Episode 19: John Meyer

For Episode 19, we are joined by Ghost Financial founder John Meyer. Meyer has a background in software development and started a keto ghost kitchen. He saw the need for a financial technology company in the ghost kitchen industry. Meyer talks about the ghost kitchen space’s unique financial needs and provides tips for ghost kitchens to improve their balance sheet.

Episode transcription 

James: John, welcome to the show today.

John: James, it’s so great to hear from you. And thanks for having me.

James: Yeah, no problem. I guess we connected at the Ghost Kitchen conference. How have you been doing?

John: You know, I would say I’m living a life that is busier and more crazy than it’s ever been. But I’m enjoying every day and having tons of fun building this company at the same time. So, you know, 15-hour days daily at this point, but it’s a joy.

James: So you ran a ghost kitchen for a while. Talk a little bit about the ghost kitchen and your background in hospitality

John: Sure. So, you know what’s so cool about this and what led to Ghost Financia is It all started with the pandemic. I had a little bit of extra time on my hands. I had work with the team at my previous company to recruit a long term CEO to sort of replace me. And I got into some angel investing, advising. And then one other thing during the pandemic, and that was in my home city currently of Austin, where that since 2019 I went ahead and took this industry I’ve been following for about five or six years now, which is this what I believe for sure is a soon to be trillion dollar industry of ghost kitchens. And I finally took action and went ahead and started my own ghost kitchen restaurant here in Austin called Keto Kitchen, designed to be sort of the first classic American ultra low carb food brand from everything from burgers with actual buns that are all under ten grams of net carbs to pizzas are cauliflower, pizzas and mashes made out of cauliflower and cookies made out of almond flour and let’s say fruit to sweeten it without added sugar. So it actually took off and what we did was we used that as essentially our partner for space for the ghost kitchen, we used the Cloud Kitchens and they’ve been great and have been, I’d say, pretty good job at evolving in this fast-growing industry in my experience working, you know, building Keto Kitchen over the last at this point year and a half. But yeah, you know, we launched here last January and 2021, hit profitability in 60 days. And it just kind of kept going afterward. And I learned a lot in the process, which of course, led to what I’m building now.

James: Is it still operational?

John: Absolutely. Yeah. So it’s we’re just recently relaunched with a brand new kitchen in Austin. And what we’ve done here is we’ve completely redesigned the space and we’re inching towards making an announcement in the next few months around what we’ve done to actually automate portions of the operation, which is now be been relaunched as of a month ago.

James: So you experienced a massive inventory loss during the Texas energy crisis. Talk a little bit about what that taught you.

John: Wow, what is it? What an experience that was. I mean, this was you know, at this point in time, I was completely focused on building Keto Kitchen. And so I was all in. And so we got hit in Texas, in Austin with what we all called the Snowpocalypse. I mean, we went from serving food to, you know, let’s say anywhere between 60 and 80 customers a day to the next morning, there’s a blizzard. Ice is everywhere. And my whole kitchen team couldn’t even get to the facility where our ghost kitchen is at. And so not only did the power go out the night before, which caused us to lose a bunch of food inventory to the point where the only thing we could serve were pizzas. But the problem was my whole kitchen team couldn’t even come in. So I spent the next two days during the Texas the apocalypse being the only one somehow with a car that could get to our facility with icy roads and really just spent two days straight alone in our ghost kitchen making cauliflower pizzas.

James: And how much inventory did you lose during that week?

John: Ended up being the tally. And total tally ended up being a little over $5,000 with inventory, you know, you know, a Keto Kitchen. We were very heavy with high end meats. You know, we were serving steaks, burgers, also a lot of fresh vegetables. And, you know, we made all our sauces from scratch and we would use a lot of creams for cream bases and dishes like our cream based chicken dish with your choice of sides. So yeah, in total was thousands of dollars of losses due to the power going out and shutting out the freezer. Our refrigerators, including the walk ins.

James: That’s hard to stomach, I imagine. So you’ve been around the ghost kitchen space for a couple of years. What are your thoughts on it and where do you think it’s headed?

John: Well, I could say what first got me excited about ghost kitchens when I heard about it years ago, I would say was the notion that for the first time in human history, it doesn’t necessarily require taking out a second mortgage on your home to start a restaurant. You know, it doesn’t cost $1 million and three years to build a brick and mortar or start a brick and mortar restaurant anymore. Now, I got mine up and running in about 45 days with maybe $30,000. And again, we were profitable in 60 days. Now, keep in mind, I did, unlike some other ghost kitchen operators that, you know, rightfully so, are out there, bring a good amount of business and marketing and let’s say product and maybe design experience to the table that helped our brand be successful, largely, which, you know, I’m doing my best to share with the community to help increase success rates of ghost kitchens. But, you know, all in all, I really do love it. I think it is the the future of food, really, due to the dramatic change in economics. You know, right now we just partnered with Cruising Kitchens, the leading manufacturer of a lot of these mobile ghost kitchens used by big QSR brands. So here in Austin, we’ve got these when these ghost kitchen trailers or vessels that I just like run into on the street sometimes and the economics are striking. It’s a 90% cost reduction in upfront capital to start a Wendy’s ghost kitchen, taking what used to be $3 million to start $300,000. And so that enables a vast, much larger amount of Americans to essentially start and live the American dream through ghost kitchens.

James: Yeah, I think Wendy’s started that project in Canada, and I think a lot of the big brands have really used the mobile kitchens and ghost kitchens to expand their footprint and not have to sink, like you said, millions of dollars into building out a brick and mortar store.

John: Right. And what was so interesting when we were just at the the Cruising Kitchens facilities last week was I learned for the first time that what these mobile ghost kitchens are doing is they are literally replicating the same exact level of sophistication, equipment and capabilities of a full brick and mortar Wendy’s, in this case, in a mobile ghost kitchen. And this is publicly known, but I hadn’t realized previously the level of design sophistication that has actually gone into this mobile ghost kitchens, you know, and it reminds me of, you know, being at such a tech guy, just the revolution of something, as you know, now commonplace as the iPhone, taking a whole computer’s worth of electronics and miniaturize again. It’s almost like that’s what’s been done with mobile ghost kitchens in in terms of these big QSR brands adopting the mobile ghost kitchen sector.

James: Yeah. So now what is Ghost Financial and how does it operate?

John: You know, what led to Ghost Financial was, of course, I was having this great experience running Keto Kitchen, and by the time I was about six months in, I had largely had it go in without me needing to be present all that much. And so that was great. And so that opened up a little more time on my plate. Again, I started thinking about some of the problems I was seeing when I walked into the khost kitchen facility every day when I was meeting hundreds of other operators of ghost kitchen and brick and mortar restaurant operators over these last few years. And it turned out that a lot of the issues ended up being centered around finances and needing to improve profit margin, needing to get capital to expand, let’s say, an operation that’s successful in a time where when you walk into a bank and in fact, when I walked into a bank, this is a real story. After my kitchen, ghost kitchen became profitable, I walked into a big bank. It was a Chase and I won’t name the location or the manager, but when I walked into a bank and ask for an expansion loan for my profitable ghost kitchen, the first thing the entire bank, including the manager said, was, quote unquote, What the heck is a ghost kitchen? So that led to an enormous amount of thought and curiosity about how there is clearly a need for an almost vertically integrated, vertically designed bank, not only for the ghost kitchen sector, which traditional banks don’t understand, but also for its overarching umbrella sector, which is really the global multitrillion dollar food service space. And, you know, as I started talking with dozens and hundreds of brick and mortar restaurant operators, catering companies, food truck owners, it ended up becoming the case that nine times out of ten, they tell me they largely feel ignored by traditional banking. And when I looked into why, it turned out that traditional banks simply don’t have the ability to properly underwrite the food services space and especially ghost kitchens, which, you know, clearly, based on my experience. They don’t even really know what they are. And so I Ghost Financial we’re building a bank and a financing platform and a card and a cash card to allow restaurants to make more money and get cash back on all of their expenses, including food inventory, which could deal with 2 to 6 figures a month in many cases, and then offer expansion loans that allow these, you know, successful operators to literally expand into the dozens of cities across the country through the scalable ghost kitchen model. And then we’re also doing modern day insurance, all in an age where, when I was looking at insurance options for my own ghost kitchen, it was almost as if I was looking at websites from the nineties. So, you know, we’re building a modern day solution that’s super user friendly. Ease of use is integrated with the providers you’re already using, whether it’s a POS system or a tablet based screen that brings all your orders together at your local ghost kitchen facility. So it’s a one stop shop all in one banking and financial toolbox for restaurant, ghost kitchen catering companies and food truck operators.

James: I imagine a lot of restaurant operators could identify with walking into a bank and having challenges getting finances. I know. I mean, access to capital for restaurant operators is always been a challenge. Like, why do you think that is?

John: Well, I touched on it a little bit and I can dove a little deeper. I mean, when I was starting to think about just financial, you know, we’re approaching actually the year anniversary of when the concept actually came about and it began a multi-month research and due diligence process. I mean, I read thousands of pages, talked to hundreds of people. And, you know, I even conducted surveys with hundreds of restaurant and ghost kitchen operators to get their stance on legacy and traditional banking and even to get their stance on who they would use as a banking partner. And now we were again, we hearing that in most cases, restaurant and ghost kitchen operators feel ignored and misunderstood and and really almost pushed away by traditional banking, because traditional banking can’t underwrite. It’s unlike what we can do and I can get into how we underwrite it properly and effectively later. That’s helpful. But the other thing we learned essentially is that access to expansion capital is nearly impossible. You have to put, you know, huge collateral or personal guarantees on the line. And it becomes really daunting to the point where it turns people away. And so how we underwrite it goes financial without these daunting aspects of traditional banking demands for things like expansion loans for a restaurant is, you know, we’re literally leveraging real time data from restaurants such as hourly sales and your even at your average food preparation time. So for our cash back card that’s designed to increase your profit margin by up to 10%, we adjust the credit limit based on some of these metrics that we’re getting on your restaurant in real time. And so that access to data combined with AI we’ve been building to make sense of that data and create almost a credit limit. And then for expansion loans and instant credit decision on an expansion loan for an entire ghost kitchen launching a new city, we can provide through our essentially proprietary underwriting system that’s leveraging this real time data on restaurants that traditional banks simply don’t come close to having access to our technology similar to us. So that’s what enables us to make this work when legacy or traditional banks can’t do it.

James: Now, do you have an example of a restaurant or ghost kitchen that you’ve helped expand or get up and running?

John: Well, we have been doing testing on the card. We’re doing a late summer launch on that. And then what’s happened much faster than the cash card for ghost kitchens of restaurants is actually our expansion loan piece. So, you know, just this week, really a few days ago, we announced our first major deal on this front, really to offer and provide up to $100 million in capital to Cruising Kitchen for their mobile ghost kitchen buildouts, which are going to now be available to essentially any even small business or independent operator or big QSR brand to sort of supercharge growth on both sides. So that would be probably the best example right now of the expansion loan side of things. We expect some major announcements, especially on the big QSR side, you know, in the next few months.

James: Okay. When you started talking to Cruising Kitchens, what were their concerns or what were the challenges that they faced?

John: So the thing with Cruising Kitchens was it was such an interesting conversation initially when we met them. First off, you know, we met them and we fell in love with the team. They were really fast moving, just like our team at Ghost Financial. They’re so passionate about what they’re doing and they really care about quality. But from a conversation standpoint, what led to such rapid dealmaking between our two companies was really something that ended up actually just further validating Ghost Financial and even cruising. And that was, you know, they’re essentially building a totally new method of launching a restaurant, especially for big QSR brands, where it’s replicating the exact set up in a full blown brick and mortar QSR restaurant in a mobile ghost kitchen that’s 90% cheaper. And so when they told us that they were talking to all these legacy banks and feeling completely misunderstood by these banks, not knowing how to even comprehend what a ghost kitchen is, let alone how to underwrite them, when they met Ghost Financial and our team also, by the way, at an industry conference, it quickly led into a rapid, deep dove into how do we create a situation where to Cruising Kitchens, which is essentially the leader in mobile ghost kitchen manufacturing, how do we design a deal and a partnership that essentially lets Ghost Financial be their personal bankers, you know, totally designed for exactly what they’re doing, which is almost the opposite experience of what we are hearing the industry is having with legacy banking, who really has a lot of trouble understanding the ghost kitchen sector and how to underwrite it.

James: Yeah. Now finally, as we wrap up, what advice would you give to restaurant operators who kind of are trying to get into the, you know, ghost kitchen space expansion when it comes to securing financing and getting up and going?

John: I would say the biggest advice right now that I’m not seeing is done enough across my peers is when you’re starting a ghost kitchen, you got to lease space for that kitchen, whether it’s at a facility or partnering up with an existing restaurant, brick and mortar restaurant, or even potentially leasing a mobile ghost kitchen. That’s an upfront cost. And so what I would say in terms of my biggest piece of advice is that is in this market right now and what I’m seeing is negotiable in every case, you know, you can negotiate these lease terms from, let’s say, your local ghost kitchen facility in Columbus. And in many cities now there are multiple ghost kitchen facilities that have leasable private kitchen spaces up to code that you can compare pricing with and get better rates on and better terms on, not only on your lease amount, the price every month, but other terms such as the upfront deposit, which can be a big upfront cost. How much, if any, they’re taking on your order ticket size. Some facilities do take a percentage, some don’t. So there are these important things to look at when you’re selecting your partner for space to build your ghost kitchen. And it’s just really important to know that this is right now negotiable and it’s highly recommended to do so.

James: Yeah. Isn’t that what they say in business? Everything’s negotiable.

John: Absolutely. You know, but it’s all too often I just see peers in the ghost kitchen space getting contracts and just signing them blindly, not even realizing they can negotiate better terms. And so that’s my biggest piece of advice, I think, to help folks better succeed, increase margin and increase their success.

James: All right. Well, thank you so much for your time today.

John: Oh, it’s been great. Thank you.