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Venture Capital

Tech Veteran Departs Silicon Valley’s Grilled Cheese Play

The Melt founder is handing over the keys to a longtime restaurateur.

One of the most outlandish ideas to spring from Silicon Valley’s most recent tech boom was an attempt to disrupt the $200 billion a year U.S. fast-food industry with grilled cheese and soup. The Melt, a San Francisco-based restaurant chain backed by Sequoia Capital, aimed to combine smartphone pre-ordering and high-tech ovens with a dining experience that evoked warm memories of elementary school lunches.

While the five-year-old chain now has 20 restaurants in California, Colorado and Texas, nostalgia and new technology hasn’t quite offered the competitive edge its backers hoped. In late 2014, it added more standard fast-food fare, like cheeseburgers and fries, to its menu.

Now Jonathan Kaplan, its 47-year-old founder and chief executive officer who previously created the innovative Flip camcorder of the mid 2000s, is leaving the helm of the company. He will be replaced as CEO by Ralph Bower, former head of Pei Wei, P.F. Chang’s fast-casual brand. “Although technology will be an important component of our business, it won’t be the reason why people come to the Melt,” says Kaplan, who will remain chairman of the board. “Ralph is a more conventional restaurant executive who knows how to operate a restaurant chain.”

Jonathan Kaplan at The Melt in San Francisco on Aug. 25, 2011.
Jonathan Kaplan at The Melt in San Francisco on Aug. 25, 2011.
Photographer: Eric Risberg/AP Photo

While it attracts long lunch lines at many of its outposts, the Melt was emblematic of a certain kind of Silicon Valley brashness. Startups here aim to use technology to revolutionize everything from food delivery to supermarket mayonnaise. Kaplan won the support of top VCs for his fast-food vision after selling Pure Digital Technologies, the company that made the Flip camera, to Cisco Systems Inc. in 2009 for $590 million. With the Melt, he raised enough venture capital to open 50 restaurants, or around $25 million, from the same financiers who backed EBay Inc. and Airbnb Inc.

But sometimes technology can’t change the impetuous whims that govern people’s appetites. Kaplan says he made a few incorrect assumptions with the Melt. The company partnered first with Electrolux AB, then with Nemco Food Equipment Ltd., to modify panini grills to make grilled cheese. It also was among the first chains to introduce pre-ordering on smartphones and allow customers to pick up their food and leave without waiting in line.

Those innovations were either widely copied or too insignificant to offer an advantage. “We originally thought that technology would provide us with an exclusive that would prevent others from making grilled cheese as good or fast or as inexpensively,” Kaplan says. “The reality is that while it was great, it didn’t motivate people to have a grilled cheese.”

Burgers and fries have apparently powered the Melt’s recent growth. Kaplan says the company’s sales are now increasing annually by double digits. Its goal is to establish 100 locations and reach $150 million in sales before holding an initial public offering.

Getting there will fall on Bower, who started at the Melt last week. Bower, 53, was previously the U.S. president of Popeyes Louisiana Kitchen before joining P.F. Chang’s. Meanwhile, Kaplan will devote himself full-time to the election of Hillary Clinton, though he is not taking a formal role in the campaign.

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