Dive Brief:

• Startup software company Acelerate has secured a $14.4 million round of funding led by Sequoia Capital. According to TechCrunch, the funding will be used to grow the company's team and products.
• Acelerate licenses its seven proprietary restaurant brands, including recipes and training guides, to existing restaurants that want to diversify their online offerings. Acelerate also works with existing restaurants to license their menus to other restaurant partners, and has partnered with third-party brands like Curry Up Now to make them available for its restaurant partners.
• Turnkey solutions that allow restaurants to add a new virtual concept have caught the attention of several brands and investors of late. This "host kitchen" model allows restaurants to reduce capital expenditures, maximize their space during down times or seasons and generate added revenue.

Dive Insight:

Interest in virtual brands is being driven by three key factors, according to Acelerate CEO George Jacobs: the industry's rate of change, the degree of growth opportunity in this segment and that fact that restaurant technology is highly fragmented. Though the pandemic didn't create the shift toward this model, it accelerated industry acceptance of this expansion tactic, Jacobs wrote in an email.

Delivery, he added in the company's blog post, is a catalyst to this opportunity, providing an ability to reach new customers and improve efficiencies as evidenced by such shared kitchen spaces. Acelerate also provides restaurants with a software solution that manages their digital ecosystem — from menu updates to marketing — as that ecosystem grows through a variety of platforms like DoorDash and Yelp, according to TechCrunch.  

C3 and Nextbite have embraced this same virtual brand model, as has Franklin Junction, which trademarked the term "host kitchens." C3 just landed a cash haul of its own, raising $80 million in Series B funding earlier this month, while Nextbite's parent company Ordermark raised $120 million in October.  

Several restaurant brands are embracing the host kitchen format as well. Red Robin, for example, is accelerating its Donatos Pizza partnership in existing locations, while Applebee's Cosmic Wings concept operates out of the brand's existing 1,300 kitchens nationwide. Applebee's is one of Acelerate's customers along with Famous Dave's and Fatburger, but these brands are using Acelerate's software platform. 

Acelerate differentiates itself in this growing space, however, through its software as a service offering, which allows its restaurant partners to manage all incoming marketplace orders in one place, mark an item out of stock, reconcile payments, assess promotional spend and more. This could attract restaurants searching for efficiencies in a post-crisis environment, and could help boost profitability and reduce chances of business failure, Jacobs said. 

"If a restaurant opens a new location in a ghost kitchen, they have to pay upstart costs, sign a lease and cover all variable costs solely on their delivery sales. It works great for some restaurants and horrible for others," Jacobs said. "At Acelerate, we drive incremental sales to an existing establishment, which drastically brings down the revenues required to achieve profitability and success."

Julie Littman contributed to this article.