When virtual restaurant brands first took off during the pandemic, they seemed to offer an easy answer to a hard question: how could restaurants drive incremental revenue when dining rooms were closed and capacity was capped? For many operators, the appeal was simple. They could leverage existing labor, ingredients, and kitchen equipment to launch delivery-only concepts and capture surging digital demand.
That early rush cooled as the pandemic faded in the rearview mirror. And while delivery remains an important and growing part of the industry, some momentum has shifted back toward in-person dining in COVID’s aftermath. Over 80 percent of consumers surveyed by the National Restaurant Association last year said they want to dine at sit-down restaurants more often. Just over three-quarters said the same for going to eat or picking up food at limited-service spots.
Reflecting that demand, most operators now view building on-premises business as a bigger priority than expanding off-premises channels, according to the Association. That’s especially important for nearly 90 percent of casual dining and family dining operators. It also holds true for a solid majority of limited-service operators, including 70 percent of fast casual operators and 60 percent of fast food operators.
“If you go back to the pandemic, full-service restaurants had complete capacity to bring all of these virtual brands on,” says Geoff Alexander, CEO of Wow Bao, an early entrant in the space. “A lot of those same restaurants have found ways to bring diners back in, and now it’s QSR and fast casual that are feeling the pinch. But they aren’t necessarily set up to bring in a second or third brand.”
Wow Bao didn’t begin life as a virtual brand. It had a physical footprint before expanding into dark kitchens in late 2019 just ahead of the pandemic’s digital tidal wave. Operators receive frozen products through a distributor and sell them via third-party delivery. A limited menu of bao buns, rice bowls, egg rolls, and other dishes uses basic equipment.
That simplicity helped the brand scale quickly, with nearly 1,200 kitchens joining the program since launch. Today, around 300 remain active, mostly with major enterprise partners.
Dog Haus is another early entrant that’s managed to hang onto its success in the delivery-only realm. The chain also launched its first virtual menus ahead of COVID, initially as a workaround for how third-party apps categorized restaurants. Online, customers almost exclusively ordered hot dogs, even though Dog Haus offered plenty of other items that did well in-store. That led to the creation of multiple virtual menus centered around overlooked categories.
Partner and cofounder Hagop Giragossian says Dog Haus initially treated virtual brands like a food truck, viewing the model as a cheaper and less risky way of entering the market and testing something out. Over the years, it has experimented with everything from chicken and burger brands to a plant-based concept. But the winner by a longshot is Badass Breakfast Burritos. Giragossian describes the concept as a “tent pole” of the company and one of its strongest areas of growth.
“It’s almost unfair to call it a virtual concept anymore, because it’s become such a huge part of our company,” he says. “It’s actually our largest menu category now. Even though we’re Dog Haus, we sell more burritos than we sell hot dogs. At this point, we’re basically a burrito company masquerading as a hot dog company.”
He attributes the success to simplicity and creativity, leveraging existing products and processes. Every Dog Haus virtual menu uses the same equipment, workflow, and ingredients as the brick-and-mortar brand. The only new SKU required for Badass Breakfast Burritos was a flour tortilla. The eggs, proteins, cheese, sauces, and other fillings already existed in the restaurants.
Dog Haus also has used its established reputation to lend credibility to its virtual brands, clearly linking them back to the parent company. Each concept is marketed as its own restaurant but with consistent branding and personality that reinforces the association with the original brick-and-mortar business.
“If you’re still around today, it’s probably because you’ve earned the right to be,” Giragossian says, noting just how challenging it is to convince a consumer who has never heard of a brand or seen a story to place an order.
Keeping the brands in-house and not expanding by partnering with other operators has helped Dog Haus avoid common pitfalls around quality control and brand trust, he adds. For every Wow Bao or Badass Breakfast Burritos that has thrived, many more have failed because they were too complicated or hard to execute.
Some high-profile concepts have also run into quality and trust issues. MrBeast Burger is a prime example: in 2023, the eponymous YouTube star sued Virtual Dining Concepts (VDC) over “disgusting” and “inedible” food that he said was damaging his reputation. While VDC countersuited and both cases are still pending, the public spat nonetheless highlighted the risks that come with licensing a brand without much operational oversight.
The legal drama and others like it also amplified perceptions that virtual brands were unreliable or even deceptive. As consumers lost trust, delivery platforms stepped in. Uber Eats purged thousands of virtual restaurants in 2023, citing duplication, low ratings, or lack of differentiation. Other platforms like DoorDash and Grubhub have followed suit with their own quality and differentiation requirements.
More recently, ezCater in October removed all virtual or delivery-only brands from its platform, citing “customer confusion caused by duplicate restaurant concepts.”
That move sparked backlash from virtual brand operators who rely on catering orders to stay profitable. And while there’s no denying that bad actors eroded consumer trust with low-quality “copy-and-paste” menus and low food quality—especially during the height of the pandemic and its immediate aftermath—Alexander says the sector’s biggest vulnerability lies in how dependent it is on third-party platforms.
“When you talk about pitfalls, I think the number one has to be that we are all reliant on an outside delivery factor in the marketplace,” he says, adding that when blanket rulings target all delivery-only brands instead of just those with violations or poor reviews, the effects ripple outward and also impact employees, suppliers, and consumers who lose access to brands they enjoy.
While the virtual brands segment has faced its fair share of negative headlines, Alexander believes those stories overshadow the many more cases where the model is working and continuing to thrive, even if it’s no longer the crucial lifeline it once was.
“The lifeline during the pandemic was literally saving jobs and paying rent,” he says. “We’re not there anymore, but if I told you today to go raise yourself 10 percent or 15 percent year-over-year, that’s a lot of people you’d have to pull into your door. Everybody has capacity, and everyone wants more sales, and this is one of the easiest ways to get that.”
The line between virtual and physical brands is blurring, signaling what could define the next phase of the segment. Take Wing Zone, for example. Chief development officer David Bloom told QSR the franchise has found “a lot of success” as a virtual brand, now available in about 100 units. Some are large-scale pilots with national partners, placing Wing Zone in 30–40 locations at a time with room to expand. Bloom said wings perform especially well in the evening and late-night hours, making them a strong fit for 24-hour operations looking to boost sales beyond traditional meal periods.
Great American Cookies is another recent example. The FAT Brands-owned chain partnered with VDC earlier this year to bring its virtual cookie brand into existing kitchens, starting with about 200 Chuck E. Cheese locations. For VDC, the move fits into a broader strategy to expand its portfolio with existing brands instead of original concepts created specifically for delivery apps. It also marks an evolution for Chuck E. Cheese’s virtual brand approach, after closing down a delivery-only pizza spinoff it created during the pandemic. And for Great American Cookies, it represents a new frontier with the physical brand quickly creating hundreds of new points of access via virtual touchpoints.
The trend goes both ways. Virtual brands are exploring physical touchpoints, too. Wow Bao has expanded into CPG products and hot vending machines at hospitals, hotels, airports, and other nontraditional locations. Badass Breakfast Burritos is now being integrated into Dog Haus’s physical restaurants, with dedicated menu boards, a distinct color palette, and neon signage to differentiate it from the original brand. Franchisees have also expressed interest in standalone locations, which could operate in smaller spaces with less equipment.
Looking ahead, Giragossian sees plenty of opportunity for other restaurants to use virtual brands in a similar way, serving as a testing ground for new concepts that could eventually stand on their own.
“Once you prove its success with third-party delivery, then you can start thinking about what else you can do with it,” he says.
