Food businesses in 2020 had to be creative to survive. For some brick-and-mortar restaurants, this meant more than switching up menu items; it meant becoming delivery-only overnight.
Food delivery through third-party delivery apps like Grubhub, Uber Eats, and DoorDash was popular before 2020, but now delivery platforms make a considerable percentage of restaurant sales. According to Statista, the projected market value of online food sales for restaurant-to-consumer delivery is expected to reach over $16.5 million in 2021.
All of which has only put ghost kitchens and virtual restaurants even more in the culinary limelight, making sure they’re here to stay. This article will explore what a ghost kitchen is and the five benefits of a ghost kitchen model.
What is a Ghost Kitchen?
A ghost kitchen is where virtual restaurants produce food without a brick-and-mortar shop to call home. Imagine, if you will, a bustling kitchen with a steamy stove and the sound of clanging pots and pans. But instead of the food being whisked away by servers to a packed dining room full of customers, the hot dishes are loaded into bags and handed over to delivery drivers.
In fact, there’s no dining room at all. A ghost kitchen is a delivery-only restaurant with the sole purpose of making delivery-only meals. Ghost kitchens have different names, including virtual kitchen, cloud kitchen, shadow kitchen, commissary kitchen, and dark kitchen, but the concept is the same— hot food delivered from virtual restaurants in minutes.
However, ghost kitchens may not whip up culinary delights from one virtual restaurant brand, but may support several restaurant operations under one roof. The same tasty burger you love from your local online cafe comes from the same kitchen space as your shrimp scampi from a virtual upscale bistro.
In a way, it’s much like a Las Vegas buffet with multiple cuisine choices, all coming from the same existing kitchen, except there’s no brick-and-mortar location to dine at.
How Did the Concept Come Into Existence?
Since ghost kitchens are changing the way the food industry operates, you may ask how this concept came into existence? Ghost kitchens or virtual shared kitchens have followed the soaring popularity of food delivery.
As more hungry customers chose delivery over dining in, more ghost kitchens popped up. By some estimates, delivery-only restaurants may be a trillion-dollar industry by 2035.
Also, consumer trends show that customers like a choice. Ghost kitchen facilities can offer different kinds of food under one roof, satisfying the consumer’s appetite for convenient variety.
Ghost Kitchens can offer food variety from celebrity chefs to food truck tasty bites, all together in a shared space. So, if the kids want burgers and the parents wish to have noodles, they can deliver both.
Different Ghost Kitchen Models
Like with any new concept, not one size fits all. Ghost kitchens offer a few different ways to set up your knives.
1. Rent the Commissary Ghost Kitchen For An Independent Model
The kitchen operator rents a small space in a larger shared kitchen area. Think of it as a bunch of mini kitchens inside a much larger one. There may be 5-20 different restaurants in the same space whipping up dishes each day to represent their virtual food brand. It’s much cheaper to pay rent on a smaller kitchen than putting down serious dough for the entire space.
Other businesses have followed this model before. For example, hair stylists rent space from a landlord all together in one building. Or a food court at a mall all compete for the same customers. But the main difference now is that everything is delivery only with no customer interaction, except online.
2. The Multi-Brand Ghost Kitchen
This operates in the same fashion as the Independent Model. The difference is that multiple brands are going through the same kitchen. For example, a Mexican food restaurant may cook up burritos and tacos for one order, and then cook wings and french fries for the next.
One restaurant can have three or four virtual brands with different names and menus, but the food is actually coming from the same kitchen and chef.
3. Rent Your Kitchen
Another ghost kitchen model is renting out your kitchen for a virtual brand to use. Suppose you have the extra space or operate on different schedules, then sharing your kitchen is a way to cut down on costs. So, if a national restaurant chain doesn’t want to enter the ghost kitchen market, there’s no reason they can’t rent their space to another chef that does.
4. Mid-Ground Model
Also very similar to the Independent Model, except for the fact that the kitchen allows for in-person pickup and a limited amount of walk-in traffic. This is a challenging model because the very nature of a ghost kitchen is to lower the cost of rent by being off the beaten track. So, attracting walk-in clientele is difficult.
5. Brand Owned Kitchen
This model relies on the ghost kitchen signing up with a third-party app like Uber Eats or Grubhub and being an exclusive brand to that app. This is becoming more popular as third-party delivery apps grow. The nice thing here is that, because their success depends on your success, the app will promote your business more than independent restaurants are typically able to do on their own. The downside to this model is that because your kitchen is owned by the third-party app, they are fully in control of your brand and how much they charge you for utilizing their platform and expertise. So, if they want to charge $500 for advertising your restaurant, you have to accept it.
6. Hub and Spoke Model
This model tends to the more established restaurant brands. Here a centralized kitchen creates all the meals and ships them out to smaller ghost kitchens in different locations. These kitchens then warm up and deliver the food. The point of this model is to allow a bigger reach for restaurants that don’t have a physical presence in particular areas.
7. Outsourcing Model
The simplest of all the ghost kitchen models, this is where you would purchase your product from a retailer, repackage it for your brand, and deliver it. It’s as simple as you purchasing Kraft Mac ‘n Cheese in bulk from Costco, bringing them back to your ghost kitchen, cooking them up when an order is received, repackaging them for your brand, and sending them out for delivery. Although very easy, everyone knows what Kraft Mac ‘n Cheese tastes like, so why would they buy from you?
Benefits of the Ghost Kitchen Model
Ghost kitchens are controversial to a certain degree. Consumers order online, thinking the food is coming from their favorite noodle shop, but the restaurant may only exist online. Or the idea that your sushi is made in the same kitchen as a greasy burger may lower customer experience and thoughts about the food quality.
But these concerns, compared to the benefits, may not hold up for a restaurant business. Here are five reasons why ghost kitchens are changing the delivery game for the better.
1. Food Delivery is the Future
Even before COVID-19, foot traffic for restaurants in some areas was down thanks to the convenience of food delivery apps. But now, having food delivered from your favorite restaurants has become a daily necessity.
This new world isn’t expected to change anytime soon, so the popularity of virtual kitchens will only increase, making finding your niche in this burgeoning market easier than ever.
Kitchen spaces need to offer fast delivery to customers, whether you’re a virtual brand or a traditional restaurant changing with the times. If you need more convincing, the truth is in the numbers.
- Since 2014, food delivery has surged 300% faster than in-person dining.
- Millennials make up 59% of all delivery or takeout orders from restaurants.
- 60% of people in the U.S. choose delivery at least once a week.
- Food delivery revenue may rise from $365 billion in sales (20% increase) worldwide by 2035.
2. Less Costly
Starting a restaurant can cost thousands of dollars, from designing the concept, renting the space, purchasing equipment and paying out front and back of the house salaries. Restaurants can also fail as soon as they begin, making your investment risky.
Anyone in the industry knows that it’s a bit like walking on a tightrope. But ghost kitchens lower costs in every category of your business, allowing new restaurants to cut the startup cost in half.
Virtual restaurants only have to deal with customers online and support a kitchen staff. Renting a kitchen space at a ghost kitchen establishment is cheaper than a brick-and-mortar location. You can cook up food, create an online presence, and start selling right away.
3. Product Testing
Finding the right product for your customer base can be costly. It takes a lot of trial and error before you find the right balance in flavors, price, and even packaging. But delivery-only concepts allow restaurant entrepreneurs the opportunity to test their dishes before establishing a brick-and-mortar location or food truck.
Big companies, such as Panera Bread, are using ghost kitchens to test out new concepts, recognizing that the next step in food is technology driven. The off-premise market leaves a smaller footprint and allows them to test-drive virtual food concepts before fully committing to developing the creations.
4. Native Delivery Widens the Market
Restaurants fixed to a specific location miss out on customers outside of their service range. Convenience is one of the most significant factors in choosing a restaurant for most patrons. Driving outside of your neighborhood for food doesn’t happen as often as one would think.
Also, less foot traffic means fewer sales. Ghost kitchens don’t have a set location, making it possible for restaurants to create food when ordered, and deliver it to multiple zip codes.
Not having a fixed location is a massive opportunity for restaurants to widen their customer base. Native delivery allows you to assign your own driver to deliver your food and maintain your brand reputation. Brick-and-mortar shops can use apps as well, but ghost kitchens don’t rely on foot traffic for sales.
5. Incredible Margins
Virtual kitchens take away many startup costs, but the concept also eliminates a lot of the ongoing daily costs of running a restaurant. The biggest one being labor. Labor costs can run between 20-30% of gross revenue.
In ghost kitchens, you don’t need a host, dishwasher, or server taking orders. Your entire enterprise unfolds in a smaller space with no face-to-face customer contact to deal with from the get-go.
Food costs take another chunk out of your revenue, but ghost kitchens typically focus on a niche or limited menu. By offering certain dishes only, you have the opportunity to improve your recipe costs and cut down on wastage.
Are Ghost Kitchens Profitable?
Like any endeavor, you have those who succeed and those who falter. But the ghost kitchen phase is just beginning. Already there have been incredible success stories of restaurants down 50% in revenue, but then adding multiple lines of ghost kitchens and making back all of lost profit and more.
Lost foot traffic for any reason can hurt a restaurant. Now, instead of calling the restaurant for takeout or delivery, people use food delivery apps. This is where a Ghost Kitchen brings the best of both worlds together – you have a good concept, the right price point, and reliable staff to make your operation successful, and now you can deliver food “as” your restaurant, without the overhead of a traditional fully staffed sit-down establishment.
Ghost kitchens are innovative, exciting, and modern. It’s nothing like the restaurant industry has seen in decades.
Who Should Start a Ghost Kitchen?
The ghost kitchen business model can work for almost any entrepreneur, including:
- Established chain restaurants
- New entrepreneurs and chefs
- Food truck operators
- Campus dining establishments
- Small restaurants
- Food influencers and creators
- Star chefs
Ghost kitchens are a fresh concept that has taken the food industry by storm. Food delivery is only increasing in every restaurant industry sector, from fast-food chains to fine dining establishments. However, to be successful, you need a business plan, a unique concept, and, yes, a ghost kitchen.
Following food trends, starting slow, and investing wisely are sage advice for any restaurateur. Ghost kitchens are here to stay, and with these five benefits, it may be hard not to get into the action.
ShiftPixy Labs Ghost Kitchen Incubator Program
If you love Shark Tank, then you’re going to love the ShiftPixy Labs Ghost Kitchen Incubator Program. It offers ghost kitchen entrepreneurs the opportunity to pitch virtual brand concepts to a panel of experts—all with the intent of being accepted into the program.
Once accepted, the incubator will mentor and nurture new and experienced restaurateurs through a series of challenges in hopes of developing a successful ghost kitchen. Under professional mentorship and guidance, the restaurateurs learn how to thrive and grow their business.