- ClusterTruck is pioneer in the ghost-kitchen space, launching in Indianapolis in 2016.
- Tech entrepreneur Chris Baggott co-founded ClusterTruck to fix third-party delivery.
- The startup is profitable because it controls everything from food recipes to delivery.
Software entrepreneur Chris Baggott launched a sustainable cattle farm in 2010 to fix a broken food-supply system. Six years later, in Indianapolis, he opened one of America’s first ghost kitchens to repair another food problem: third-party delivery.
Baggott owns a grass-fed burger restaurant in Greenfield, Indiana, that serves his farm’s beef. After launching the business, the tech veteran turned restaurateur immediately saw the pitfalls of food e-commerce. Consumers blame restaurants for soggy food and late deliveries, but most damaging are the third-party-delivery fees that kill thin restaurant profits.
Yet Baggott said he kept hearing delivery apps like Grubhub say they generate “incremental revenue” for restaurants. Baggott, whose farm sells pasture-raised pork, beef, and chicken directly to the public, knew that was hogwash.
“That sort of pissed me off,” he told Insider. Third-party-delivery operators can charge restaurants about 30% of orders in commission fees in cities without caps in place.
So Baggott co-founded ClusterTruck in 2016, a delivery-only restaurant company that, like his farm, cuts out the “middleman” by selling food directly to consumers. ClusterTruck creates delivery-only brands, prepares the food in ghost kitchens, and leverages technology to deliver the meals using its own fleet of gig workers – bypassing third-party-delivery apps.
“We control everything,” Baggott said.
Here the CEO’s playbook for success:
Create a broad Cheesecake Factory-inspired menu
The first ClusterTruck kitchen opened in downtown Indianapolis in 2016 inside an old office building that Baggot converted into a dark kitchen. In doing so, the startup became one of the first ghost-kitchen operations to exist before the term was even coined.
Today, the competition is fierce with rent-a-kitchen operations like Kitchen United, CloudKitchens, and Reef Technology, which license with brands like Wendy’s and Burger King and sell their food from mobile kitchens. Initially, Baggott thought he would license recipes from local food trucks, but he soon realized that wouldn’t work if a brand suddenly went out of business.
So he hired a restaurant-industry chef who cut his teeth at the Cheesecake Factory. The casual dining chain’s voluminous menu would serve as a template for ClusterTruck’s broad menu of about 80 items — including breakfast burritos, chicken wings, pizza, burgers, poke bowls, soups, and salads.
Profits come by shunning third-party-delivery apps
Brian Howenstein, the chief operating officer of ClusterTruck, told Insider that all locations “are profitable with zero delivery fees” for customers.
That’s a feat that has eluded most delivery apps for years, though
recorded adjusted profit in its latest quarterly earnings.
Low real-estate and labor costs also help.
Foods are prepared in ghost kitchens ranging from 800 square feet to 4,800 square feet. Roughly five employees (cooks and managers) work per shift.
But unlike rival ghost kitchens, ClusterTruck does not work with third-party-delivery apps like DoorDash and Grubhub.
Instead, it deploys its own fleet of gig drivers. The drivers make about four to six deliveries an hour. That’s more than twice as many trips as to third-party delivery couriers, Howenstein said.
The more trips, the more tips, and the happier the drivers, Howenstein and Baggott both said.
“If the model does not work for our courier-delivery drivers, it’s not going to work for the business as a whole,” Howenstein said. “So we want to make sure that our couriers get paid well. And we do that by making sure they’re as highly utilized as possible.”
Leverage technology to ensure food doesn’t ‘die quickly’ in transit
To increase delivery trips, ClusterTruck cuts travel time in two ways. Customers pick up their food curbside so drivers don’t have to get out of their cars. Deliveries are also limited to a six-minute radius from a ghost-kitchen location.
An additional benefit of a shorter delivery route: the food always arrives hot — even fries. The company’s proprietary software won’t allow an order to be cooked until a driver is ready to make that six-minute trip.
“Even if your entire order may have taken 40 minutes, your food is only going to be about six minutes old,” Howenstein said.
Ultimately, Baggott said that’s ClusterTruck’s main mission — fixing the problem of delivering a product that “dies quickly” in transit.
“If you don’t care what the quality is, then time doesn’t matter. But that’s our passion. That’s what we’re fanatics about. Every minute matters.”
Expansion into supermarkets provides more exposure
ClusterTruck currently has eight locations in the greater Indianapolis area, Kansas City, Missouri, and Ohio. A ninth ghost kitchen is set open later this year.
In December 2019, ClusterTruck made its move into supermarkets, opening its first location inside a Kroger store — a decision made to expose shoppers to their delivery-only food brands.
Today, ClusterTruck locations are inside Kroger stores in Indiana and Ohio, which has allowed the ghost kitchen to add pickup service to its model.
ClusterTruck has raised $38 million to date, and plans to expand operations through franchising, and by licensing its software to other ghost kitchens.