At a Cleveland CloudKitchens, operators say they were set up to fail | Hacker News Reader

At a Cleveland CloudKitchens, operators say they were set up to fail

restaurantbusinessonline.com

34 pointsdonsupreme12 comments

After reading Super Pumped it would take a small army of lawyers to convince me that working with a Kalanick company is anything but a terrible idea.

I used to work in restaurants and have enormous respect and sympathy for anyone that tries to make a go of it. But the featured protagonist didn’t even have enough cash to last more than 30 days when even the article says that Cloud Kitchen promotes the idea that they could be profitable in 6 months.

Said person then went to the press and tried to start a class action suit. I think they need to look in the mirror and recognize how woefully unprepared and likely unqualified they were to run a restaurant.

And no, Cloud Kitchen doesn’t want to have people fail out that quick so they can “get the deposit.” That’s a terrible LTV to CAC ratio, and like the article says, they can’t even fill the place as it is.

> And no, Cloud Kitchen doesn’t want to have people fail out that quick so they can “get the deposit.” That’s a terrible LTV to CAC ratio, and like the article says, they can’t even fill the place as it is.

This is the principal-agent problem at work.

The CEO (principal) likely doesn't attend sales meetings, they just set the targets and lets the salespeople (agents) do their thing.

Agents are incentivized to use whatever legal methods at their disposal to close a deal, and book a commission. LTV is the principal's problem, not the agent's.

What's the scam here? A bunch of people went into a super competitive industry where a vast majority of businesses fail within a few years and then failed.

I certainly wouldn't work with any company related to Kalanick or Uber but it's not really clear what they did wrong here besides advertising.

>More than once, she put business cards in the lobby. Management removed them, she said, and told her she’d have to pay to put up a sign. Mema’s was never fully onboarded to Uber Eats and DoorDash within CloudKitchens’ ordering system. And when she fell behind on payments, the company turned off her system altogether.

>He was told, for instance, that his first two months would be free, but was billed within 30 days.

>“The first month, we weren’t even really on the delivery apps,” he said.

They were promised services that they did not receive. The restaurant industry is hard enough when you're not dealing with new, never-seen-before avenues of rent-seeking.

Ok, seems sketchy, but also he said she said and also basically par for the course with dealing with most corporations. If they got it in writing and they clearly didnt receive services than sue I guess?

As I said, I would never defend Kalanick or any companies out of a general dislike but still wouldn't use the word scam here. More like this company probably sucks to work with. I have no doubt of that.

Previously:

May 2022: https://www.restaurantbusinessonline.com/technology/many-sma...

July 2022: https://www.restaurantbusinessonline.com/operations/cloudkit...

Also: https://www.theverge.com/2022/8/23/23317897/ghost-kitchens-c...

> CloudKitchens has already been sued four times in the past year, with operators accusing the company of deceptive business practices. This report isn’t the only evidence of potential mismanagement at CloudKitchens, either. Another report from Insider details a high turnover rate and a misogynistic internal work culture that’s all too reminiscent of the toxic work environment that plagued Uber while under Kalanick’s rule.

> Augustine agreed with others, though, that CloudKitchens had not been fully transparent. “Of course they lied,” she said. “They’re salespeople.”

This has echos of Boston Market, which soaked franchisees and shareholders instead of trying to make a profit on receipts.

https://www.benzinga.com/news/11/12/2181341/a-lesson-in-hist...

Agree with some of the comments here -

What is the scam - that CloudKitchens is the reason these restaurants fail? That it is actually more expensive to launch a CloudKitchens restaurant versus a normal brick and mortar?

From my perspective, this is a reporter and a failed restaurateur using Kalanick's notoriety to fabricate a story. A vast majority of restaurants go out of business- it happens.

Kalanick's name appears once in the article, and well below the headline, summary and first paragraph. It does not even quote him. How is that "using his notoriety"? Kalanick has more or less been out of the news for the past half-decade as it is.

As for the failure rate of restaurants, I would assume it's something that the readers of RestaurantBusinessOnline.com are already quite familiar with.

Another silicon valley startup that scams people out of their hard work.

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