What is a Ghost Kitchen?
Ghost kitchens, (also known as dark kitchens, cloud kitchens, virtual kitchens and shadow kitchens) are one of the latest trends making an impact on the food and delivery market.
As in-person dining faded to the back of our minds during the pandemic, food delivery services experienced an all-time high in 2020. Over $2.7 billion has been invested into the development of ghost kitchens, highlighting how much these facilities are changing the industry. [1]
What are ghost kitchens?
Ghost kitchens are restaurants with no sit-in or collection space for customers. They operate on a delivery-only basis with no shop front; they literally are just a kitchen where orders are prepared and distributed from. They operate with two teams: the chefs and kitchen workers prepare orders, and the delivery drivers or courier companies that deliver the food to customers.
While all ghost kitchen restaurants share the principle of being delivery-only, they may be structured differently:
1. Rented commissary kitchen
A rented commissary kitchen is where multiple ghost kitchen restaurants operate simultaneously in the same rented space, independently from one another. Chefs will work within close proximity to each other, but for their own restaurant. Courier services coming to and from the kitchen may be linked, however.
The most popular locations for commissary kitchens are converted real estate properties. Uber’s ex-CEO, Travis Kalanick, acquired $400 million in funding in 2019 to renovate and build a commissary kitchen empire [2].
2. Hidden’ ghost kitchens
A hidden ghost kitchen is a subsidiary, or ‘spin off’, delivery-only restaurant opened by a sit-in establishment. Despite the elusive name, hidden ghost restaurants are simply delivery-only services which operate within the same main kitchen as its parent company.
For example, a restaurant which only sells burgers may open a separate virtual restaurant which delivers vegetarian meals. They are owned by the same company, yet trade under a different name and brand, and prepare their orders in the same kitchen.
3. Rented restaurant or courier kitchens
Food delivery services, such as Deliveroo, provide the option to temporarily lease a commercial kitchen, under the promise that your food orders will be delivered by their couriers [3].
Similarly to hidden ghost kitchens, some restaurants with sit-in options offer ghost kitchen owners the opportunity to rent their kitchens and operate secretly from inside. The main difference being that the brick and mortar restaurant does not own the ghost kitchen company who is renting their space.
4. Restaurant chain owned virtual kitchens
In the United States, large scale franchises such as Wendy’s and Chipotle [4] are expanding by opening delivery-only versions of their restaurants. Patrons who don’t have a sit-in or drive-through restaurant local to them can now access their favorite brands through a delivery-only ghost kitchen experience.
Why are ghost kitchens so popular?
COVID-19 pandemic
The pandemic leveled the playing field between physical restaurants and virtual restaurants, since both competitors could only offer their services in the same way: at home delivery.
Since ghost kitchens always operate on a delivery-only basis, they may be ahead of the curve and have the packing and delivery method executed to perfection.
Ghost kitchen restaurants work closely with delivery services, such as Uber Eats or Deliveroo, to fulfill orders during regular times, as well as during lockdown. Therefore, their contracts with courier services may come at a better rate than brick and mortar restaurants who are only flexing into the realm of delivery to survive the pandemic.
Low overhead cost
Sage reports that the average restaurant startup cost is $425,000, or $3,734 per seat [5]. Online-only restaurants can save thousands on building and renovation costs by renting a commercial kitchen, or operating solely from a kitchen, with no dine-in option.
The price of kitchen equipment and installing adequate plumbing and electricity is already covered when you rent a property that is built to purpose.
Owning a ghost kitchen business also provides a lot more flexibility, as there are much lower branding costs, just the logo and packaging.
No customer hosting costs
Another benefit is that the costs associated with hosting customers are non-existent.
A few of the expenses which ghost kitchens avoid include:
- Tables
- Chairs and high seats
- External business signs
- Decoration
- Fancy tiling, wallpaper and flooring
- Customer air conditioning
- Heating systems
- Menu printing
- Cutlery, crockery, glassware
- Alcohol taps or a late alcohol license
Reduced labor
Generally, labor costs for a sit-in restaurant average between 28.8% and 34%. With a ghost kitchen, you won’t have to worry about a host, cashier, waiters, or staff to clear and prepare tables, since there are no customers to tend to.
Essential staff in a ghost kitchen include: chefs, people who sort and pack the orders, couriers, a kitchen manager and somebody to answer the phones and process online payments. There may even be an overlap of these roles, reducing the need for extra staff even further.
Having fewer staff on board means that labor costs are kept to a minimum, and kitchens can be run with utmost efficiency and profitability.
Less food waste
Customers who order directly through the restaurant’s website or the courier’s website are responsible for making sure that their order is correct. Liability lies with the customer themselves, rather than restaurant staff.
In some areas, customers are not entitled to a refund if they ordered something by mistake or order something wrong, as long as you deliver what they requested.
Despite this, it is good etiquette to try and resolve the problem, for the sake of customer retention and your business reputation.
Since customers are able to review and verify that their order is correct prior to purchasing, the opportunity for error is greatly reduced. This will save both time and money being spent on amending mistakes made by staff and customers.
Food waste is also reduced since many ghost restaurants may opt for a limited menu, with overlapping ingredients. For optimized inventory management, ghost kitchen brands should select a system which automatically deducts ingredients from master stock levels once an order is placed. The Epos Now system will recognize when a certain item is running low, and provides the option to take out-of-stock items off the menu, to avoid customers purchasing something and then needing a refund.
Reach a wider customer base
Ghost kitchens are an incredibly versatile business model.
- They provide the opportunity for companies to develop multiple brands, with one location dedicated to preparation and distribution. By widening the variety of products available, businesses can reach a wider demographic.
- Ghost restaurants are not limited to a seating plan or table capacity, therefore you can serve more customers at one time.
- The only requirement for a customer is a delivery address and the ability to pay remotely. This creates extra convenience for customers without means of travel or with limited mobility.
That being said, let’s explain how payment works:
How do ghost kitchen restaurants receive orders and payment?
Food courier apps
If your products are delivered by a courier company customers can order directly from the courier’s app or website. Typical back of house or kitchen ordering systems can be linked with courier apps, which simplifies the ordering process even more. This will increase visibility. However, some couriers may request a small fee for orders accepted this way.
Order and pay systems
Systems like Epos Now Order and Pay platform allows customers to order directly from the restaurant’s own website. Use a website builder to design and launch a fully customized site, which is optimized to meet your business’s needs, and match your branding.
Input your menu, nutritional and allergen information, special offers and customer discount codes if applicable, then allow patrons to order and pay online. Delivery updates and tracking also available.
You may want to read:
How to Make Your Restaurant More Sustainable in 2021