In a strategic move reflecting the challenges faced by tech and real estate companies, Travis Kalanick’s City Storage Systems (CSS), the ghost kitchen venture, has implemented job cuts, affecting an undisclosed number of its 4,300-plus employees. The announcement comes amid a difficult market environment characterized by inflation, higher interest rates, and broader headwinds.
CSS, led by Uber co-founder Travis Kalanick, has been at the forefront of redefining the food industry, mirroring Kalanick’s disruptive impact on the global taxi sector through Uber. The CSS portfolio includes CloudKitchens, focused on transforming US and Canada warehouses into ghost kitchens for various restaurateurs, from small businesses to major players like Chik-fil-A. Another CSS arm, Otter, specializes in software solutions for both ghost kitchens and traditional restaurants. Notably, in fall 2021, CSS secured $850 million in funding from investors, including Microsoft, valuing the venture at $15 billion.
While specific details about the number of affected employees remain undisclosed, reports indicate that staff learned about the job cuts through scheduled meetings with human resources. An all-hands meeting was subsequently convened to address the changes and challenges faced by the company.
CSS’s CloudKitchens division, which embarked on an ambitious warehouse acquisition spree between 2019 and 2021, has encountered hurdles as it brings facilities online. Reports suggest instances of high customer churn, with some operators expressing concerns about cleanliness, safety, and technical support in the kitchens provided by CloudKitchens.
Despite owning more than 70 active locations across the US, several sites reportedly remain underutilized, and at least 10 have been listed for sale or have changed ownership over the past year. The real estate team has witnessed reductions, transitioning from acquisition-focused groups to teams concentrating on renovations and asset management.
On the software front, CSS’s Otter has faced operational challenges, with customers citing issues such as late deliveries, glitches, frequent disconnections, and access problems. Otter, originally designed to aggregate orders from various delivery platforms, has expanded its offerings to include a point-of-sale system named Mercury, competing with industry players like Toast. The company is now emphasizing enterprise sales over catering to small restaurants.
CSS and CloudKitchens have not provided additional comments or responses to inquiries, leaving industry observers curious about the strategies the company will employ to navigate the evolving market dynamics.