Ghost-kitchen startup Reef Technology is temporarily closing about one-third of its food trailers, reported Business Insider. (Jan 13)
This activity comes on the heels of numerous operational challenges the delivery-only kitchen business has faced in recent months.
In a memo to staff sent on Friday and viewed by Insider, the company said it was pausing operations on 95 of its “underperforming vessels.” A spokesperson for Reef told Insider that the “decision was entirely intentional” and temporary.
While Reef declined to say when these trailers would reopen or what constituted an “underperforming” vessel, a current employee with direct knowledge of Reef’s business operations defined underperformance as making “anything less than $500 a day.”
Reef has grown rapidly over the past few years, operating about 330 food trailers in parking lots globally at its peak in 2021, largely through licensing agreements with restaurant brands like Wendy’s, Nathan’s Famous, and Burger King.
“Coming off the most successful quarter in our history, we are reviewing and refining our operations as is customary for any growing business,” the company said in a statement sent to Insider.
The abrupt closures follow a slew of operational challenges the company experienced in the second half of 2021.
In addition to health and safety issues — including three incidents in which a propane explosion injured employees — Reef has faced multiple citywide shutdowns over permitting and other regulatory violations, reported The Wall Street Journal. (Nov 29)
Since the summer, local officials in New York City, Houston, Detroit and Chicago have suspended operations at multiple fleets of trailers for violating regulations —— more than 25 closures in total — many of which were for kitchens that were operating without permits.
Some have since come back online, while new closures have occurred in Philadelphia and Minneapolis, current and former Reef employees and city officials said.
Other challenges include connecting to local utilities, higher-than-expected costs, and a labor shortage.
Reports of operational chaos contributed to the loss of high-profile client, David Chang.
In December, Chang’s popular fried chicken restaurant Fuku dropped its partnership with Reef and is now working with the startup’s competitor, Kitchen United, reported Business Insider. (Dec 15)
The move followed an Insider report which revealed a pattern of customers complaining of raw and undercooked food from brands such as Fuku coming out of Reef mobile kitchens across the U.S.