Blue Orbit Hospitality Consulting

Ghost Kitchens: How Are They Driving Growth in the Restaurant Industry

Michael Maxwell – Partner, Blue Orbit Restaurant Consulting

 

 

 

It would be an understatement to say that the COVID-19 pandemic has made things challenging for restaurants. Many restaurants were forced to close their doors permanently. Others shut down temporarily and shifted their focus to takeout and delivery. During this chaotic period, a phenomenon known as the ghost kitchen has become increasingly popular. This trend represents a pivoting period for restaurant owners to help them survive during these difficult times.

What is a Ghost Kitchen?

While Ghost Kitchen may sound like the name of a new reality show about haunted restaurants, it actually refers to restaurants that operate on a delivery-only basis.

Many restaurants had adopted this model during the pandemic when local regulations often banned in-restaurant dining. Even in places where indoor dining has resumed, regulations on social distancing make it difficult for smaller establishments to remain open.

What began out of necessity has sparked some creative new dining models that are likely to persist well beyond the pandemic. Customers have become accustomed to convenient takeout and delivery options using food-delivery apps such as Grubhub and UberEats. The growing popularity of ghost kitchens can be seen as the next step in this evolution. While indoor dining will always have its place, there is quite a bit of potential for the ghost kitchen dining model to grow even more.

The Rise of Food Delivery Apps

While food delivery has accelerated since the pandemic, customers were enthusiastically embracing it quite a bit sooner. Smartphone applications have helped drive this trend versus ordering through websites. Uber, Amazon, Grubhub, and other food delivery apps have expedited the movement of ghost kitchens. According to QSR magazine, the online food delivery app market is $16.6 billion. Even when customers have the option to dine out, busy people often prefer the convenience of delivery, especially when it only takes pressing a few keys on their phone.

The Gig Economy

Another factor supporting the rise of ghost kitchens is the growing number of gig workers. Drivers are needed to deliver all these meals. The gig economy is another rising trend boosted by the pandemic as many traditional jobs were lost. Statista projects that the gig economy will grow to $455.2 billion by 2023. Ghost kitchens have access to a large and growing population of gig workers to deliver meals.

Types of Ghost Kitchens

Ghost kitchen is a broad term for a restaurant without dining space. There are multiple varieties of ghost kitchens.

Pop-Up Kitchens

A pop-up or incubator kitchen is a section of a traditional restaurant dedicated to preparing food for deliveries. Most restaurants fitting this category are set up for traditional indoor dining but have switched to the delivery and online order model. However, we are now seeing startups that are created exclusively for deliveries. The latter can be more efficient as the owner doesn’t need as much space. At the same time, in the post-pandemic world, a restaurant can simultaneously offer indoor dining and deliveries.

Shared Kitchens

Another restaurant model is the shared kitchen, where two or more restaurants share space and prepare food for delivery. This type of arrangement is beneficial for existing restaurant owners who need to make changes as well as aspiring owners who want to open a restaurant without a huge investment. In addition to lower upfront costs, a shared space means lower rent. As restaurants often operate with tight margins, sharing space and equipment can give owners more breathing room.

Mobile Kitchens

Mobile smart kitchens are an interesting hybrid between food trucks and delivery services. Food trucks, of course, have really taken off over the last decade, especially in big cities such as Los Angeles, Austin, and New York. Rather than have customers come to the food truck, mobile kitchens deliver orders straight to your door. It’s worth noting that the mobile smart kitchen concept is not directly related to the pandemic as even most places under lockdown permit food trucks. A mobile kitchen does offer additional social distancing, which is certainly a perk for at-risk customers. However, it’s also a convenient service for hungry customers who don’t feel like going out and waiting in long lines at popular food trucks.

Dark Kitchens and Virtual Restaurants

Dark kitchens, also known as virtual restaurants, can be differentiated from ghost kitchens in that they aren’t housed in an actual restaurant (or delivery truck, as in the case of mobile kitchens). They are, instead, specially-created structures for delivering food. Many are pod-like structures that look more like a storage unit on the outside than a restaurant. This type of kitchen is popular in the UK, where companies such as Deliveroo are offering catering services from public locations such as parking lots.

Pros and Cons of Ghost Kitchens

Ghost kitchens have advantages as well as drawbacks, both for restaurant owners and customers.

Pros

  • Convenient for customers who prefer to have their food delivered.
  • Allows existing restaurants to adapt to changing conditions such as the pandemic.
  • Allows for a bigger budget for marketing and utilizing social media and word-of-mouth to drive awareness.
  • Lower startup costs for new restaurants. It requires less startup capital to rent space in a shared kitchen, for example, than to rent a traditional restaurant. Ghost kitchens also mean lower operating costs as you need less space, a smaller staff, and don’t need for tables, chairs, and decorations.

Cons (we couldn’t find too many)

  • Be prepared to have a portion of profit go to delivery services.
  • As ghost kitchens and virtual restaurants get more popular, there may be gaps in establishing safety standards and regulations. Thus, diners may feel less secure in ordering from a business whose health scores are not visible to the patron as traditional restaurants.

Looking for Guidance To Open a Ghost Kitchen?

The ghost kitchen concept holds exciting possibilities for current and aspiring restaurant owners. It’s a creative way to operate during the pandemic and also fits in nicely with the emerging trends of food delivery apps and food trucks.

If you are interested in opening your own ghost kitchen, it’s important to do ample research and learn as much as possible about details such as financing, location, necessary equipment, and more. Working with a consulting firm with expertise in this emerging sector helps you get off to a strong start. Blue Orbit is a national hospitality consulting team, providing creative solutions to restaurants, hotels, and real estate developers. To learn more about our services, contact us.