One of the most persistent problems in food service has been the inefficiency of restaurants: Franklin Junction

Aziz Hashim, Franklin Junction Founder & Former International Franchise Association Chairman joins the Yahoo Finance Live panel to discuss the rise of Ghost Kitchens.

Video transcript

ZACK GUZMAN: Pre-pandemic, we were talking a lot about ghost kitchens and the way they differed from restaurants. If you didn't hear the term before, essentially a restaurant that didn't actually allow diners to come in and eat there. But still, a kitchen that was serving food that would be delivered. Interestingly, the pandemic kind of blurred the lines between what is a ghost kitchen and what is a restaurant. But now, on the other side of the pandemic, more and more restaurants may be recognizing the opportunity to use their kitchens for more than just welcoming diners into their own restaurants.

And one company is working to do exactly that-- leverage unused kitchen space and time. And here, to talk to us about it is Aziz Hashim, Franklin Junction founder and former International Franchise Association chairman. And Aziz, good to be chatting with you today about what your company works on. But explain it to me, how you're helping some of these companies, these restaurants leverage downtime in what we've learned from the lessons of COVID.

AZIZ HASHIM: Absolutely. Thank you for having me. It's a pleasure to be here. One of the most persistent and, I would say, pernicious problems in food service has been the capital and efficiency of restaurants. So if you think about it, this preceded the pandemic a lot. I've been in this business since I was 14 years old, you know, mopping floors and washing dishes. And over the four decades that I've been in this business, one of the really, really big problems has been you build a restaurant, but you never get to full utilization. It's almost like you build a factory, and you're only using the factory 50% of the time. But you're paying the rent, you're paying the employees, you purchase the equipment.

So what can you do to use up the rest of that time? So, what we did was we came up with a solution and e-commerce based platform called the Host Kitchen Platform, where a kitchen can then use this extra capacity and sell food from other known brands, who also want to expand. And they need the white space expansion. So we are, in a way, connectors of existing restaurant and food service outlets with brands that want to grow. And the beauty of our model is that there's no capital expenditure on any side. The restaurant, who we call our host partner, already has built the restaurant, already has the employees, already paying rent, has purchased the permits.

And the brand that wants to grow has an outlet now where they can go to a professional food service operator and interject their brand into their kitchen and sell it online to consumers. And the biggest winner, of course, of all are consumers because they get to get brands that they know and they loved, which weren't formerly in their area, and all of a sudden, they now appear in their market. So it's basically a win-win situation for all involved.

AKIKO FUJITA: Aziz, when you talk about this idea of a host kitchen, to what extent has that been accelerated by the growth we've seen in these third party, food delivery services like a Grubhub, like a DoorDash?

AZIZ HASHIM: Absolutely. So, Akiko, you know, as I mentioned, I've been at this for 40 years. Why couldn't we do this before? The technology tools did not exist. In the last few years, the availability of broadband internet, the availability of cloud-based computing, the fact that we can use data and store data online, examine data. Because, you know, in the past, restaurant cash registers were basically glorified calculators, and then the last mile delivery providers.

So all these tools have basically all converged over, I would say, not even the last four or five, seven years. And that has enabled us to create these solutions. That's why we've been thinking about the problem for a long time, but haven't really been able to do it until now. So everything is sort of, there's been a confluence of factors. And then the pandemic just accelerated everything. But this was a problem way before the pandemic ever arose.

ZACK GUZMAN: A couple of things for me, though, because we talked so much about margins being already very small in the restaurant business. And then you got to think about everything taking a cut here from the payment processor and what you're talking about to the delivery model as well. I would assume that the reward gets smaller and smaller.

But when you talk to some of these companies as well-- you work with brands like Fuzzy's Taco Shop, Nathan's Famous, among some others-- when you talk to them, what are their concerns when they think about doing this? I mean, are they overseeing the production of the food that might be made at some of these kitchens being leased out? How does that process work?

AZIZ HASHIM: Absolutely. So quality control is by far the number one thing, right? We want to make sure-- everybody wants to make sure the food is being prepared and delivered the way that it should be. And that has to be a top concern. So I think where sometimes people forget is that when we as Franklin Junction play the matchmaker role, it is our responsibility to find host partners that have a certain level of proficiency in what they do.

So if you're a professional restaurant owner and you have a professional staff and professional equipment, you should be able to be trained to sell-- produce and sell somebody else's product. So I think from a quality control platform, we take it very, very seriously to make sure that everything has been done the way. And that's why the partners that you mentioned-- Nathan's Famous, Fuzzy's-- these are substantial companies. And they would not work with us unless they had that assurance that we're going to be able to get really good host partners to sell their products.

AKIKO FUJITA: Yes, certainly, quickly evolving restaurant industry. I think we've all encountered at least one ghost kitchen over this last year with so many food deliveries we've done. Aziz Hashim, founder of Franklin Junction and former International Franchise Association chairman.