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- Reef Technology bills itself as the largest operator of delivery restaurants in North America.
- But as it grows rapidly, the startup has been told to shut down for violating city and public health codes in various US cities.
- Reef has defended its run-ins with health inspectors as a byproduct of its unique business model.
Reef Technology’s network of parking-lot-based ghost kitchens, which make food for chains like Wendy’s, Popeyes, and Burger King, has run afoul of food-safety inspections across multiple cities in the US, Insider has learned.
While many restaurants are cited with food-safety violations, Reef’s rapid growth seems to have pushed the startup to shirk some basic rules of permitting and cooking and serving food, such as obtaining licenses to operate the company’s mobile kitchens, according to former employees and health inspection records. Insider found violations in Chicago, Baltimore, Detroit, and Philadelphia and has previously found violations in New York City and Houston.
Several former Reef area directors and managers have told Insider that Reef plays fast and loose with city regulations as it seeks to quickly add hundreds of ghost kitchens across the US and globally. The former employees’ identities are known to Insider, but they spoke on condition of anonymity for fear of professional repercussions.
Reef described their run-ins with health departments as part of doing business as an innovative startup.
“We’re going to continue to face those challenges by doing the right thing,” Reef president Michael Beacham said when asked about the challenges the company has faced in various cities during a recent interview with Insider. There’s a “healthy bit of friction” in the “intersection of innovation and regulation,” he said. “We always come into a market, meeting with the local regulatory authorities and trying to find a way to operate within the guidelines. Sometimes it always doesn’t fit neatly because we’re not a food truck. And we’re not a brick and mortar.”
A Reef spokesperson said the company has worked with cities to adopt regulations to their business model.
“Regulations and compliance are an ongoing conversation in every city because we’re creating something new. We continue to adapt our model, follow guidance from local partners, and work cooperatively with local regulatory agencies to understand the best framework for our delivery-only model.”
Globally, Reef operates 320 food trailers that prepare food for delivery through licensing agreements with national chains, independent restaurants, and celebrity-backed virtual brands like Guy Fieri’s Flavortown Kitchen. The ghost-kitchen operator has raised $700 million from SoftBank, among other venture-capital funds, and has called itself “the fastest-growing restaurant company on the planet.”
‘There’s no tolerance for noes’
While many restaurants and food trucks receive violations, Reef has a pattern of flouting city rules to serve the fast-expanding startup’s need for growth, according to city records and conversations with former employees.
“There’s no tolerance for noes or can’ts,” said a former area manager who was employed during Reef’s fast-paced pandemic growth in 2020. “We ruined a lot of relationships early because instead of going to municipalities … we would just go and do it,” the person said. “So we would go onto someone else’s property, put up a vessel, and just operate it until they found out and came and demanded that we move it.”
In New York City, Houston, Baltimore, and Detroit, citations from local health departments showed Reef was forced to cease operations after operating without proper permits.
In addition to Reef’s lacking permits, health departments cited issues with potable water.
Of 27 inspections that Chicago’s department of health conducted from July 2019 to October 12, 2021, Reef failed six inspections “resulting in immediate shutdowns.” Among the multiple food-safety violations listed in Chicago public-inspection records was “inadequate water source for clean potable water.”
A similar violation was cited in Philadelphia.
James Garrow, the communications director of the Philadelphia Department of Public Health, told Insider the city shut down two Reef trailers for various violations in September and October. According to an inspection report, violations included the use of unapproved “external water tanks on the food trailer,” lack of an on-site employee certified in food safety, and a lack of hot water at the hand-washing station.
A Reef spokesperson attributes citations about potable water to confusion over the company’s business model.
“Unlike traditional food trucks, water is not involved in on-site cooking nor the preparation of food within our kitchen vessels,” a spokesperson wrote in a statement. “Reef Kitchens vessels are for cooking, storage, and operations. Whereas the actual food preparation and handling of food is carried out in separate fully compliant brick-and-mortar commissaries. This is the case for all vessels in every market where we operate.”
In Baltimore, a food trailer was shut down on August 17 for “operating without a permit,” health officials told Insider. Baltimore health officials told Insider that Reef purchased a permit on August 18. In Detroit, Reef was issued a cease-and-desist order for its unlicensed vehicles on July 27, according to the city’s health department.
Insider previously reported Reef’s ghost mobile kitchen operation ceased operations in New York City when health department officials caught the company operating food trailers without a permit to prepare and sell food in the city. Over the summer in Houston, some Reef food trailers were also shut down for having an “illegal” operation, inspection records show.
“In Houston, we successfully resolved the administrative permitting issues you referenced months ago. In New York City, Reef continues to operate fully permitted brick-and-mortar kitchens, and we are working closely with local officials to develop an appropriate permitting framework for our vessels,” a Reef spokesperson wrote in a statement.
‘Mad rush to open more’
Reef hasn’t tangled with inspectors in every city. Health authorities in Dallas; San Antonio; Vancouver, British Columbia; and Chattanooga, Tennessee, told Insider that Reef is in compliance and does not have any record of violations.
Reef trailers operating in Los Angeles County are under compliance, after previously being cited “for violations of the California Retail Food Code,” the county’s health agency told Insider in an email.
But as it expands rapidly, insiders say navigating various city rules has been a pain point for the startup.
“There wasn’t anyone that was really serious about solving the issues that existed. It was just this mad rush to open more,” the former area manager told Insider.
The company recently announced plans to expand its Wendy’s partnership to 700 delivery kitchens over the next five years and the full acquisition of iKcon Restaurant LLC, which would push the startup into the Middle East and North Africa. Last week, the DJ and producer DJ Khaled announced one of the largest restaurant launches with plans to open 150 locations of his chicken-wing concept in partnership with Reef.
Deals with top brands pushed Reef to open at all costs, the former operations manager said.
It was routine for corporate leaders to demand trailers open quickly even if it meant taking shortcuts, the former operations manager said.
“Maybe training wasn’t fully completed,” the former Reef employee said. “Maybe permits weren’t fully implemented. Maybe lots weren’t really ready to use.”
Category: Restaurant News