The phenomenon called Ghost Kitchen Explained
How many times do you think of the source of your deliveries? I assume that you believe your food gets delivered to your door directly from a restaurant kitchen. And, most likely, you’re right. There has been a recent trend emerging in the busiest parts of the world, and it’s possibly not even known by you.
The popularity of online ordering is skyrocketing amid the pandemic, and restaurants are no exception. In 2014, delivery and digital ordering rose at three times the rate of dine-in visitation.
And as a result, it boosted food delivery apps such as Uber Eats, Doordash, and Postmates. It is also leading to the increased growth of “Ghost Kitchens.”
What Is a Ghost Kitchen?
One can refer to Ghost Kitchens as cloud kitchens, shared kitchens, and dark kitchens. They are commercial kitchen spaces, and their primary purpose is to prepare and deliver food.
A Ghost Kitchen is part of a delivery-only restaurant model where you would rent out a kitchen. This is where your restaurant or virtual brands would prepare the food and deliver it.
Ghost Kitchens are cooking facilities that produce food only for delivery and takeout. It has no customer-facing areas or dine-in seats.
This strategy allows establishments to save money, making it a viable business plan, especially in the event of a pandemic. However, it’s not a new concept.
Take Domino’s pizza. It’s essentially been a Ghost Kitchen since its inception.
Big brands like McDonald’s and Chick-Fil-A are also experimenting with kitchen-only models.
One can employ Ghost Kitchens primarily for two things. They can expand the delivery range of an existing brand or create a new business.
Take a local pizza shop, for example. Suppose they wanted to expand their delivery range to a new area in their city.
In that case, they can essentially open a second location by renting a Ghost Kitchen in that new area, and then they would have the ability to offer delivery to that area.
On the other hand, you can use Ghost Kitchens to start a new business. For example, you can create a virtual food brand where food delivery apps are your exclusive storefront.
So, how do you go about visiting these Ghost Kitchens?
Can You Visit a Ghost Kitchen?
Unfortunately, you cannot. As previously stated, these are restaurants that do not have a physical location. The only method to get their stuff is to order it through third-party delivery apps.
Their primary goal is mass production. They wish to generate a large number of food items and provide their services through these various delivery apps.
How Do Ghost Kitchens Come To Be?
Ghost Kitchens are the result of a profound change in consumer behavior that has a massive impact on all eateries. They take advantage of the surge in online orders to bring prices down connected to brick-and-mortar restaurants.
The appeal of Ghost Kitchens is that, except delivery, you have complete control over most of your logistics.
You do not need to open a restaurant in a highly-populated area to attract customers. You do not have to hire service staff, and you can simply tailor your menu to focus just on food.
Nevertheless, you must establish an efficient workflow and focus on high packaging, which is a modest cost to pay.
Growth of Ghost Kitchen
The global 43-billion-dollar industry is expected to reach 71 billion by 2027. Ghost Kitchens and virtual restaurants are actively disrupting the restaurant industry. They have sparked interest in former Uber CEO Travis Kalanick.
He has already invested over 100 million dollars into the Ghost Kitchens space. Other companies like Amazon have also joined the space, entering with an investment of 575 million dollars.
As online deliveries surge, Ghost Kitchens could create one trillion-dollar market, according to a recent report from Euromonitor. Cheaper, faster, and more reliable delivery could capture 50% of drive-through service.
It could also capture 50% of takeaway food service and 25% of dine-in foodservice.
The Halal Guys, Dog House, and Wow Bao are among the top brands that have been successful in opening Ghost Kitchens in the U.S.
Other brands such as Famous Daves, Drinker International, and Fat Brands have also jumped on the Ghost Kitchen bandwagon. Bloomin Brands, one of the world’s largest casual dining companies and the one behind Outback Steakhouse, is also testing a kitchen-only format for takeout and delivery.
But can Ghost Kitchens help businesses survive the pandemic? Is it more than a trend that will continue even after we get the vaccine broadly distributed?
The Rise of Ghost Kitchens
Covid accelerated some of the existing trends. Ghost Kitchens are cooking warehouses with multiple small kitchens. It’s either leased by a restaurant or a restaurant subcontractor.
There are also virtual brands which are when a brand exists solely online without a brick-and-mortar store. It’s optimized for online food delivery and takeout.
Kitchen United, a Ghost Kitchen startup based in Pasadena, California, received USD 40 million in funding from RXR Realty in the summer of 2019.
Former Uber CEO Travis Kalanick founded Cloud Kitchens in 2016. They received USD 400 million from Saudi Arabia’s public investment fund.
Kitopi, another Ghost Kitchen platform, received USD 60 million to open 50 new delivery-focused kitchens in the U.S. and 100 globally by the end of 2020.
With two-thirds of Americans ordering food online, the addressable market for online delivery is set to grow from USD 375 billion in 2020. It could possibly be even more than USD 467 billion by 2025.
According to Morgan Stanley research, food delivery services are also thriving. Take a look at Doordash. It’s one of the hottest IPOS in 2020, which started trading at USD 182 per share. It gave the company a market cap of USD 57.8 billion dollars.
It’s the leading food delivery service app grabbing 45 of the food delivery market as of April 2020, according to Edison Trends Data.
In theory, the idea of a Ghost Kitchen starts to take out some of those costs associated with the traditional restaurant format. It also makes delivery more cost-effective.
McDonald’s opened its first Ghost Kitchen in London to meet its growing demand for delivery. Chick-fil-a also launched delivery-only operations around the same time in the Bay area during the pandemic. Chipotle made headlines by opening its first digital-only restaurant in New York.
The CEO estimated digital sales could exceed USD 2.5 billion in 2020, more than double in 2019.
One fast-casual Asian American chain Wow Bao is seeing success with its so-called Dark Kitchen model. From April to October, Wow Bao managed to launch 100 Dark Kitchens across the country.
It is now one of the fastest-growing restaurant concepts. The company has expanded to locations across the U.S in places like San Francisco, Miami, Austin, Los Angeles, Minneapolis, and Portland.
Wow Bao’s Dark Kitchen model works in that it partners with other restaurants to sell their food.
Types of Ghost Kitchens
According to the founder of Sweetberry Bowls, Desi Saran, Ghost Kitchens come in different forms.
– The first form is what he called the “Big Box,” a 10,000 square foot facility broken up into ten or more kitchens.
A businessman hires the space, installs the necessary cooking equipment, and then rents it out to Ghost Kitchens under this model.
This approach is reasonably priced since you save the high expenses of opening a startup. The cost of renting a kitchen space is far cheaper, and you will have all of the necessary equipment.
Because successful business individuals or large corporations frequently own these spaces. As a result, the Ghost Kitchens follow OSHA regulations, food service regulations, and state-building laws.
These are among the most complicated aspects of running a restaurant. Its only significant disadvantage is that you may be forced to share space with other eateries.
A single Ghost Kitchen can house multiple food concepts. It essentially means that they’re preparing food as different virtual brands. A big-box type facility with 15 kitchens with three concepts per kitchen would house 45 virtual brands.
– The second type of Ghost Kitchen is the “Small Box,” a 1,000 square foot facility that houses one or a few kitchens.
These kitchens hold franchise partnerships with food outlets. However, they exclusively serve orders through online platforms and delivery services.
This strategy allows you to incorporate deliveries into your business. Consequently, it also keeps the procedures distinct. As a result, your restaurant crew isn’t overburdened by the orders placed online.
Established restaurants searching for new sources of income might consider this approach.
The greatest part is that you already own the business and have all of the proper materials. All you need to do now is develop efficient processes.
– Lastly, the third type of Ghost Kitchen is virtual restaurants.
A virtual restaurant is a restaurant that doesn’t exist in its own space. It only exists on digital food delivery platforms. Unlike traditional Ghost Kitchens, virtual restaurants don’t rent from third parties.
Virtual restaurants are existing brick-n-mortar restaurants. These restaurants make total profit from their existing kitchens. And they accomplish this by creating additional delivery-only menus.
In addition to the United Kingdom, China, and India, there are currently 1500 Ghost Kitchens. Restaurants can test Ghost Kitchens using third-party services like Kitopi, Kitchen United, and Cloud Kitchens.
Millions of dollars are invested in these companies to help them grow Ghost Kitchens across the United States.
What’s the deal with Ghost Kitchens?
Building a successful delivery approach is more crucial than before.
- To begin working in a Ghost Kitchen, rent out a workspace in a venue where you may prepare food deliveries.
You can establish your online restaurant brand via various third delivery apps.
All you need to do is set up the Ghost Kitchen appliances that you will need to manage.
- To get you started, establishments/companies such as Cloud Kitchens will provide the technology and infrastructure to run proper delivery services.
- Every kitchen comes fully operational with essential conveniences as well as customizable choices to fit the demands of you and your clients.
You will have more than enough freedom to test new meal concepts and ideas in the kitchen.
- To start off, you will have the opportunity to open a Ghost Kitchen.
The kitchen space will have all the essential equipment needed for your operation.
- You will also have the liberty to customize your kitchen space.
The company will provide you with the tools you’ll need to stay on top of your food orders.
- After that, the customer puts an online order, and you will receive all the food orders through a tablet.
This will be the case regardless of whatever third-party delivery app the customers use.
- You can then prepare the meal in your kitchen space without any hassle.
A service team will be available that will hand over your orders to the delivery person in the quickest time possible.
You’ll receive 5-star ratings from your customers on the basis of speedier and precise delivery.
Also, in case you forgot, internet evaluations may make or destroy your business, so it’s critical to cultivate good reviews.
What Is The Difference Between Ghost Kitchen vs. Traditional Kitchen?
A Ghost Kitchen or virtual restaurant offers not only a quick and exciting way to start making money in the food industry. It allows you to expand into whatever niches you desire.
But before we dive into more about Ghost Kitchens, let’s start by analyzing the difference between a traditional kitchen and a Ghost Kitchen.
Traditional restaurants lease a brick-and-mortar space. They focus primarily on in-house service. While they may offer delivery or take out, the source of the majority of their revenue is from customers.
Customers of traditional restaurants invest a great deal of time, energy, and money in the decor. Besides that, the atmosphere, as well as the aesthetics of the restaurants, plays a huge role.
These establishments need a seating area for clients as well as servers to meet business requirements. Besides that, the extra room implies greater spending and upkeep costs, which may affect the budget and make it impossible for a typical kitchen to break even.
Conversely, Ghost Kitchens, Virtual Kitchens, Dark Kitchens do not require extra space. Several brands share a single specialized area for operational processes.
The space houses chefs and other employees who are constantly able to manage orders on time through a delivery app in this location.
3 Ways To Run A Successful Ghost Kitchen
– Aesthetic is Important
Do not underestimate the importance of both the aesthetic and functionality of your packaging. Your brand cannot produce leaking or punctured containers. There should be no difficult and ill-fitting lids, messy, or just meals.
At the end of the day, the small details can leave a very bad taste in someone’s mouth before they even take a bite. Investing in attractive, highly functional, eco-friendly packaging is a move you’ll never regret.
– Take Good Inspirations
Imitation is the best battery when it comes to recipes. Don’t be afraid to take inspiration from others.
You don’t have to constantly reinvent the wheel to be original and fresh. You can draw from dishes and meals that have proven to have the wow factor or classic comfort foods that don’t need a new spin.
Humans are creatures of habit, so they aren’t necessarily looking for something dramatically new. They’re more likely looking for something familiar.
You’re in a great position to get their business by offering something they love at a slightly lower price. Remember, you’re saving a ton just by being virtual.
– Consider A Partner
No truly great thing was ever done alone. Being an entrepreneur is challenging. So, involving someone you trust and whose opinions you value is one of the best steps you’ll ever take.
Don’t forget that two are better than one. You can offer constructive feedback, help each other make decisions collaborate on new ideas.
Most importantly, you get to share the joy and excitement of your restaurant’s success.
Ghost kitchens are unquestionably the new big thing!
Since more individuals are employing home delivery services, it is important to stay updated with market trends.
The current epidemic is also an indication that the business world is volatile. Don’t risk investing all your resources in one spot.
We hope this article helped expand your knowledge about Ghost Kitchens.