But the project was delayed by the pandemic and a long authorization process, and an opening date has not been set. In the meantime, CloudKitchens has scaled back its ambitions here.
Initially, the company envisioned 53 kitchens for the Roxbury warehouse, but last year it cut that projection in half, according to building permits. CloudKitchens is in negotiations to sell 65% of the warehouse to City Fresh Foods, which is across the street, according to three people with knowledge of the matter. City Fresh ― a for-profit company that sold a share of its business to its employees last year ― delivers food to housebound elderly people, schools and care centers.
CloudKitchens is trying to reinvent the way restaurants sell food in a world where more and more people are ordering delivery online. It’s no easy task, but there’s reason to believe Kalanick, the former CEO of Uber, would be up for the challenge. Although he was eventually kicked out after several scandals and complaints of gender discrimination and sexual harassment at the driving app company, he played a vital role in shaking up the long-stagnant taxi industry.
His new company says it offers restaurants a way to capitalize on the food delivery boom. A restaurant can rent kitchen space to expand its delivery business, without the cost of opening another physical location. Or it could be a way for businesses without a physical presence in an area to grow purely through delivery. CloudKitchens already has dozens of food delivery centers across the country, including California, Arizona, and Rhode Island.
Restaurants say they pay thousands of dollars upfront to be part of CloudKitchens, hoping to gain access to cooking facilities near “hungry eaters who frequently order food online” , as well as technology that streamlines the delivery process. “All you have to do is cook,” according to the CloudKitchens website.
But critics say CloudKitchens didn’t fully live up to its promises complaints. Business turnover at some facilities is high, with some complaining of lukewarm sales, poorly managed facilities, and a general sense that what was presented in their sales pitches never fully materialized.
“They had me hook, line and sinker,” said Greg Stevens, owner of Pat’s Italian in Rhode Island. It only lasted a few months at CloudKitchens’ Providence location, which opened in the spring of 2021. “It was definitely too good to be true.”
It’s unclear how many issues are CloudKitchens’ fault.
Neither Kalanick nor CloudKitchens responded to repeated requests for comment. Former CloudKitchens employees and restaurants that do business with the company are asked to sign nondisclosure agreements, which limit what they can say publicly about the company. (A CloudKitchens employee told a Globe reporter that to find out about the Boston warehouse, she too should sign an NDA).
Zena Powell, an entrepreneur who briefly ran a restaurant at a CloudKitchens facility in New Jersey, filed a federal lawsuit against the company in December, accusing it of deceptive marketing practices and making false claims about the services it provides. she would provide. She also filed a similar complaint with the Federal Trade Commission. In both cases, she acted in her own name.
When Stevens heard about CloudKitchens opening in Providence, he thought it would be a way to expand his delivery business. He short restaurants in Cranston, Johnston and Coventry, but didn’t want online orders to overwhelm his staff as people started eating indoors again.
When he asked how much money he could generate in one of the kitchens, a CloudKitchens employee told him it would be “easy” to make between $10,000 and $15,000 a week, Stevens said.
Those estimates, and the appeal of only needing one or two people to outfit the kitchen, sounded promising to Stevens. He bought $30,000 worth of equipment to outfit his space and agreed to pay about $4,000 in rent and other monthly fees..
But in its first week last fall, Pat’s Italian only made $400 through CloudKitchens, according to Stevens, and weekly sales never hit $1,000.
Another restaurant owner, who asked not to be named because she signed a nondisclosure agreement, said the Providence establishment did not have a cold water for months, the in-room fridge was not kept at the correct temperature, and CloudKitchens employees often handed food to the wrong delivery drivers.
Over the past year, “we’ve seen probably 15 kitchens transform,” she said, adding that the 30-kitchen building had never been fully rented.
Despite these and other complaints, CloudKitchens has raised hundreds of millions of dollars from investors since inception. was founded about six years ago. Its valuation hit $15 billion in November, according to PitchBook, and top brands that have sold food from its kitchens include Chick-fil-A, Applebee’s and TGI Friday’s.
Jamie Richardson, vice president of Ohio-based White Castle, said CloudKitchens has allowed the fast-food chain to expand its presence “without making such a big bet.” The company is able to generate strong demand for delivery apps due to its high brand awareness, he said.
Richardson said he considers ghost kitchens “the biggest thing to hit restaurants since drive-thrus,” although he admits there’s still a learning curve.
“I don’t know if any of us have completely figured out how to do it,” he said.
But according to interviews with former restaurant employees and owners ― and an internal CloudKitchens email obtained by the Globe that documented the situation at restaurants it worked with across the country ― other restaurants were disappointed with the situation. ‘arrangement.
Most “needed to make at least $10,000 a week to make money…which is pretty hard to do,” said one ancient employee, who requested that his name not be published because he signed a nondisclosure agreement.
Renters pay CloudKitchens a 3% commission on their sales, according to the New Jersey complaint, and that’s on top of the 20-30% cut delivery services like Uber Eats take.
“You have to be a big fast food brand or a proven virtual brand,” said Matt Newberg, founder of HNGRY, a media platform looking at how technology is reshaping the food industry. “I don’t think, right now, the setup of the economy makes sense for family restaurants.”
A CloudKitchens vendor, speaking anonymously to trade publication Insider, said 90% of his customers failed in their first 90 days. That compares to an industry failure rate of about 30% in a restaurant’s first year, according to the National Restaurant Association.
“It’s just such a staggering failure rate,” said Maureen “Moe” Tkacik, senior fellow at the American Economic Liberties Project, a nonprofit advocacy group.
Providence CloudKitchens remains open, but when a Globe reporter visited recently, only four restaurants were selling food online. Most delivery drivers left with Chick-fil-A bags.
Charnelle Wilson, spokeswoman for the national chicken sandwich chain, said “delivery kitchens are part of our strategy to serve customers wherever they are,” and that she has no plans to open at the Boston facility.
Despite the issues, Kalanick’s vision for CloudKitchens goes beyond transforming warehouses into WeWorks for restaurants. Through a handful of subsidiaries, it buys property, rents kitchens, builds restaurant brands and sells software.
“They want to dabble in everything related to the food industry, other than making real food,” Newberg said.
Through a subsidiary, Future Foods, CloudKitchens creates virtual restaurant brands – online-only concepts that restaurants allow to be used on delivery apps, in an effort to broaden their appeal. A pizzeria, for example, can license “Eye Heart Pizza”, or a sandwich shop can pay CloudKitchens use names such as “Grilled and Cheesy” or “The Hot Italian”.
These brands are marketed to CloudKitchens tenants, but also to brick-and-mortar restaurants, including some in Boston, that do not use company facilities.
Tenants, as well as companies licensing brands through Future Foods, must use software made by Otter, another CloudKitchens subsidiary. Otter consolidates online orders from companies like Uber Eats and DoorDash on a single tablet.
The technology allows CloudKitchens to access large amounts of order trend data. This information could help him create virtual restaurant brands that could succeed in a specific market, or allow him to better select the tenants he chooses.
For now, CloudKitchens apparently tries to keep much of its operations secret. Employees are asked to keep the name off their LinkedIn profiles, and company facilities are given names that do not feature CloudKitchens branding.
This does not surprise Newberg.
“They think they have a big opportunity, mostly because they’re stealthy and nobody really understood what they’re doing,” he said. “The reality is, [CloudKitchens] wants to own everything.