The unicorn, which has opened hundreds of pandemic-era “ghost kitchens” across the country, plans to lay off more than 50 employees in the New York City area and shift to grocery delivery as the meal-prepared model sees a steep decline.
Leaf Technology, a SoftBank-backed company that was once valued at $1 billion, filed a WARN notice with the state Department of Labor earlier this month and announced plans to lay off 53 employees at three locations in late September, according to government filings.
The move is part of a larger shift the Miami-based company has been quietly making over the past 18 months away from ghost kitchens and toward micro-fulfillment and technology services, a senior executive told The Washington Post.
The three New York stores affected by the cuts are on West 24th Street in Manhattan, Riverhead on Long Island and in Fresh Direct’s sprawling parking lot in the Bronx.
Leaf will own the facilities and continue to provide grocery delivery services, said the executive, who asked not to be identified because the plans have not yet been announced.
“We receive products from FreshDirect warehouses, store them in our own facilities and then distribute them to FreshDirect customers,” the source said.
“We do a lot of deliveries in the Hamptons and Manhattan using vans and electric cargo bikes,” he added.
Leaf, founded by Ali Ojalbo and Ummet Teki, will lease the facility to a new owner-operator and provide support services, executives said.
In a statement to The Washington Post, FreshDirect said it is “working with several local vendors, including Leaf and MetroSpeedy, to help fulfill smaller orders,” adding that despite the looming job cuts, there have been no discussions about “discontinuing service.”
Leaf started as Park Jockey in 2013 as a company providing software and management services for parking lots and changed its name in 2019.
Leaf secured $700 million in funding from SoftBank and others in November 2020, at the peak of the pandemic, and set up so-called “container” kitchens in trailers that prepare restaurant food exclusively for delivery.
The ghost kitchen industry has boomed during COVID as lockdowns have led to a surge in demand for takeout and delivery services. KFC and Chick-fil-A have begun experimenting with the concept, and several fast-food chains have partnered with ghost kitchen operators.
By late 2022, Reef had more than 300 similar vessels in the U.S. and overseas.
But as the pandemic eased, the need for ghost kitchens faded, and many closed, were acquired or changed their strategies.
Only a handful are still open, including CloudKitchens, run by Travis Kalanick, the former CEO and co-founder of Uber, which has received billions of dollars in funding from SoftBank.
Cloud Kitchens faces a number of challenges, including lawsuits alleging misleading business practices, violations of health department rules and terminations.
Leaf has also struggled to turn around its business operations over the past two years.
The company temporarily closed about a third of its food trailers in 2022 and laid off 5% of its workforce after explosions in some kitchens were caused by propane burners.
Officials in many cities, including New York, Houston, Chicago and Philadelphia, have ordered Leaf to temporarily shut down its trailers for violating regulations, including operating without a permit. Wall Street Journal report.
Last year, Reef inked deals with food and beverage providers at airports and stadiums, including Miami’s Hard Rock Stadium and Raleigh-Durham International Airport, allowing travelers to use kiosks or their mobile phones to order food from about a dozen restaurant brands supported by Reef, the company said in a statement. Restaurant Business Report.
