Why Wow Bao Wowed and MrBeast Bombed
This week, James Donaldson, known online as MrBeast, sued Virtual Dining Concepts, the company behind his restaurant brand.
In the lawsuit, MrBeast and his legal team said that “Virtual Restaurant Concepts was too focused on expanding the business quickly as a way to position the restaurant model to other celebrities for its own benefit, it was not focused on managing the quality of MrBeast Burger’s customer experience and products.”
The complaint goes on to say that the low-quality products have resulted in thousands of negative reviews and viral social media posts, including this Reddit article that showed pictures of undercooked beef.
Above: An image from a Reddit post complaining about BeastBurger
Through its lawyers, VDC has dismissed Donaldson’s claims as “full of false statements and inaccuracies” and says he is trying to use “bullying tactics” to force VDC to “hand over the company to him” and is using the lawsuit to “discredit MrBeast Burger and terminate his existing contractual obligations without reason.”
While it’s too early to tell how this will all shake out, there’s no doubt that the Beast Burger brand will suffer from its founders’ celebrity public complaints about the quality of the food. Although VDC has shown no intention of discontinuing and closing the BeastBurger brand, the current trajectory of the world’s most popular virtual restaurant brand does not appear to be sustainable.
Ever since I started writing about Mr. Beast’s growing dissatisfaction with the BeastBurger project, I started thinking back to a conversation I had this spring with Wow Bao CEO Geoff Alexander. Like BeastBurger, Alexander’s company entered the virtual restaurant business a few years ago. However, unlike BeastBurger, there are no celebrity sightings, and from the looks of it, Wow Bao’s ghost kitchen business seems to be thriving. In fact, according to Alexander, the company had recently expanded its restaurant footprint by more than 106 restaurants in about four months, bringing the total number of WowBao locations to more than 700 at the time of our interview.
So why is Wow Bao succeeding while BeastBurger is struggling? From what I can tell, these two products have three key differences: Quality control, partner monetization, and product niche.
From a quality control perspective, Wow Bao and BeastBurger are very different. Unlike BeastBurger and many other virtual brands that rely heavily on various restaurant partners to source and make food, Wow Bao simplifies the process by bringing ready-to-eat products to restaurants.
“We ship frozen products all over the country,” Alexander told me. “If you can’t search for a product, you can make a product.”
That’s right; no cooking burgers, fries, or other foods, no combining different ingredients for different results. Hear Alexander explain, the Wow Bao model is the restaurant kitchen equivalent of me bringing home a bag of frozen dumplings from Costco and throwing them into my Instant Pot.
Another difference is the monetization model. According to Alexander, Wow Bao’s restaurant partners only pay Wow Bao for food costs, a very different approach than many product management companies take to reduce overall revenue (while also leaving food and labor costs to the restaurants). After deducting staff and food, the penalty for third-party delivery, and a cut in revenue to a virtual product partner, there’s often not enough financial incentive for a restaurant operator (who often has their own brand business to worry about) to give the love and attention a brand like BeastBurger needs.
The third major difference is the product niche. Asian cuisine has grown in popularity in recent years but is still not well represented by fast service chains compared to standard American fare. A typical mid-sized town in the US may have five to ten burger joints and about the same number of pizza places but may have few Asian restaurants (and often a few casual or fast-casual variations). Wow Bao’s dumplings and buns are more likely to face less competition from third-party delivery apps than other categories.
Finally, another difference that should be mentioned: Wow Bao is a chain of real restaurants full of restaurants, while BeastBurger was born in the real world as a business concept, built around an Internet celebrity who became famous not for eating, but for playing video games and tracking his life almost daily with videos uploaded to YouTube. There’s something to be said for food born in a real restaurant with a real menu for someone born in a business plan to create an extension of a nonessential business product.
Beast Burger’s problems are no different. Over the past year, it has become clear that many of the ghost kitchen and restaurant brands that have emerged in recent years are unlikely to survive. After Uber Eats and DoorDash began to closely control and reduce physical brands in their space and chains like Wendy’s began to adjust their physical location programs, it was clear that the end of the western era of ghost kitchens was near. Now, with MrBeast’s efforts to shut down BeastBurger, we have what looks like a definitive end to the first chapter in the story of the ghost kitchen industry.
The good news is that some companies like Wow Bao and Hungry House are showing that there are other ways to use ghost kitchen models and make it a success for both ghost kitchens/virtual brands and restaurant partners.
As for Wow Bao, it seems they will soon expand beyond their restaurant business and take a page out of MrBeast’s book by bringing in their packaged goods business. This week, Alexander teased the release of Wow Bao’s retail products in a LinkedIn post.
