideal for takeout, like breakfast burritos and sandwiches. While many limited-service brands offer breakfast items to-go, Jaffe says none were executing at Snooze’s quality level.

At the same time, the restaurant had always positioned itself as a dine-in destination and never really focused on convenience or speed of service. Bodegga was a chance to pursue both.

“When you think about the Snooze experience, it’s not always frictionless. If you’ve ever visited Snooze on a weekend or ever plan to, we have a wait, we have a line,” Jaffe says. A virtual brand could eliminate that friction for customers wanting their food fast.

“At the same time, we saw a huge opportunity in what I would call that Monday-to-Friday time frame,” he adds. “We felt like Bodegga could really help us capitalize on this morning routine experience that a lot of us go through. … We wanted to be part of that ritual and no different from how a guest is hitting a Starbucks for their latte and a sandwich.”

Indeed, the morning ritual can be especially lucrative; insights from The Coca-Cola Company’s Grounding Data found that consumers’ breakfast orders were 1.5 times more likely to be part of a ritual than all other dining-out occasions.

The name “Bodegga” also plays into the idea of a morning routine. Especially prevalent in New York City, bodegas are hybrids themselves: part convenience store, part grab-and-go food purveyor, part local shop. Historically, city-dwellers might pop into their neighborhood bodega for various items, including coffee, bagels, fruit, etc.

Bodegga moved quickly through the proof-of-concept stage, going from idea to pilot program in less than six months. Since its debut at two Charlotte, North Carolina, locations last April, Bodegga has gleaned business insights while also refining its formula, from marketing and branding to menu selection.

“As we look to the future and roll out in a bigger market later this year, we’re going to be able to apply some of those learnings. And there may be a couple of these items that don’t go later this year,” Jaffe says. “I’ll use an example, like the breakfast burger. [We’re] not sure that’s going to be one that takes us to the next phase of launching in other markets, and that was part of this process—learning from an ops perspective.”

Although some chains may use digital brands as a means of testing the waters for expansion, Snooze has no plans to do so with Bodegga. Instead, it will launch only from the brick-and-mortar restaurants, and herein Jaffe makes an important distinction. Where the terms “virtual brand” and “ghost kitchen” are often used interchangeably, Snooze specifies that Bodegga is the former since the latter would imply it operated out of a space unaffiliated with the mother brand.

The dine-in meld

For as popular as virtual brands have become, they’re not the only foodservice concept-within-a-concept model. Well before the pandemic, it wasn’t uncommon for restaurants—both sit-down and counter-service—to include a marketplace or retail shop within the business’s four walls. Similarly, some full-service establishments, particularly cafes, have a separate POS dedicated to grab-and-go or order-up items.

That’s just one of the hybrid models Denver-based Sage Restaurant Concepts (SRC) has pursued over the past two years.

“I think we threw everything at the wall during the pandemic to figure out how we can just create savings,” says SRC chief operating officer Meaghan Goedde.

At its Southwestern concept Kachina Cantina, innovation has manifested in the form of a breakfast-slinging airstream. Because the restaurant is located within The Maven Hotel, guests expected a hot breakfast option, Goedde says. But a combination of COVID and labor shortages made the daypart a loss leader, so the team got creative.

Kachina Cantina has an on-site airstream that has long been a part of the restaurant’s full-service operation; staff would use it to prepare menu items like guac and chips and specialty drinks. Now, it’s the morning hub.

“We started offering breakfast out of the airstream because we weren’t able to open for breakfast profitably within the restaurant, and honestly, we couldn’t staff it. We turned it into a grab-and-go, and really all we’re serving out of there now in the mornings are breakfast burritos and coffee,” Goedde says. “We were able to shut down the dining room and just direct guests there, and that’s actually worked out really well for us. That’s been kind of a silver lining.”

SRC plans to continue serving breakfast out of the airstream and has even followed suit in another Denver property. At the Rally Hotel, a coffee cart extends the guest experience into the lobby without having to open the on-site restaurant, The Original, for breakfast.

At the Denver location of its multiunit steakhouse, Urban Farmer, SRC converted the restaurant’s cheese and charcuterie bar into a market for prepackaged goods and meal kits. Unlike the breakfast airstream, however, this was a temporary measure, though Goedde says the possibility of including a mini business within the restaurant could come into play with future locations.

But that’s not the only way SRC is mixing limited-service elements into its business. When rooftop restaurant and bar Red Barber opened in The Catbird Hotel late last summer, it did so with order-at-the-table technology—a first for the group.

“It certainly is taking components of fast casual in a full-service environment,” Goedde says. “People are at the table, but at the same time, they are ordering on their own, and we’re delivering the food.”

As a company that prides itself on the interactive, human elements of hospitality, SRC had resisted this sort of tech integration in the past. The system isn’t perfect yet, but the group has spent the last several months tweaking and streamlining.

“It’s going OK; it’s not going great,” Goedde says. “We are used to being the people who are full service and at your table with a smile. So it’s been a little bit challenging to embrace that new style and new techniques.”

Challenges notwithstanding, the tech will be utilized at other restaurants within the SRC family, including Hello Betty, a seafood-centric concept set to open this month in Oceanside, California. Like Red Barber, Hello Betty is part full-service restaurant and part lounge, with a heavy bar focus. Given not only this dual focus but also the sheer size of the space, Goedde thinks it’s a good venue to apply the lessons of Red Barber.

“I think our biggest learning is that technology is never going to replace humans. It’s just reevaluating how you’re using your team,” Goedde says. “Everyone’s looking for technology for labor savings and to address the labor shortages. It’s not a 1-1 ratio; you’re not going to save on all of your servers, but your people can certainly handle a whole lot more when your guests are participating in the ordering process.”

She adds that the consumers have been more accepting of restaurants’ push into tech because of the pressures from the coronavirus and widespread labor shortages. Still, those applications have their place. Goedde doesn’t expect a tech-forward hybrid model to take root in fine-dining and mid-tier establishments, but she could see table-ordering and QR code menus sticking around the more casual ranks.

And therein lies an enduring characteristic of many hybrid restaurants: They tend to be concepts that already toe the line between limited and full service, whether in terms of atmosphere, menu options, price point, or some combination of the three.

The original hybrid

For Houston-based Dish Society, pulling from the two formats wasn’t a COVID measure but rather a brand pillar from day 1. Some eight or so years back, founder Aaron Lyons was eager to join the swell of fine-fast casuals that were cropping up across the country. But while still on the drawing board, the plan changed when Lyons realized dinnertime was the model’s Achilles heel.

Eager to capture evening business and roll out a robust cocktail program, Lyons opted to run Dish Society as a fast casual from midday until 3:30 p.m. when it switched to full service with a social hour followed by dinner.

“We didn’t invent [the model] by any means. I’ve seen a couple of concepts start to do it here and there,” he says. “If you go to Chipotle or Panera or Zoës Kitchen at night, they’re just not busy. They make most of their money from 11 to 1, and I wasn’t excited about that. And also, I wanted to do things differently.”

Dish Society’s model was strong out the gate and has continued to prove its mettle. Now at six units in the greater Houston area, the micro-chain brings in about 35–40 percent of its sales after the 3:30 p.m. service switch.

COVID was perhaps the biggest stress test of all, but it did fare better than many full-service restaurants. The brand already had experience with off-premises and tech integration for online ordering, curbside pickup, and third-party delivery. And once the shutdowns ended and business started ratcheting back up, Dish Society was able to flex its limited-service muscles.

It reopened for patio dining only in May 2020 before eventually easing back into the dining room at half capacity.

“But we didn’t do full service. We basically just kept doing counter service,” Lyons says. “We did that for a while to limit the exposure and interaction, and that was something that our staff preferred. It also seemed to be something that the guests preferred as well.”

Eventually, social-distancing fatigue set in along with an increasing desire for a normal dining experience. At that point, Dish Society reverted to its original hybrid operation.

While its inherent adaptability helped the brand in COVID, Lyons still sees the benefit and potential of full-service-only restaurants. In fact, he just opened a NexGen Casual concept, Daily Gather, in January. The dishes are a little more elevated, and the atmosphere puts a premium on bringing people together for an interactive experience (servers even bring mini decks of cards to the table as conversation starters). For these reasons, Lyons decided Daily Gather would be better suited for the classic full-service model.

This line of thinking goes back to what Smokey Bones’ O’Reilly said about the post-COVID dine-in landscape. Consumers have become more deliberate in their decisions to eat at a restaurant, meaning the pressure is on for making it an exceptional one.

“The stakes for full-service operators are even higher now to provide incredible, dynamic experiences, and we see the impact of that in our business,” he says. “Consumers are spending a little more; they’re adding on that extra drink or that extra dessert or appetizer because it’s somewhat more of a special occasion than it was.”

Hybrid operations—whether in the form of a drive-thru, digital brand, or daypart shift—can be significant revenue generators, so long as they don’t overturn the foundation of full service, namely exceptional hospitality and memorable dine-in experiences. But the brands who have made it to the other side of COVID seem unlikely to succumb to that pitfall. If anything, they’re reworking the idea of a hybrid restaurant to be even more eclectic than before.

“[As] restaurant people, we’re wired to be all over the place and a little frenetic, so I think you’re going to see a lot of really creative innovations come out of the past few years,” SRC’s Goedde says. “I think there will be a lot of things that are great that came out of this: this need to innovate and rethink your spaces and how we utilize technology and really how we connect with our guests.”