Operations

Can Ghost Kitchens Revive the Restaurant Industry?

The last time we wrote about ghost kitchens here at EMERGING was in March 2018. Although the concept (shared kitchens for rent) and outlook (wait and see) have not changed much, the cultural and culinary climate have. 

When ghost kitchens first started popping up in 2017, they were just one of the many business models to choose from – there were full service restaurants, food halls, food courts, food trucks, markets, etc. And for most entrepreneurs, brick and mortar restaurants were still the model of success.

Now, with the spread of the coronavirus pandemic, the food industry is facing an uncertain future. Meanwhile, the last few months have seen ghost kitchens grabbing major media headlines: Business Insider tells of six restaurants operating in one shared kitchen, while Forbes ties ghost kitchens to the rise of food delivery. Thrillist has even launched a Ghost Kitchen series that’s well into its first season.

There’s little doubt the way we approach and handle food is set to change. But will ghost kitchens be the safe haven we need in today’s uncertain food industry?   

Pared-down food production

Ghost kitchens are a professional food preparation and cooking space set up for delivery-only meals. They include all the essential equipment and facilities needed to take a dish from start to finish, just without the front of the house (i.e., dining area, entryway, bar). 

At its core, ghost kitchens (also referred to as cloud kitchens or virtual kitchens) offer a stripped down, streamlined means to food service. For a monthly membership fee, they allow businesses to launch or expand without a massive investment.

Some ghost kitchens sweeten the pot by providing additional service and support. Zuul Kitchens in New York, for example, takes care of dishwashing and delivery fulfillment. CloudKitchens, founded by former Uber CEO Travis Kalanick, integrates software to handle online orders and logistics.

With these conveniences at their fingertips, chefs and entrepreneurs are free to focus on the food. They can test out new concepts, widen their delivery to new locations, or even expand into multiple brands – all from a single location. 

Possibly the biggest benefit, however, is that all these opportunities are available whether the business is just starting out or already an established name. In the delivery space, where brands exist primarily online and in-app, the playing field is level for all. Everyone has a fair chance of capturing a customer’s attention. 

Moving to off-premise production

Ghost kitchens and the entire off-premise model deliver a vastly different experience, for restaurants and customers alike. Many things we associate with food service – ambiance, table setting, plating, etc. – are all gone. This leaves the decision between ordering from one restaurant and the next a matter of brand recognition and trust. 

All restaurants will have to compete for that digital real estate on delivery apps. Rather than spending on interiors and uniforms, more effort will be spent on building a website and social media presence and engaging with customers online.

Another key consideration is location. Although ghost kitchens eliminate the need for a traditional brick and mortar, they are still bound to delivery within a certain radius. 

Look for a facility in a central area, and determine if your menu offers something new to the surrounding market. Do you offer the same cuisine as 10 other providers in your area? Are your dishes too expensive for the residents in the neighborhood? 

Not only will the right ghost kitchen offer more potential customers, it will also minimize food transit and wait times. 

Food supply and demand

As sheltering in place continues during the COVID-19 pandemic, we’ve seen an acceleration in the already growing sector of delivery and takeout. 

Online statistics portal Statista notes that in 2015, the total food delivery expenditure in the US was about $30 billion, out of which $4 billion was from online delivery sales. About 20% of consumers were having food delivered at least once a week. 

In 2020, online food delivery revenue is estimated at $23,991 million. This is further expected to grow at an annual rate of 5.1%, reaching a total $29,222 million by 2024.

Consumers are searching for food delivery, and providers are looking for a crowd-free place to operate – ghost kitchens emerge as the perfect solution. Without a space for diners to line up or linger, they remain one of the safest spaces for food production at the moment. 

These days, off-premise facilities are in high demand. Relatively low cost and low barrier to entry, many ghost kitchens actually now have a waitlist.

This opportunity has caught the eye of keen investors. Two California-based ghost kitchen chains, Virtual Kitchen Co. and Kitchen United, have recently received backing from top venture capital firms.

Last February, Dubai-based Kitopi raised $60 million to open 50 cloud kitchen locations in the US and 100 around the globe by the end of 2020. Then in March, Miami-based Reef Technology secured the largest ghost kitchen investment to date – a whopping $900 million to transform parking garages into on-demand food delivery hubs. 

Popular food delivery apps, such as Uber Eats, Grubhub, and DoorDash, are expanding into the virtual kitchen space, as well.

Future of food service

Ghost kitchens aren’t new to the industry. But these past months have ushered in a change in what it means to operate as a restaurant. There will be a shift in how food is prepared and served, and ghost kitchens now offer one of the few available options to safely cater to customers. 

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