Chicago's 2ndKitchen, a startup that helps kitchenless venues like breweries and hotels offer food to their customers, is being acquired by Reef, a SoftBank-backed ghost kitchen firm.
Reef said Tuesday that it has bought 2ndKitchen, which will combined under Reef's branding and operate as part of Reef's Hospitality division. Terms of the deal weren't disclosed.
2ndKitchen, founded in 2018, connects businesses without kitchens to nearby restaurants, allowing them to create custom menus even though they don't serve food. It raised over $4 million in funding from investors like Hyde Park Venture Partners, MATH Venture Partners, Great North Labs, Techstars and M25.
Like many businesses in the restaurant industry, 2ndKitchen was hit hard in 2020 as Covid forced establishments to close their doors.
"When everything was closed, almost our entire revenue was wiped away," CEO and co-founder Nick Anastasiades told me.
But as the restaurant industry came back, so did 2ndKitchen's business. The company saw "strong growth" in 2021, Anastasiades said, and 2ndKitchen now operates in over 30 cities, adding a new city every month. Anastasiades said 2ndKitchen had a Series A term sheet in hand, but opted instead to take the Reef deal.
Anastasiades said the startup has seen especially strong growth in the hotel sector, as chains like Hilton and Marriott are using the company to offer room service to guests without having to operate a kitchen of their own. This asset-light approach helps hotels save money and offer their customers more dining options, he explained.
Reef is among the leading companies in the ghost kitchen industry, which offers delivery-only food. It business model includes launching kitchens in parking lot trailers across the country, a move that has drawn controversy in many cities where it operates. Reef has faced shutdowns in several cities, including Chicago, New York City, Houston and Detroit, over permitting and other regulatory violations. Some of its trailers have reportedly caught fire, while others were operating without permits, according to the Wall Street Journal.
Reef has aggressive expansion plans, with the goal of opening hundreds of kitchens around the U.S. after raising $1.5 billion in funding from investors that include SoftBank. It's looking to raise an additional $1.5 billion in funding, the WSJ says, as it looks to keep up with Covid-driven demand and compete with other ghost kitchen firms like Travis Kalanick's CloudKitchens.
Anastasiades said the combined company can now help any business spin up a food ordering service, with Reef handling the food and 2ndKitchen taking care of ordering, payment, fulfillment and customer support. He added that 2ndKitchen will still allow establishments to offer food from nearby restaurants on its platform, in addition to food from Reef's kitchens.
2ndKitchen's team of 17 employees are all joining Reef.
