Food delivery is on the rise in America. With the options of apps and websites, long gone are the days when you would have to pick up a phone to place an order. More Americans are opting to eat their food at home as digital ordering and delivery have grown over 300% faster than dine-in customers since 2014.
WHAT WE’LL COVER:
The delivery revolution – mixed with the COVID19 pandemic forcing many restaurants to reconsider their business model do to the loss of dine-in revenue – has led to an entirely new type of model for restaurant and food entrepreneurs – the ghost kitchen.
A ghost kitchen is a facility where chefs or virtual restaurants rent out kitchen space to produce their food menu that is only available for delivery. Think of a ghost kitchen as the restaurant equivalent of a co-working space. There are no tables, no guests.
A ghost kitchen can be used by a completely virtual restaurant brand that only delivers – or by chain restaurants who want to separate out their delivery and on-site orders or create a new virtual brand.
Since COVID-19 for example, major chain restaurants have cut operating costs down by closing physical brick-and-mortar locations and reopened with in-house or third-party ghost kitchens that are delivery only. Those include Qdoba, Chili’s, Applebees, Fazolis, Chuck E. Cheese, Wendy’s, and more.
A virtual brand is a food-concept similar to a restaurant but focuses exclusively on delivery orders placed through third-party delivery services such as UberEats, DoorDash, and 2ndKitchen and on its online website.
Additionally, some physical restaurants will open up virtual brands to drive additional orders and get the most use out of their kitchen. For example, Chuck E. Cheese created Pasqually’s Pizza & Wings to capture more orders from non-children audience groups on apps such as Groupon and UberEats. Recently the brand said Pasqually’s represents 10% of the entire company’s revenue, with 421 of 470 locations selling the brand.
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Suppose you don’t want to go all out and create an entire virtual brand, but you still want to get in on the delivery hype. A virtual restaurant might be more suited to your needs.
A virtual restaurant allows you to operate under the same restaurant identity, but the only difference is you have exclusive menu items and specials that you only offered for delivery.
Perhaps your restaurant is more upscale. You cater to elegant evening dinners or a fancy business lunch. You might realize that there’s a market for a smaller (and cheaper) lunch-sized portion of your meals. By opening a virtual restaurant, you can have those lunch portions delivered directly to your customers in their offices and homes without affecting your day to day operations.
Many popular restaurants are toying with the idea of moving towards ghost kitchens, and some have already started. Chick-fil-a has already partnered with the leading ghost kitchen provider, and Wendy’s has been toying with the approach as well. The midwestern supermarket chain Kroger has partnered with ClusterTruck – an Indianapolis-based ghost kitchen – to expand their delivery services as well.
As delivery continues to increase in demand, and services like Grubhub and UberEats take off, more popular brands will be turning to ghost kitchens to help them meet needs.
Common Ghost Kitchen Use Cases:
- Traditional restaurants who are have high delivery orders and need to expand their kitchen operations.
- Traditional restaurants who are launching new virtual brands that are delivery-only to create new revenue channels.
- New virtual restaurants that are launch on third-party delivery platforms and will be delivery only.
- Chefs looking to expand their operations and get access to cutting-edge kitchen tech, without the overhead costs and commitment.
For restaurants looking to expand their current delivery footprint – or for new virtual brands launching a delivery-only business, there are many benefits to using a ghost kitchen.
1. Online orders increase in revenue
As mentioned above, the demand for delivery is booming. Over half of restaurant orders from Millennials are for either take-out or delivery. If you’re not offering take-out as part of your business, that’s a huge missed opportunity. Being able to provide delivery services
2. No need for a physical dining room
A physical dining room will come with its own set of problems and expenses. If you were to open a physical dining room, you’d have to fill it with seats, tables, decor, and other things that typically wouldn’t be top of mind. You would then need staff to clean the area and engage with customers. By not having a physical dining room, you can focus more on the quality of the food and less on the atmosphere of your space.
Without a dining room to worry about, you can instead focus on getting more employees to deliver your food. As delivery is the backbone of your business, you’ll want your employees focused on what drives your revenue. s
3. Restaurants can be more agile
A dark kitchen will help your restaurant keep up with the influx of your delivery orders. At a typical restaurant, chefs cook delivery and dine-in meals in the same kitchen. This process can be confusing as they might plate some carry out orders. There’s more staff in the kitchen as an employee will be gathering to-go orders while others are preparing meals for the in-house customers.
By using a ghost kitchen, your kitchen staff can focus on what’s there. Fewer people in the kitchen means that fewer people are getting in the way. Your team can concentrate and deliver exceptional service to dine-in patrons.
4. Short-term commitment
When you use a ghost kitchen, you can change your menu items on the fly. This flexibility will give you the option to test different menu items. If you’re trying out a few different options to see what would work best, you don’t have to worry about printing out new menus or updating your signage boards. Update the description on your website or app, and you’re good to go. You can make these updates in a matter of minutes compared to the time it would take for printing.
Similarly, you might be toying with the idea of opening up a brick and mortar store. A ghost kitchen will give you the perfect testing ground to see if there is a demand for your product before you commit full-on. Sure, those Minnesota style fish tacos might sound good on paper, but this will allow you to see if they play out as well as you think.
5. Cutting-edge technology
As technology continues to advance, food ordering progresses as well. Many of the companies that operate ghost kitchens tend to fall in the tech category. Their operations rely on excellent customer experience – that’s the experience from the restaurant they’re cooking for and the client that receives the food. To keep everyone happy, these companies will continuously be working to improve the technologies that they use.
1. No dining room
The entire concept of a ghost kitchen is to not have a physical location that a chef or brand is tied down to. While the benefits of not having a dining room have been previously stated, it also means that the virtual brands, chains, and chefs using dark kitchens will still need figure out how they will serve their food creations to their customers.
2. Fees of third-party apps
A downside of turning towards ghost and dark kitchens is the fees that you’ll get from the use of third-party apps. Each of the companies that you partner with will want to take their fair share. Costs can vary by city, but the more popular companies like Grubhub, Uber Eats, and DoorDash can take up to thirty percent of the final customer check. These fees can put a serious ding in your profits.
3. Gentrification of communities
Ghost kitchens also have the potential to impact communities. As more real estate developers begin to look for locations where they can build these dark kitchens, run-down buildings seem like a perfect opportunity to start from scratch.
However, as these companies begin to take over these neighborhoods, they need to realize that revitalization doesn’t happen in a vacuum. As the business starts to grow and improve, it will attract other companies as well. Development of the neighborhood will start, and soon the lower-income residents of the communities will be priced out of their homes.
As ghost kitchens have emerged as an option for delivery, entire companies have emerged from the need.
- CloudKitchens is a ghost kitchen company with substantial investment from former Uber CEO Travis Kalanik. The company totes itself as offering a smart kitchen for delivery-only restaurants.
- Kitchen United is a Pasadena-based dark kitchen that has attracted the attention of Google Ventures, which has invested $10 million into the company. With eight ghost kitchens throughout the united states, the company plans to expand to fifteen by the end of 2020.
- UberEats opened its first ghost kitchen in 2019 in Paris. They have since opened more kitchens throughout Europe – but have yet to expand its dark kitchen service in the US.
- Zuul Kitchens is a ghost kitchen in New York City’s SoHo neighborhood. As of 2019, they’ve opened nine separate kitchens.
Is a Ghost Kitchen Right for You?
Whether you’re wanting to start delivery or find a way to streamline your operations, a ghost kitchen might be just the thing you need.
So next time you place your order for delivery, remember that while the food is still the same, it might have been cooked in an entirely separate kitchen from the restaurant that took your order. In some cases, there might not be a restaurant at all.
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