26 Mar Ghost Kitchens Are Taking Over the Foodservice Industry: Here’s What You Need to Know
The restaurant industry is one of those most devastated by Covid-19. Thousands of restaurants have already permanently closed, and those that haven’t are left struggling to cover the rent with reduced revenue flows.
It is easy to conclude that, with the growing demand for online food delivery, high real-estate costs, and thinning margins, the small restaurant model will become unviable in a post-Covid-19 world. Luckily, that’s not the case.
Amid social lockdowns throughout 2020 and a soaring food delivery market, a new kind of restaurant was thriving: Ghost Kitchens. While still a relatively new concept, ghost kitchens are gaining momentum by the minute. During the pandemic, literally, every restaurant left standing has either added a food delivery arm or became itself a ghost kitchen overnight.
Ghost kitchens allow restaurants to turn the explosive growth in online food delivery into a business opportunity. And it is exploding. According to UBS Group, food delivery worldwide will become a $365 billion market by 2030; and these were pre-Covid-19 predictions.
In what is quickly becoming one of the leading foodservice trends of 2021, more ghost kitchens are popping up in major cities around the US every day. This phenomenon drives the competition higher in an already dizzyingly volatile food space.
In this Ghost Kitchen 101 series we take you through everything you need to know about ghost kitchens and how you can use this model to rebuild and grow your business.
Table of Contents
What Is a Ghost Kitchen?
Ghost kitchens, also known as cloud kitchens, virtual restaurants, dark kitchens, or satellite restaurants, are delivery-only restaurants with no physical space for dine-in. Looking into one of these, you’ll find all your typical back of house buildout of ovens, ranges, and refrigerators, as well as a chef, line cooks, and dishwashers. What is missing are diners.
Without the standard brick and mortar storefront, ghost kitchens are stripped-down commercial cooking spaces that cater exclusively to online ordering. They typically partner with app-based, third-party food delivery services like GrubHub, DoorDash, and UberEats to bring in customers and fulfill orders. However, some operate their own delivery service to save on the hefty commissions these delivery platforms charge.
There are different kinds of ghost kitchens. Some operate as a stand-alone kitchen, others are existing restaurant kitchens turned virtual, yet others are specially-made facilities housing multiple operations. Either way, they are all tech-oriented, optimized for delivery, and designed to keep food and labor costs down while maximizing profit.
Why Are Virtual Restaurants So Popular Now?
Maintain brand flexibility while dominating multiple food categories
Perhaps the most remarkable thing about ghost kitchens is that they allow restaurants the flexibility to launch more than one brand under the same kitchen infrastructure. By doing so, multi-brand cloud kitchens can increase their chance of capturing a customer looking for a specific dish.
Most customers prefer to order certain dishes from a restaurant because they think it specializes in that particular cuisine. For a restaurateur, rather than introducing new items to existing menus, it is often better to start a new brand. This way, instead of a vast menu where some items might get lost, those items can be broken out and highlighted as brands of their own.
Keep costs to a minimum
Ghost kitchens allow restaurants to keep costs at a minimum. The barrier for entry is far lower for ghost kitchens compared with traditional restaurants. For existing restaurants, too, ghost kitchens are a cost-effective way to expand into new markets because they do not require the financial output a conventional brick-and-mortar store requires.
Cloud kitchens are better suited for on-demand labor and don’t have to worry about service staff at all. The fact that ghost kitchens do not include any front-of-house operations means that staffing costs and compliance with ever-stricter labor laws are made much easier and less costly.
Real estate costs are also cut down significantly in this model. Besides the kitchen itself, virtual restaurants do not need floor space for seating, and they do not need to pay high rents for storefronts with high foot traffic in prime locations.
Ghost kitchens typically run very efficiently. They use custom-built spaces, and they’re built with delivery in mind. Indeed, the kitchen itself is designed to prioritize preparation speed and quick pickup by delivery drivers.
Those that operate several brands from the same kitchen often batch prep ingredients for the different menus. This practice also helps make smarter ordering and prep decisions and keep food waste to a minimum.
Operating times can be changed according to dynamic business needs with no negative impact on customer satisfaction. Because they are designed with tech in mind, cloud kitchens can optimize processes, ordering, and staff scheduling based on consumer behavior.
The same goes for seasonal menus, which can be adapted to suit demand and increase margins. They can be changed quickly and without the fear of losing loyal customers, allowing restaurants to take advantage of seasonal demands without enduring any downturn.
Access to real-time data
In virtual restaurants, as the name implies, every transaction is a digital transaction. If managed properly, these can amount to an impressive data cache. Data turned to insight can then inform future operational decisions.
Because cloud kitchens are uniquely tech-enabled and work closely with food delivery apps, they have invaluable access to user data and real-time adaptability. They can, for example, determine what types of foods to produce for specific neighborhoods and when the demand is likely to be most significant.
Sneak Peek into Part 2 of the Ghost Kitchen 101 Series
In our next chapter of the Ghost Kitchen 101 series, we’ll look at the different ghost kitchen types. We’ll discuss the challenges that come with operating a delivery-only virtual restaurant and how the suitable business model – and the right partner – can assist you in overcoming these barriers.
See you next time!
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