Some of the most successful companies of the last ten years built an asset-light version of an existing industry: Airbnb is famously the world's largest hotel chain despite not owning any hotels, just as Uber is the biggest taxi service despite not owning any taxis. Wow Bao is a ghost restaurant chain that takes this one step further, offering a side hustle for restaurants that grows on top of an existing asset-light network.
Wow Bao allows existing restaurants to start selling Chinese food under their brand with an initial investment of just $2,000 and three square feet of kitchen space. They target an aggressive payback period: $2,000 in weekly sales within six weeks, with pre-tax margins of 40%. Wow Bao delivers pre-cooked, frozen food to restaurants, so they’re eliminating much of the training and inventory management needed to start selling new dishes. Their main distribution channels are apps like UberEats, Doordash, and Grubhub. Scaling this way has allowed Wow Bao to grow from a handful of locations early last year to over 200 today. The model is especially successful in smaller markets and rural areas; a town that's big enough for a restaurant but not big enough for a Chinese restaurant gives Wow Bao operators a local monopoly.
In the early days of chain restaurants, some investors made a killing by identifying regional chains that had national appeal. If a chain could achieve density in one region, it had a straightforward growth path to expanding throughout the country. That basic model is still true, but it's been radically accelerated by the rise of delivery apps. Now, ghost kitchen-based brands can grow from just a handful of stores to hundreds in the space of a few years. There are now over 1,500 ghost kitchens in the US, and five times that number in China.
Wow Bao has some fully owned-and-operated locations, including several at airports. Airports are a particularly strategic place for marketing, because people will try something new if it looks fast and convenient, and once they’ve tried it in-person they can reorder on their phones. Their approach is especially powerful given that the popularity of bao itself is on the rise (nearly 50% YoY) and by making it their initial focus, Wow Bao is riding an organically growing wave.
In a way, Wow Bao’s model is an echo of the original fast-food boom, which was propelled by the interstate highway system. Highways created demand for more cars, and also led to more travel, which put a premium on familiar dining experiences and thus meant more brand value for national chains. Wow Bao is scaling on a different network, and following the same path—at an accelerated pace.