Those attracted to the restaurant industry have always been a little “unconventional.” Despite thin margins and late nights, these unique individuals feel the call to use their creative culinary genius and build their dream diner or full-service mega-brand.
So, after a year marked by extreme ingenuity and unconventional innovation, it’s no wonder that nontraditional locations and concepts are making the news.
Wendy’s Goes to the Zoo
Wendy’s is digging into the unconventional to help drive growth and expand its global footprint to 8,000 units by 2025. Wendy’s Chief Development Officer Abigail Pringle shared that about 30% or 360 of their 1,200 new locations will be nontraditional units in the form of ghost kitchens, fuel and travel center places, and a Frosty Cart at the Tampa Zoo.
In 2020, Wendy’s partnered with Reef Canada and created the Neighborhood Kitchen. These ghost kitchens are found in parking lots in food-truck style trailers and are another piece of the puzzle to their nontraditional growth strategy.
Big Brands Go Dark
While virtual and ghost kitchens had already edged their way into the global market, the pandemic gave the sprouting venues a mighty shove. In 2021, it’s difficult to go a week without seeing another brand going dark.
According to Sterling Douglass, CEO of POS integration company Chowly, almost 100,000 virtual concepts can be found on third-party apps. And while the terms are often used interchangeably, there is a subtle difference.
A virtual restaurant operates within an existing brick-and-mortar establishment. They create a name and a delivery-only menu and use their existing kitchen to make the meals. Think of Smokey Bones, a full-service barbecue chain whose 122 locations are also home to two additional virtual brands—The Wing Experience and The Burger Experience.
A ghost or dark kitchen is a professional cooking facility designed for operators to launch their delivery-only virtual brand. Established brands like Wendy’s use this concept to reach more customers without building new brick-and-mortar locations. Red Lobster opened their first dark kitchen in Chicago.
Applebee’s ghost kitchens can be found in Philadelphia and Los Angeles, with plans to open another in Miami. According to Forbes, Dubai, Saudi Arabia, and Kuwait already have their Applebee’s ghost kitchens in place. The brand has also entered the virtual domain with their Cosmic Wings concept located in almost 1,300 existing Applebee’s locations.
Big names are also entering the virtual arena. Rapper Wiz Khalifa’s HotBox delivery-only munchie menu continues to sprout up around the nation. YouTuber MrBeast joined with Virtual Dining Concepts to create MrBeast Burger, a virtual brand that sold 1 million burgers in under three months and operates out of 300 restaurants across the nation. Celebrity Chef Guy Fieri opened up Flavortown Kitchen in 23 states during the pandemic.
Boston’s Pizza Restaurant & Sports Bar Eyes Hotels
Boston Pizza, the predominant casual dining concept in Canada, moved into the U.S. and Mexico and now has 400 locations across North America. In 2021, they estimate that about 80% of their new units will be in nontraditional locations, such as hotels. The brand is also considering ghost kitchens and virtual concepts.
The Future of Ghost Kitchen Concepts
While many big brands have made the news with astronomical virtual sales, there are those in the profession that believe a “dark” reckoning may be coming. CNBC quoted Kitchen Fund’s Vice President Dan Fleischmann, “You can’t keep just throwing up virtual brands—at some point, there’s saturation.”
As the demand for dark kitchens escalates, so too does the price. Peter Saleh, a BTIG analyst, spoke with a restaurant operator who said he would pay the same amount for a 3,000-square-foot restaurant space as he would for 200-square-feet in a ghost kitchen in some locations. When adding in the additional costs associated with third-party delivery apps, it’s hard to envision a profitable operation. And yet, many brands credit this business model to their success.
Earlier this year, Saladworks partnered with Ghost Kitchen Brands to double their footprint by opening 90 ghost kitchens in the U.S.and Canada in 2021. Saladworks, a brand that sells made-to-order entrée salads, sandwiches, soups, and wraps, grew by more than 40 locations in 2020. These included nontraditional locations, like universities and ghost kitchens.
Globally, at least 378 venture capitalists financed 25 ghost kitchen providers in 2020. Kitchen United amassed $50 million in venture capital funding, City Storage Systems invested about $130 million into CloudKitchens, and Reef Technology raised approximately $700 million. With these multi-million-dollar deals changing hands, we expect the continuing expansion of ghost kitchens and other nontraditional locations to only escalate.