National Post ePaper

GHOST KITCHENS SPREAD FROM B.C. PARKING EMPIRE.

David Reevely

OTTAWA • When bylaw officers checked out the Wendy’s delivery kitchen, operating in a trailer in a parking lot in Little Italy west of Ottawa’s downtown, they shut it down.

The trailer was operated by Florida-based Reef Technology.

Backed by Japanese conglomerate Softbank and an Abu Dhabi sovereign wealth fund, Reef owns thousands of parking lots in the U.S. and Canada, and it’s trying out many, many, many different uses for its urban spaces as the whole industry struggles with a pandemic-driven collapse in demand for downtown parking.

In Reef’s hands, a bare, boring, minor eyesore is a potential community hub, solving “last-mile” problems for multiple industries. But finding new uses for old asphalt can be fraught, with bylaws and regulations insisting, for instance, that a kitchen have running water and a power source other than a big diesel generator that exasperates the neighbours.

THIS PARTNERSHIP WITH REEF IS TESTIMONY TO OUR AMBITIONS,

THE POTENTIAL WE SEE TO GROW OUR BELOVED BRAND AND OUR QUEST

TO REACH MORE CUSTOMERS IN MORE WAYS. — ABIGAIL PRINGLE

Reef bills itself as “The Neighborhood Company,” transforming “open spaces into multi-purpose places that create jobs and bring new goods, services and experiences to your neighbourhood.”

So far, maybe its most visible venture has been with Wendy’s. In November 2020, the burger company announced its first “neighbourhood kitchen” experiment with Reef, in Toronto. Last summer, that blew up into a five-year, 700-location deal covering Canada, the U.S. and the U.K.

“This partnership with Reef is testimony to our ambitions, the potential we see to grow our beloved brand and our quest to reach more customers in more ways,” the announcement of the expanded partnership quoted Wendy’s executive Abigail Pringle as saying.

But those trailers are just one of the uses Reef is proposing for its parking lots. Its website is dizzying. It’s in the microwarehouse business. Health care. E-bike charging. Vertiports. DJ Khaled is selling chicken wings via its kitchens after “the biggest restaurant launch in history” that did not involve what you’d ordinarily think of as a restaurant (via online delivery services, Reef sells fast food with numerous brands besides Wendy’s). All in addition to offering technical services like pay-by-app to other parking operators.

“Reef’s origins were in making parking lots more efficient, but the company’s mission grew to include supporting other applications that make sense for commercial lots and benefit local neighbourhoods,” Reef’s California-based head of global communications, Mason Harrison, told The Logic by email. Besides all the above, the company is excited about the potential of vegetable farming in shipping containers, to address food deserts.

At its core, though, Reef remains in the parking business: Harrison wrote that kitchens are its fastest-growing segment, but parking “continues to drive the largest amount of the company’s revenue.”

Reef began in 2013 as Parkjockey, a company with a smartphone app that was meant to make it easier to find and pay for parking, directing users to spaces in members’ lots and handling the payments.

But in 2018, Parkjockey made a gigantic splash. Armed with investments from Softbank — best known for its high-profile backing of disruptive businesses like Wework and Uber — as well as Abu Dhabi’s sovereign wealth fund Mubadala, reportedly totalling as much as US$1 billion, it bought two of North America’s large parking concerns at once.

Vancouver-based Imperial Parking, known better as Impark, with 3,600 properties in 330 cities, went to Parkjockey from the Ontario Teachers’ Pension Plan for an undisclosed sum. Parkjockey also acquired Citizens Parking, itself an agglomeration of Lanier, Ameripark and Parkone parking brands.

The next year, Parkjockey rebranded itself as Reef Technology. In late 2020, it raised another US$700 million, again drawing on Mubadala and Softbank, for its vision of itself as a “proximity platform,” offering its urban lands for multiple uses.

Then COVID-19 knocked the struts out of downtowns.

“With so many people working or attending school from home, driving significantly decreased during the pandemic. Of course, fewer people driving meant fewer people parking, leaving some parking lots vacant for months on end,” the company said in a meditation on the state of the parking industry posted this month.

Removing friction from finding and using paid lots is a no-brainer for increasing those lots’ value to their owners, but there’s a lot more to try, the web post reads.

Unlike Uber or Airbnb — famously the biggest taxi company with no cabs and the biggest hotel company with no hotels — Reef owns an awful lot. It claims 18,000 workers and 5,000-plus locations now.

So it has boots on the ground throughout North America and abroad. But food service is an industry full of complex regulations that vary from municipality to municipality, let alone country to country.

In November 2021, The Wall Street Journal reported on Reef’s problems with its kitchens in cities across the United States. Those have included shutdowns over the company’s failure to secure permits for its trailers, and workers injured by fireballs blown out of the trailers’ propane equipment.

In Ottawa, it ran into regulators who don’t have a scheme for a semi-permanent trailer kitchen on wheels, catering only to app-based delivery services like Skipthedishes and Doordash.

“It could be one of two things,” Catherine Mckenney, the city councillor who represents the area, told The Logic. “It could be a food premise, in which case you would need siteplan approval … it needs to be licensed, it cannot run a diesel generator [and] it has to have a water source, which this one didn’t have.”

Or it could be a “mobile refreshment vehicle.”

“To be a food truck, you cannot take up any parking spots. Oddly enough, that’s the rule,” Mckenney said. “You would need a zoning amendment.”

This kitchen trailer has been stationed against the wall of a building with a dentist office and yoga studio. When The Logic went to see it, it had a big generator on a separate trailer and a line from two large gas cylinders on the asphalt several metres away. Plus two big waste bins and a portable toilet outside its door. Residents had complained about the generator and about litter on a nearby path.

Wendy’s told The Logic that three Reef-operated trailers with its smiling-redhead logo on them in Ottawa have clean health inspections. But two have had to be closed “due to a power supply issue only, and not related to any health or safety concerns,” wrote vice-president Heidi Schauer, in an email. (The third is powered without a generator, a fat cable plugging into a box on a nearby retaining wall.)

“It’s another one of those disruptive businesses,” said Mckenney. “Similar to Uber or Airbnb, now we have these ghost kitchens.”

“Creating a new category of anything comes with its fair share of obstacles, especially for a business as operationally intensive as restaurants,” Harrison told The Logic. “When we’ve stumbled, we’ve succeeded in learning, adapting and improving as we’ll continue to do. We welcome the scrutiny that comes with being a market leader because it helps us continue to improve.”

Toronto lists 16 duly inspected Reef kitchens. Edmonton has seven, Calgary eight, Vancouver one. Reef has openings across Canada in the “parking field” and “kitchens field.”

These experiments with underused parking properties aren’t unique to Reef, and the pandemic has increased the urgency.

The board chair of the International Parking & Mobility Institute, a trade group, is Dave Onorato, whose day job is heading the Pittsburgh Parking Authority. Before COVID-19, he said, his agency’s garages and surface lots were routinely full by 8:30 a.m. That hasn’t happened in nearly two years.

The Pittsburgh authority projects it’ll be back to 85 per cent utilization by the end of 2023 and that will be the new norm. “We don’t anticipate getting back to where we were in 2019, either for revenues we had or the demand,” Onorato said.

Indigo Group, a French company with extensive Canadian operations, is also rethinking its real estate, in a process begun before the pandemic. Indigo’s focus is on its underground garages, but the basic idea is the same as Reef’s: retrofitting them with everything from bike-share stations to kitchens to container farms to delivery warehouses to data centres.

“The entire business model for our industry is transitioning,” said Brett Wood, a consultant based in Charleston, S.C., specializing in parkingand transportation-demand management. Demand for street parking has largely recovered but off-street lots haven’t, he said, and the monthly leases that used to be the core of that business might never.

As crowds returned for pro sports and downtown theatres, Onorato’s agency tried offering the first floors of garages as designated spots for Uber and Lyft drop-offs and pickups, to clear room on streets. They’ve had farmers’ markets — being under cover meant markets could run later in the fall, Onorato said. They’ve set up garage roofs as event venues. They’ve tried using garages as transshipment points for courier services.

Some of these moves have been good for people and neighbourhoods, he said, “but it hasn’t made a significant impact to the authority from a revenue standpoint.”

Wood said many municipalities are repurposing street spaces as restaurant patios or pickup zones for delivery services — since surface lots and garages are underused, people can park in those instead. Finding a way to replace the revenue those street spaces generated for cities and towns is a million-dollar question, though.

“We are now seeing a lot of companies that are beginning to automate that, where they’re working with food-delivery operators to basically determine the number of transactions that are happening at the curb, and then monetizing that, or monetizing it using an interface between the vehicles, GPS, and the curbside environment,” he said. None has been a resounding success, though.

Wood said he’s worked with one Texas town that took a municipal lot and made it a foodtruck centre. “We’re seeing communities implement that as a service to their constituents,” he said. “Reef has been out in front with the ghost kitchens.”

Both he and Onorato said Reef’s reputation in the parking business is solid. In Impark and Citizens, it bought established businesses and hasn’t monkeyed with their core activities.

But it’s a tough time, Onorato said. Technology was changing the industry and COVID-19 has increased the pressure. He said he’s seen one ticket-processing company try to become a vendor of whole parking meters and meter companies get into payby-phone apps, with poor results.

“I do see that once in a while when companies expand beyond their expertise, that they could even weaken what they’ve been strong at doing in the past.”

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2022-01-26T08:00:00.0000000Z

2022-01-26T08:00:00.0000000Z

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