How can restaurant kitchens earn more? The “virtual brands” solution
Archived article
Archived article: please remember tax and investment rules and circumstances can change over time. This article reflects our views at the time of publication.
Many food service businesses underuse their kitchen capacity as they solely focus on one menu. This spare capacity means that a kitchen can normally do a whole lot more and generate additional revenue.
Meanwhile, demand for food delivery, which surged during the pandemic, remains strong: a recent report by KPMG found that 38% of 18-24 year olds ordered a takeaway at least two or three times a week in 2022.
How could food service businesses capitalise on this?
This is where Peckwater Brands, a company backed by Fuel Ventures, comes in. You might have ordered from one of its brands without even knowing. That’s because Peckwater specialises in virtual brands: restaurants with recognisable brand identities but no physical high-street presence, which are only seen on delivery apps. Peckwater provides everything a kitchen operator needs to partner with an online brand and start taking and fulfilling orders online.
Find out more about the company, how Fuel Ventures EIS Scale-up's investment is now valued at a 4.5x unrealised return, and how you could invest in similar companies through the Fuel Ventures Scale-up EIS Fund. Past performance is not a guide to the future.
Important: The information on this website is for experienced investors. It is not advice, research, nor a personal recommendation to invest. If you’re unsure, please seek advice. EIS investments are high risk and you could lose the money you invest.
What does Peckwater do?
Peckwater specialises in virtual brands: brands which are created solely to be seen in delivery platforms like Deliveroo and JustEat. The kitchens working behind the scenes and making the food mostly belong to restaurants you’ll see around in your city. For example, one of Peckwater’s partners is a fast-food restaurant in London called Ritto’s. It specialises in beef and grilled chicken burgers but now it is also producing Peckwater’s virtual brands to maximise use of kitchen capacity and reduce ingredient waste.
Peckwater uses customer insights and data to predict which brands and menus may be more popular in a given area and makes them available to restaurants up and down the country to enable them to have new menus and reach new customers.
Virtual brands are also increasingly being used by companies as a low-risk and low-cost way of experimenting with new ideas. It also addresses the current market trend of consumers looking for a cuisine rather than a specific restaurant when they order. Kitchens can also use virtual brands to have more than one entry per cuisine, preparing the food in the same kitchen.
Peckwater currently has more than a dozen brands under its portfolio – from Flip the Bird (chicken) to Fiesta Mexico (burritos) and Good Roots (salads and wraps). These brands are carefully created by the company ahead of trends, whilst chefs develop the recipes and menus – with the focus on reducing cost and waste. This low-cost and low-waste strategy enables the brands to easily integrate into kitchens with no need to drastically change standard operations and only take up minimal storage space.
Simply put — here's how Peckwater works:
- Peckwater builds the fully operational virtual food brands: concept, menu, and recipes as well as investing in promoting and marketing the brands
- Operators choose which brands match their service and kitchen capacity
- Peckwater trains the operators on how to prepare and deliver the items
- Once everything is fully set up the virtual brand gets launched into the food delivery apps
Peckwater has obtained £15 million in Series A funding in 2022 after receiving £3 million in seed funding in 2021. Today, Peckwater continues to expand its number of locations and grow its revenue.
Why did Fuel Ventures invest?
The Fuel Ventures Scale-Up EIS Fund first invested £2 million in 2021. The investment is currently held at a 4.5x uplift – past performance is not a guide to the future and this is an unrealised return. In 2022, Fuel Ventures made a subsequent investment through its Follow-on Fund, which is currently held at cost.
Fuel Ventures invested in the company for three main reasons:
- Its growth: Peckwater Brands had grown 20% month-on-month over the past year in the lead-up to Fuel’s original investment. It went on to launch a US division in 2022, planning further expansion into France and Belgium
- Its approach: Fuel Ventures was impressed by the growth of the food delivery market and is excited by Peckwater’s approach which brings technology and scalability to the space
- The team: Fuel Ventures found the management team to be strong and share Fuel’s own level of ambition.
Peckwater Brands is showing rapid growth across Europe, the Middle East, and the U.S., with live sites rising from 100 in March 2022 to 554 in April 2023. Its proposition is clearly hitting its mark with target customers as its portfolio of virtual brands continues to grow.
Mark Pearson, Founder and Managing Partner, Fuel Ventures
How can you invest in similar companies?
Experienced investors can get exposure to companies like Peckwater (albeit not the company itself) by investing in the Fuel Ventures Scale-up EIS Fund.
The fund aims to back fast-growing digital marketplaces, platforms and Software-as-a-service (SaaS) businesses and use its first-hand operational experience to accelerate their growth.
Fuel Ventures Scale-up EIS Fund, including its previous four iterations, has invested into 61 investee companies across 70 investments (September 2022). Of these investments, five have since failed. In 2021, the fund achieved its first exit when ContentCal was acquired by Adobe, delivering a return of 7.7x the original investment cost. In 2022, the fund achieved its second profitable exit when Capdesk was acquired by US fintech unicorn Carta, generating a return of up to 8.5x for investors. Please note, past performance is not a guide to the future.
Fuel Ventures Scale-up EIS Fund: Performance per £100 invested in each tax year
Source: Fuel Ventures, as at 13 September 2022. Past performance is not a guide to future performance. The chart shows realised returns (where share proceeds have been returned to investors as cash) and unrealised returns (where cash has not yet been returned and the value of the investments is based on the manager’s own valuation methodology). There is no ready market for unlisted shares. The figures shown are net of all fees and do not include any income tax relief or loss relief.
Fuel Ventures Follow-on EIS Fund: Performance per £100 invested in each tax year
Source: Fuel Ventures, as at 15 December 2022. Past performance is not a guide to future performance. The chart shows realised returns (where share proceeds have been returned to investors as cash) and unrealised returns (where cash has not yet been returned and the value of the investments is based on the manager’s own valuation methodology). There is no ready market for unlisted shares. The figures shown are net of all fees and do not include any income tax relief or loss relief.
Wealth Club aims to make it easier for experienced investors to find information on – and apply for – investments. You should base your investment decision on the offer documents and ensure you have read and fully understand them before investing. The information on this webpage is a marketing communication. It is not advice or a personal or research recommendation to buy any of the investments mentioned, nor does it include any opinion as to the present or future value or price of these investments. It does not satisfy legal requirements promoting investment research independence and is thus not subject to prohibitions on dealing ahead of its dissemination.
Fuel Ventures Scale-up EIS Fund
Learn more about the Fuel Ventures Scale-up EIS Fund – its manager, strategy, risks, what type of companies it invests in, the manager’s performance record, charges and our view.
Read more and see how to apply online