Ghost kitchens are almost on the same footing as virtual kitchens. Virtual because the order process is online, and dining is not an option. It’s like regular restaurants using delivery, but this time, they’re not accepting dine-ins.
The business model of ghost kitchens is based on reducing operating costs and maximizing available staff. Restaurants may opt to eliminate the dining space, or renting out kitchen spaces.
Ghost kitchens can also work as a collaborative space to which several restaurant staff may work under. Delivery services have also involved themselves in ghost kitchen operations. UberEats, for example.
What are Ghost Kitchens
Ghost kitchens have a bit of humorous history. A few restaurants in NYC applied for delivery services using different restaurant names. An investigation led to finding out that most of these applications belong to only one restaurant.
The term ghost kitchen may be appropriate to individually operated businesses. These businesses use the internet as their main marketing platform. The website acts as an automated order entry platform while the business owner prepares the dishes. Food is then sent out via a delivery service partner.
The rise of ghost kitchens is also correlated to the number of food delivery apps existing today. Companies like Uber, Zomato, Grubhub, and Doordash are just some of these.
How The Pandemic Fast-Tracked The Shift From Regular Restos to Ghost Kitchens
Over 110,000 eating and drinking establishments have been closed due to the pandemic. Whether the closures were temporary or permanent, it was bad enough to affect income.
The only way to adapt to the situation is if owners changed their business model. Food delivery apps were at an all-time high, with some companies propelled a year advance. Despite not being a food delivery service, the grocery delivery app Instacart achieved its goals a year early.
Doordash, Deliveroo, and Ubereats saw an increase in the number of orders as the pandemic forced everyone to stay at the safety of their homes. This was between the months of February and March,
A good sixty percent of the US population order food through an app or website at once a week. Statistics show customers would rather order from the restaurants directly. A majority preferred supporting local businesses instead of using third-party services. Most restaurants are starting to see the advantage of using their own staff to deliver. This setup increased their sales dramatically.
Why Open A Ghost Kitchen
Ghost restaurants are predicted to increase revenue by 25 percent each year. At this rate, the total value of the ghost kitchen industry will increase to $1T by 2030. In November of 2020, the number of seated diners has decreased by 50 percent, which means they need for servers will decrease. Since the coronavirus pandemic limits face-to-face interactions, employees are faced with massive layoffs. In the US alone, there was a surge in applications of unemployment benefits.
The number of delivery personnel from January of 2018 to last year is nearly approaching one million.
- Lesser operating costs
- Complies with quarantine policies and procedures
- Increase in profits
- Multiple sites for ghost kitchens cater to several customers, equalling to increased profits
- Less paperwork in setting up the business
- Eliminates the need for a brick-and-mortar restaurant
- Kitchen spaces can be rented out
- 3rd party delivery services are expensive due to increased demands
- Possibility for losing customers over food handling mistakes
- Environmental impact of using food packaging items (paper bags and plastics)
- Increased competition due to popularity
- Brands need a marketing strategy for more visibility
Famous Ghost Kitchens
Many food chains have opened their ghost kitchens to cater to customers who have no access to food. Five Guys recently launched its first ghost kitchen in Texas. The fast-food chain is only cooking food for delivery. The restaurant is currently partnered with GrubHub, Postmates, and DoorDash.
Miami Reef Kitchens is also one of the largest ghost kitchens in the US, with over 4500 locations. Last year, this famous ghost kitchen chain raised over $700 million. They received the help of UAE-based Mubadala Investment Company. Reef Kitchens also hosts its parking lots as testing sites for COVID, which helped boost and cement its popularity. They’ve also delved into sustainability, making use of these spaces for vertical farming.
Amped Kitchens is also seeing an increase in the number of owners wanting to rent their spaces. The company offers the advantage of renting out spaces that require less paperwork. The company has involved itself with its customers by giving relevant information on rising food trends. There are still vegans out there, so Amped Kitchens made sure they have organic certification. The certifications are from USDA and CCOF, among others.
Established in 2014, UberEats makes use of employed couriers instead of side-gig workers. The company aims to bolster its profits with its recent entry to Germany. The company is challenging locally-owned JustEatTakeaway.com.
UberEats is one of the few companies that also branched out to delivery service. They then expanded to ghost kitchen territory. With lower delivery costs, it presents a real struggle. The German company has a more active stance towards benefiting its workers. Delivery personnel gets more commission for each successful delivery. This may be a weakness as customers will start looking for cheaper options.
LAStartups.com is a digital lifestyle publication that covers the culture of startups and technology companies in Los Angeles. It is the go-to site for people who want to keep up with what matters in Los Angeles’ tech and startups from those who know the city best.