What is Ghost Kitchen ?
To say 2020 was a bad year for the restaurant industry would be an understatement. The government imposed COVID-19 restrictions forced a lot of restaurants, including some well-established brands, to shut their doors forever. However, out of this disaster arose a new concept- delivery restaurants, operating out of "ghost kitchens."
A ghost kitchen, aka a dark kitchen, is a food preparation and cooking facility devoted to preparing delivery-only meals. They have no dining rooms, no counters, no tables, no drive-thru. Customers place their orders online and the dishes are delivered using Uber Eats, DoorDash, and other third-party delivery platforms.
A single ghost kitchen may be home to a number of different virtual restaurant brands. While some are independent operations, some ghost kitchens are associated with brick mortar establishments. It's not unusual for a traditional restaurant to have its own ghost kitchen brands.
Dark kitchens first began to sprout up in response to the growing demand for delivery meals. Third-party apps were making it easier and less expensive for restaurants to have their meals delivered. A delivery-only model also allowed restaurant managers to set up operations outside of high rent areas.
Ghost kitchens do best in high population urban centers like Los Angeles or New York City. That's because these places have a big enough customer base to make their delivery-only operations possible. Urban areas also have a reliable food delivery system, with an adequate pool of independent delivery drivers.
In today's market, ghost kitchens offer many advantages over traditional restaurants. Their relatively low overhead makes them an ideal start-up. And established restaurants can use a ghost kitchen to experiment with new menu items and services.
Why a Ghost Kitchen?:
Ghost kitchens and takeout delivery services have been around for a while. However, it took the COVID-19 related restaurant dining room closures for the ghost kitchen concept to really take off. While dine-in restaurants are still recovering from the effects of COVID-19; there are now more virtual restaurants than ever.
Ghost kitchens are large food preparation facilities or kitchens. Multiple restaurant brands rent kitchen spaces within the ghost kitchen facility. This approach greatly reduces operating costs, allowing brands to focus on food production and marketing.
There are many challenges to running a ghost kitchen. With some ghost kitchens hosting up to fifty virtual restaurants, efficiency is key to the ghost kitchen concept. This means ghost kitchens have to streamline and optimize their operations to keep up with demand.
Design is important to making the ghost kitchen concept work. Each individual kitchen space in a ghost kitchen comes equipped with several basic amenities, such as refrigerators and freezers. It's laid out in such a way that everything is easily accessible and within arm's reach.
Still, the costs of renting out space in a ghost kitchen are much less than in a traditional restaurant. While ghost kitchens charge their clients rent, it's nothing compared to the real estate costs most restaurant. And since it's delviery only, wait and service staff aren't needed.
Most ghost kitchen facilities provide their tenants with a number of services in addition to kitchen space. These services can include marketing support, delviery platforms, equipment maintenance, and cleaning. This allows their residents to focus on the important job- preparing meals.
Ghost kitchens are expanding like never before. Why are so many new startups and established brands adapting the ghost kitchen model? Well, ghost kitchens provide many benefits not available to brick and mortar eateries.
Focusing solely on the preparation of delivery menu items doesn't require as much space as a dining restaurant. No dining rooms, bars, waiting areas, etc. are needed. Kitchen space can be maximized for food prep and output.
Without the need for space, a restaurant doesn't need a lot of real estates. By focusing on delivery-only options, location isn't an important consideration for a ghost restaurant. This reduces operating costs greatly, especially in high-rent areas.
Since virtual restaurant brands don't cater to dine-in customers, they don't need a whole lot of staff. No wait staff, bar staff, etc. is needed. This saves a lot on labor costs.
Operating dark kitchens allow traditional restaurant brands to expand their digital business. Virtual brands can allow them to reach a very specific segment of their target market. Using different virtual brands also allows them to increase their exposure and presence on third-party delivery apps.
A virtual kitchen allows restaurants to utilize their inventories more effectively. Multiple brands using the same space can strategically create items that allow them to share and reuse ingredients. This leads to less food waste and higher profits.
A ghost kitchen model allows restaurants to experiment with different menu items. These menu items can be designed to reach a specific niche market. A virtual restaurant could serve a niche in a way that might not be profitable for a storefront restaurant.
We've looked at the benefits provided by the Ghost Kitchen concept. But what are some of the pros to going the ghost kitchen route as opposed to a more traditional restaurant approach? Sure it's cheaper, but what are some of the other pros to running a virtual restaurant out of a ghost kitchen?
If you're a traditional restaurant with an established brand, there can be many advantages to starting your own virtual brand. Depending on how you integrate your operations, you may not need to hire any additional employees. Plus, the new menu items will give your staff an opportunity to expand their culinary skills.
Online menus make it easy to add new items or remove ones that aren't performing to expectation. In addition, you can try out different menu items and try your hand at the latest food trends. This can allow you to reach different target market segments without changing your restaurant's theme, decor, etc.
For startup entrepreneurs, there's a whole different set of advantages to using a ghost kitchen. Once again, cost is a factor; it's a lot cheaper to operate just a kitchen rather than an entire restaurant. Starting a restaurant is risky enough without the extra burdens of leases, property taxes, and labor costs.
Ghost kitchens can be run with a minimum of staff. Some ghost kitchen virtual restaurants are even single-person operations. Third party delivery apps provide owners with a medium in which they can market themselves without spending a lot of money.
We've looked at the benefits ghost kitchens have to offer. We've looked at the advantages ghost kitchens provide to traditional restaurants and startups. But it can't all be perfect, right?
Like any business venture, there are risks to running a virtual restaurant out of a ghost kitchen. There can be cons to setting up a ghost kitchen operation. But do the disadvantages outweigh the advantages?
For an established restaurant, there's the risk that the ghost kitchen menu items won't sell as anticipated. Your existing staff may not be able to handle the additional workload. You may have to train staff or hire new staff to prepare certain dishes.
Another problem these operations often encounter is problems with food deliveries. The restaurant has little control over what happens once the food leaves the kitchen. Depending on the delivery person, orders may be delivered late, to the wrong address, or not at all.
If you're a startup, you'll have to work hard to establish your brand. You won't have the opportunity to interact with your regular customers. Your target market will be limited to internet sales.
Startups have the same lack of control over the delivery process as bigger, established brands. However, bad reviews for wrong, late, or lost deliveries can do significant damage to a startup virtual restaurant. In addition, some menu items may look great when they leave but arrive in a not-so-great condition.
There are cons to running a ghost kitchen virtual restaurant, no matter what your level of business experience. It's important to have a realistic business plan in place before you get started. That way your pros will outweigh the cons.
Without a doubt, ghost kitchens are gaining in popularity. Their influence is being felt throughout the entire restaurant industry. What are some of the ways ghost kitchens are affecting the restaurant industry?
Take-out delivery dining has been around for years. So have ghost kitchens, which were shady outfits used by established brands to avoid taxes and regulations. It took the COVID-19 pandemic for restaurant managers and investors to begin to realize the value of delivery-only brands.
Many traditional restaurant chains are embracing the take-out delivery concept. For some, the extra income from delivery orders has allowed them to survive the worst of the pandemic. Their main challenge is expanding their brands into the digital realm.
Boston Market and others have been experimenting with virtual chain restaurants. Operated out of a ghost kitchen, they offer take-out versions of their most popular offerings. These delivery-only virtual locations save the chains money on real estate and staffing costs.
Investor interest has been keen. The growing food delivery markets and the low overhead and start-up costs are particularly appealing. There are currently plans for chains of ghost kitchens to open up across the U.S.
Third-party food delivery apps are also having a big influence on the industry. Without these third-party services the ghost kitchen/virtual restaurant fad probably wouldn't be happening. More and more restaurants are becoming comfortable with trusting their delivery orders to these outside contractors.
Virtual restaurants and brands are changing the way restaurants market themselves as well. Restaurants used to focus their marketing resources on getting diners to actually visit their restaurant. Now the focus id shifting creating virtual brands aimed at very specific segments of the take-out dining market.
While the ghost kitchen concept is still evolving, it has definitely had a big impact on the restaurant industry. But how are they changing it? Are ghost kitchens here to stay, or are they just another fad?
Thanks to the COVID-19 pandemic, ghost kitchens and virtual take delivery-only restaurants are opening all across the country. Everyone wants to get in on the action, from startup entrepreneurs to some of the restaurant industry's top-selling brands. Some of these brands include Cracker Barrel, Boston Market, and Chik-fil-A.
Delivery-only menu items were catching on even before the pandemic hit. Demand for delivered meals was on the rise. So were the number of companies catering to this growing new market.
The rise of third-party app delivery companies like UberEats and DoorDash also changed the landscape. These services made it easier for restaurants to cater to the growing delivery-only dining market. One reason was that restaurants no longer had to hire their own delivery staff.
Some chains began experimenting with take-out-only "express" restaurants. Starbucks and Shake Shack are a few of the brands that are trying their hand at take-out-only dining. Others are attempting to build a chain of virtual restaurants to augment their brick-and-mortar operations.
The advantages presented by a ghost kitchen operation mean the concept is probably here to stay. The virtual restaurant industry is still evolving. As long as demand for take-out delivery continues to expand, so will the need for ghost kitchens.
- Several "restaurants" can be operated by a single kitchen.
- Restaurant managers have no control over the delivery process.
- You don't get the opportunity to interact with customers and get their feedback.
- It can be hard to establish a virtual brand.