From Food Courts to Ghost Kitchens: A New Collaborative Menu for Grocers and Dining Brands

When Philadelphia ShopRite stores needed to add healthy meal stations, owner Jeff Brown considered traditional salad bars but ultimately chose to bring in a popular salad restaurant in the produce section. Meanwhile, online grocer Peapod, to develop meal kits, reached out to well-known chefs in Chicago and Indianapolis, inviting them to design dishes.

Restaurants and grocers are fiercely competing for meal consumption share on both physical and digital channels, but some businesses are finding that collaboration is more profitable than confrontation. Instead of competing head-on, they are leveraging each other's core strengths to provide consumers with the best grocery and meal experience.

Restaurants have long offered branded meals and other products in stores. In an era of creative collaborations—such as Kroger products entering Walgreens stores, and Potbelly Sandwich Shop signing an agreement to open in Macy's department stores—the opportunities for grocers and restaurants to join forces are clearly increasing.

"Grocers' expertise still lies in salad bars and hot food bars," Anne Mezzenga, co-founder of consulting firm Red Archer Retail and former head of marketing and partnerships for Target's future store projects, told Grocery Dive. "If they can strengthen collaboration with restaurants, they can truly elevate both sides at the local and regional level."

"Disrupting normal shopping behavior"

One of the most notable ways grocers and restaurants collaborate is by opening dining establishments inside stores to attract traffic during meal times. This strategy has become popular among large supermarket chains, boosting visit frequency and brand image while providing restaurants with low-cost expansion opportunities.

In Toledo, Ohio, two Kroger stores will add fast-food outlets operated by Tony Packo's—a Hungarian hot dog restaurant famous for its appearance on the TV show M*A*S*H. The first location opens later this month, with the second expected early next year.

Tony Packo's Executive Vice President Scott Radel said Kroger has sold its grocery products, including hot dog sauce, pickles, and chili, for years. Kroger also valued Tony Packo's loyal local fan base and its experience operating in-store locations at local grocers. Radel said the Tony Packo's Express counter will offer the restaurant's most popular items, including chicken paprikash, cabbage rolls, strudel, mashed potatoes, and hot dogs.

"Kroger does an excellent job with groceries and deli, but they weren't satisfied with hot food sales," Radel told Grocery Dive. "They wanted professionals skilled in restaurant operations to come in."

Radel said the arrangement will boost Tony Packo's brand awareness. If the partnership expands—Kroger and the chain are already in discussions—it could also allow the five-location operator to enter new markets without investing in full-size stores.

Kroger has applied the same model in other markets. Rapid Fired Pizza—a chain known for making pizzas in under three minutes—has signed on to open locations in several Kroger stores in Ohio. In Kirkland, Washington, a new QFC restaurant features a satellite location of Italian chain Tutta Bella.

Whole Foods has also signed local restaurant suppliers, even after being acquired by Amazon in 2017. Meanwhile, Walmart Canada has opened over 100 Freshii locations in its stores, and Hy-Vee has added Wahlburgers menu items to its Market Grille restaurants.

Mezzenga said many grocers' hot food bars and salad stations fall far short of restaurant quality, so from a customer experience perspective, collaboration makes sense.

"When partnerships work, they disrupt consumers' normal shopping behavior and let them accomplish more in one place," Mezzenga said. "It saves customers trips and ultimately provides convenience, meaning they'll be more willing to return."

However, while restaurant operators can ease grocers' burden in menu development and execution, managing two separate businesses under one roof can be challenging, said Wade Hanson, principal at Technomic. He said retailers and restaurants operate two very different business models, and reaching agreement on terms can be difficult and may not satisfy both parties.

Tony Packo's Radel said he and his team will be mindful of their surroundings when opening the first fast-food location at Kroger.

"We'll share refrigerator and freezer space," he said. "We want to make sure we don't cross boundaries and can regularly receive feedback on our performance and operations."

For small restaurants, investing in in-store locations and keeping up with grocers' growth demands can also be difficult. Kroger's Mariano's ended its partnership with Chicago's Pork & Mindy's at 28 locations this month after the restaurant filed for Chapter 7 bankruptcy.

Other grocers are choosing to develop their own restaurant concepts rather than balance the needs of two business entities under one roof. In Seattle, PCC Community Markets, the largest co-op grocer in the U.S., just opened its first in-store restaurant—a seafood station serving fresh steamed clams, chowder, and cioppino, with wine and beer. CEO Cate Hardy said the co-op chose to build its own restaurant rather than bring in a partner because it believed that was the best way to keep the experience consistent with the rest of the store.

Rick Stein, vice president of fresh foods at the Food Marketing Institute, believes in-store restaurant brands are a temporary solution for grocers as they figure out how to improve food service internally.

"In my view, it's a defensive move," he told Grocery Dive. "If I don't have the capability or resources to do it myself, then having a partner is better than being absent or doing it wrong."

Brown, who oversees 12 ShopRite stores in the Philadelphia area, said he would partner with restaurants if they offer compelling value his team couldn't develop on its own. For Saladworks, he valued the chain's brand recognition, focus on portion control, and use of trendy ingredients like quinoa and edamame. He said operating two separate businesses at the same location pushes both to do better in service, cleanliness, and food preparation.

"We do all these things too, but having a disciplined restaurant, I think, raises your game," Brown said.

Currently, Saladworks has opened locations in two ShopRite stores, and Brown said he hopes to add more, noting that its unit sales and total sales far exceed the performance of traditional salad bars.

Saladworks CEO Kelly Roddy said the in-store locations have boosted the company's brand exposure thanks to daily customer traffic. He said Saladworks is exploring more grocery partnerships and noted that the key to its success with ShopRite lies in its prominent location in the produce section.

"People can find milk, eggs, and bread, but if you have a restaurant, you need to put it in front of customers," he told Restaurant Dive.

Food halls, meal kits, and ghost kitchens

These partnerships aren't limited to in-store restaurants. As grocers continue to build large destination-style stores, they are adding food halls that incorporate multiple restaurant brands.

Kroger's flagship store in Cincinnati, Kroger on the Rhine, features a food hall with several regional favorites, including Eli's BBQ and Dope Asian Street Fare, along with the grocer's own restaurant brand, Kitchen 1883. In June, Korean grocer H-Mart opened a 40,000-square-foot market in San Diego, with a food hall featuring local restaurants like Myungrang Hot Dog and overseas brands like Sinjeon Food Sys.

Beyond attracting curious customers, Mezzenga said food hall-style stores can also offer an appealing online shopping experience by selling restaurant meals alongside frozen foods, milk, and coffee. Kroger currently partners with Instacart and Shipt for grocery delivery, while Eli's BBQ delivers through third-party platforms like DoorDash and Grubhub. A company spokesperson declined to comment on future e-commerce strategies for Kroger on the Rhine.

"If you think about what customers want, it's getting meals and groceries when they want them," Mezzenga said.

Mezzenga said grocers and restaurants can combine to further tap into efficiency and revenue opportunities. Restaurants are buying space in ghost kitchens—off-site facilities dedicated to preparing meals for online restaurant orders. As grocers' prepared food businesses grow and go online, they could eventually share these spaces. She noted grocers could also rent space to restaurants in internal kitchens or store back-of-house areas, and even cross-promote delivery between retail and restaurant brands.

As retailers optimize sales areas and shift more online fulfillment to automated facilities, there may be more space for meal preparation.

"There could eventually be thousands of square feet of space where you can place such a central kitchen," Mezzenga said. "The key is to be as local as possible."

On a more philanthropic level, Mezzenga noted restaurants and grocers can collaborate to reuse food waste. This concept is already popular in Europe. In Amsterdam, three employees of Albert Heijn, part of Ahold Delhaize, founded Instock—a restaurant chain that creates dishes using surplus ingredients collected from stores across the Netherlands. In Helsinki, Loop Restaurant creates dishes from surplus food collected from stores and farmers markets.

"They use food that would otherwise be discarded to inspire their menus," Mezzenga said.

Judging by some recent collaborations, there's also room for menu collaboration. Starting in December, Whole Foods will offer prepared Hanukkah meals designed by local chef Michael Solomonov, founder of Philadelphia's award-winning restaurant Zahav. The meals include dishes like chicken schnitzel with apple amba sauce, serve eight people, and cost $140. Some dishes will also be available at Whole Foods' hot food bar.

Over the past few years, online grocer Peapod has launched meal kits in partnership with popular Midwest restaurants, including Big Bowl and Wildfire, as well as chefs like Chicago's Stephanie Izard. According to Peapod spokesperson Nicole Friedman, Peapod is learning from the performance of items like BBQ bison sliders and Yucatan fish tacos. Meanwhile, restaurants benefit from increased revenue and exposure.

"Restaurants win in multiple ways, and we simply facilitate connections with customers through solutions," Friedman told Grocery Dive in an email.

Although shared kitchens and digital storefronts sound like a recipe for next-generation retail, there are also many ways partnerships can go wrong. For example, merging meal preparation facilities requires sorting out regulatory and food safety protocols, not to mention different standards for ingredient segregation and receiving, Mezzenga said.

"Kroger follows one standard, and this restaurant follows another, so it raises a host of issues."

Despite the risks, Brown said restaurants and retailers still need to think creatively about ways to partner. Companies should be willing to try new concepts and accept failure. Brown said he didn't expect Saladworks to perform so well in his two stores serving many low-income customers.

"If you're going to create the ultimate restaurant experience for consumers, I think it takes some experimentation, and I imagine the more you do it, the more you learn what works and what doesn't," he said.

Julie Littman and Jessica Dumont contributed to this article.