Article contributed by Joy Pouros of Culinary Software Services.
New restaurants are constantly opening in the most unexpected places – they don't have the most appealing exteriors, they're usually not in prime real estate locations, and you can't actually dine there.
A ghost kitchen, also known as a virtual restaurant, cloud kitchen or dark kitchen, is a delivery-only restaurant that operates from a commercial kitchen with no dining room or customer service staff, and often with multiple brands operating from the same kitchen.
How do ghost kitchens fit into the industry now and in the future? Let's take a look at what makes ghost kitchens appealing to business owners and how the concept interacts with consumer trends.
The rise of the virtual restaurant phenomenon
Ghost kitchens offer a variety of benefits to business owners, including reduced operational costs and increased flexibility, but despite these benefits, they have only recently become popular in the United States.
China and India lead the world in the number of ghost kitchens, and it was only in 2020 that the United States started to catch up. Why? Food delivery apps are driving the growth of ghost kitchens. In 2019, more than 60% of China's population was already using a food delivery app. In the United States, that number was less than 40% before the pandemic hit, but has increased significantly since.
Ghost kitchens are essentially made possible by technology. Food delivery is not a new concept, but delivery apps have made it much more convenient for consumers to order from home or wherever they are. Payment software allows you to store your credit card information in your preferred delivery app and use it at any restaurant on its platform.
Order management and kitchen display systems allow restaurants to receive orders from multiple delivery apps, streamlining operations and minimizing errors. Cloud-based management systems allow restaurants to keep their menus and hours up to date across all online listings.
COVID-19 created a unique need for the market in which ghost kitchens thrive. Restaurants were closed and people turned to delivery apps more. Consumers were excited about the increased options, and some didn't even realize they were ordering from a ghost kitchen at all. While many businesses struggled, the use of innovative technology paid off. Without this technology, it's doubtful ghost kitchens would have been as successful as they are today.
What are the benefits for businesses?
What makes ghost kitchens attractive to restaurateurs? Cost and flexibility. The combination of cost savings and flexibility allows restaurateurs to optimize operations, maximize profitability, and stay competitive in an increasingly dynamic and challenging market environment.
cost
Ghost kitchens have the advantage of low initial and operational costs to open a restaurant. Owners do not need expensive real estate in prime locations with high foot traffic. They can operate in much cheaper areas. Owners/investors do not need to worry about factors like roadside appeal, décor, ambience, etc.
With no need to worry about diners, you can focus on making your kitchen layout the most efficient possible. You no longer have to worry about the customer experience of parking, walking in, sitting at a table and enjoying a meal. You can streamline your kitchen to increase efficiency and maximize storage space.
Labor costs are also lower. Ghost kitchens don't have front-of-house staff, and because virtual kitchens can support multiple brands, back-of-house staff costs are shared. These cost savings lower the barrier to entry, making it an attractive option for entrepreneurs.
Ghost kitchens, on the other hand, rely on delivery apps, which take a hefty commission of up to 30% of sales. Competition between restaurants can be fierce, and ghost kitchens often operate without the brand recognition of traditional restaurants.
Flexibility
A delivery-only model offers flexibility that traditional restaurants don't have. Operating a new brand out of the same kitchen makes it easier to pivot to new trends and try new concepts without risking brand equity like a traditional restaurant would if they changed their menu too frequently.
They're also easier to scale. Popular traditional restaurants have limited seating capacity. Adding more locations requires significant research and upfront investment. If a location is too large for its customer base, real estate costs are wasted. Ghost kitchens can support as many brands as needed until they reach maximum capacity. If space is needed, it's much easier for some brands to move to a new space or increase capacity in an existing location.
Lower operating costs mean lower risk in making changes in the kitchen, which in turn allows for more innovation. But taking risks doesn't mean being naive. The amount of software they use to take orders and manage their restaurants gives them a ton of data on what consumers are ordering and when. This makes it easier to make data-driven decisions and pivot with consumer trends. This includes offering menu items specific to diets like plant-based and gluten-free. This benefits both restaurants and consumers: consumers get more of what they want, and restaurants can make these changes more easily with the flexibility that ghost kitchens offer.
Adapting to changing consumer behavior
Delivery apps were on the rise before 2020, but the pandemic dramatically accelerated their growth. COVID-19 had a profound effect on many consumer behaviors, leading to a surge in food delivery services as people adapted to restaurant closures, grocery store shortages, and increased time spent at home.
As a result, ghost kitchens have thrived, a trend that investors and entrepreneurs expected would continue, but it hasn't. Consumers have come to value authenticity, and the experience economy has bounced back. These two trends have combined to create challenges for ghost kitchens.
Reliability and clear communication
Until recently, most consumers were unaware of the existence of ghost kitchens. As ghost kitchens have grown in popularity, so has consumer awareness, but not always in a good way. Some discoveries have spread on social media, leaving customers feeling duped. In some cases, they thought they were supporting a local restaurant only to find out it was a chain they don't usually patronize. In other cases, they sought out more information about the restaurant or even visited it in person, only to discover it wasn't what they expected. Rightly or wrongly, customers felt duped.
As ghost kitchens grew in popularity, delivery app menus became repetitive as multiple brands operating from the same kitchens offered nearly identical menu options, creating a confusing and frustrating experience for consumers.
These failed customer expectations have led some food delivery platforms to impose additional rules on ghost kitchens or require them to be clearly labeled to help consumers make an informed choice.
Branding
One of the advantages of ghost kitchens is that they allow you to build a brand without owning real estate. New restaurants can open with less capital, existing businesses can offer a different menu without changing the theme of their traditional restaurant, and a pizza place owner can offer burgers on the menu under a different brand name instead of being limited to pizza.
But a brand is more than the food served. People are attached to the physical presence of their favorite restaurants. Having a multifaceted relationship with a brand will increase loyalty to that company. Ordering food exclusively through a delivery app won't inspire brand loyalty the way a great dining experience at a restaurant would.
Is it time to give up?
While the trajectory of ghost kitchens may be uncertain, it's not all bad news for them. Food delivery remains more popular than it was before the pandemic. After all, consumers appreciate the convenience of ordering food online and enjoy trying new options. Ghost kitchens are combining technology and innovation to create a consumer experience full of convenience and choice. If delivery platforms and ghost kitchens can build trust with consumers, the future looks bright.
Joy Poulos Serve as an authoritative writer in the training department Cooking Software Serviceswhere she writes on a wide range of topics from human resources issues to increasing profits. Joy started in the industry as a nutritionist in the Chicago area before moving into writing and consulting. Joy now specializes in marketing and public relations and writes for a variety of industries.
