What Is a Ghost Kitchen?
February 25, 2021
The next big thing in food delivery is here: ghost kitchens. With restaurant delivery sales growing 52% year-over-year, it was only a matter of time before a new kind of delivery-only restaurant emerged that is optimized for the delivery economy.
Minimal startup costs, incredible margins, unlimited growth potential. This new—and controversial—opportunity is captivating savvy entrepreneurs around the globe.
Everyone from established restaurant chains, to high-profile investment firms, to aspiring food startups is getting in on the action. In fact, over $1 billion has been invested in just the real estate that powers ghost kitchens in the last two years.
Now is the perfect time to explore if the ghost kitchen opportunity is a good one for you.
We’ll guide you through all the essential details you need to know about starting and running a successful ghost kitchen, including…
- What most people misunderstand about the business model
- 5 incoming challenges the ghost kitchen industry will face
- The best way to staying profitable in the coming price war
By the end, it will be clear if the ghost kitchen gold rush is one you want to join.
Table of Contents
- What Is A Ghost Kitchen?
- Who Should Start A Ghost Kitchen?
- *COVID-19: The State Of Ghost Kitchens
- Ghost Kitchen Benefits: 7 Reasons Everyone’s Excited
- Beyond The Hype: Drawbacks Of Ghost Kitchens
- The #1 Thing Ghost Kitchens Need To Optimize
What Is A Ghost Kitchen?
What do you get when you take away the tables and chairs, the order counter, hanging menus, self-serve drink stations, and trash cans?
A ghost kitchen, simply put, is a delivery-only restaurant. There’s no physical space for customers. Orders are made in one location, picked up by a delivery driver, and enjoyed off-premise.
This means that ghost kitchens are heavily reliant on 3rd-party delivery apps, like Grubhub and UberEats, to get customers and deliver orders. It also means they don’t have to pay rent on the physical space that would normally be taken up by diners (or the lack thereof).
More on the pros and cons later—there’s a lot to cover.
There are two main forms that ghost kitchens take.
1) The Rented Commissary Ghost Kitchen
In this model, restaurants rent space from a shared kitchen space—often alongside 10-20 other delivery-only restaurants. Think WeWork, but instead of offices there are mini-kitchens, each hosting their own separate food brand.
This is what most people are talking about when they say “ghost kitchen”.
Commissary and shared kitchens have existed for a long time, but a new wave of entrants to the space are making ghost kitchens more affordable (and available) than ever.
- New Distruptors — Ex-Uber CEO Travis Kalanick’s new startup, CloudKitchens, recently raised a record-shattering $400 million to launch a ghost kitchen real estate empire, while other former Uber employees raised $15 for Virtual Kitchen Co.
- Food Delivery Companies — Deliveroo, GrubHub, UberEats, and DoorDash have all launched their own ghost kitchen locations and are actively encouraging restaurant partners to open delivery-only concepts to enable greater sales.
Parking Spot Kitchens — Miami-based Reef Technology converts unused parking spots into ghost kitchens with portable kitchen containers. The company is rumored to have received an investment in the hundreds of millions.
These new ghost kitchen spaces are popping up in dense urban metros, suburban office parks, and even tenant-less shopping malls. While most of the new locations are opening in bigger cities, we’re seeing the ghost kitchen opportunity gain steam in mid-sized cities, and it won’t be long before even small, rural towns have their own thriving ghost kitchens.
2) The Secret Back-Of-House Ghost Kitchen
Some established restaurants, however, aren’t looking to outsource their ghost kitchen experience. Instead, they run delivery-only concepts directly inside their existing locations.
Fatburger in Los Angeles is turning its existing stores into ghost kitchens for its Florida-based sister brand, Hurricane Grill & Wings. This gives west coast fans of the east coast chain a chance to enjoy Hurricane food—but in-store visitors to Fatburger would never know the separate brand exists back-of-house.
Taking a slightly different approach, Chipotle turned its “second make line” in every restaurant location into the “digital make line”, effectively severing the in-house and online sides of the business into two distinct operations. “We have 2,450 or 2,500 dark kitchens,” the company’s Chief Financial Officer, Jack Hartung, said. “Chipotle has a dark kitchen in every single restaurant.”
Who Should Start A Ghost Kitchen?
The sheer flexibility of the ghost kitchen business model makes it applicable to a variety of food business types. If you work in one of these, you’ll want to take the ghost kitchen opportunity seriously.
- New chefs and entrepreneurs. It’s hard to imagine a lower-cost way to test your concept and skills in a commercial setting. As a newcomer, you may not be able to compete with larger brands on price at first, since you likely won’t qualify for bulk order discounts or outspend them on ads, but there’s no better way to learn than by doing—and with such low risk, it’s no wonder why so many first-timers are choosing to open ghost kitchens instead of full restaurants.
- Small restaurants eager to expand. If you’ve been around for awhile, you’ve probably toyed with the idea of a location #2 or #3. Now you might not have to. Using a ghost kitchen, you can still expand your area of service, but you don’t have to risk an expensive buildout. This enables you to serve more customers via delivery, and focus on creating an exceptional dine-in experience at your flagship store.
- Established chains. Multi-unit chains, from regional players to global ones, are exploring ghost kitchens as a way to evolve with changing consumer demands. They’re the perfect medium for getting your food in expensive-to-serve locations, like urban metros, since you’re only paying for a small fraction of the real estate you would traditionally.
- Food truck owners. With such a small space, many food trucks struggle to balance in-person and delivery orders. It’s hard on the cooks, and it’s frustrating for the customers. By using a ghost kitchen, food truck owners can still enjoy the delivery opportunity without sacrificing quality of service for in-person guests, losing order time while in transit, or having to shut off delivery during events.
- Content creators and influencers. High-profile content creators, including food magazines, influencers, and celebrity chefs, can turn their fame into food with personality and brand-driven ghost kitchens. Rachael Ray, Bon Appétit, and Whole30 are doing it—why can’t you?
- Campus-specific dining. University and corporate caterers are experiencing greater demand for delivery in the areas they serve. Trying to serve both deliver and dine-in customers puts a strain on cafe workers and can erode the in-person experience. Opening a separate ghost kitchen—or creating a distinct ghost kitchen section—can alleviate these pains while increasing revenue via on-campus delivery.
There are so many ways ghost kitchens can be used, but they all rely on the same thing to become sustainable, profitable businesses.
*COVID-19: The State Of Ghost Kitchens
As governments around the world restrict restaurants to delivery and takeout to avoid the spread of COVID-19, many are forced to adopt ghost kitchen-style operations to stay open.
We understand this is immensely stressful and want to help you access the resources you need to make it through this. We’re very familiar with…
- Delivery apps and other helpful software (most are waiving restaurant fees)
- The process of pivoting to delivery (we’ll share success stories from recent weeks)
- What it takes run a profitable ghost kitchen
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