2020 was a scary time for restaurants, with customers in isolation, dining rooms closed, and uncertainty looming. Though no one wants to reminice about that bleak period, the food industry rebounded quickly, with many brands discovering creative solutions to survive. With in-person dining off the table, delivery became a household word, becoming synonymous with the word “food.”
Outdoor dining was the first big idea, followed by meal kits, food trucks, and vertical expansions.
There was one more bright light at the end of the tunnel–one much less spooky than the name connotes – the ghost kitchen.
Not an apparition or figment of the imagination, ghost kitchens were a real game-changer, helping to keep many establishments afloat. And like outdoor dining, which what was thought to be a temporary fix, the ghost kitchen began to take on a life of its own.
As things settled down, there was renewed hope that in-person dining would return. But with a labor shortage looming, savvy owners knew they had to shift gears once more. Realizing that the ghost kitchen was more than a provisional way to keep customers' tummies full; restaurants discovered that the ghost kitchen was a sustainable and cost-effective way to expand their brand.
Ghost Kitchens vs. Virtual Restaurants
Though the terms ghost kitchens and virtual restaurants have similarities, the two concepts are differentiated by one key factor - ghost kitchens rent space, while virtual kitchens utilize an already existing space.
Ghost Kitchen
Ghost kitchens, also known as dark, virtual, shadow, commissary, cloud, or delivery-only kitchens, are commercial cooking facilities that are not attached to a brick-and-mortar restaurant. There is no physical storefront, no front-of-the-house staff, no seating, no space for customers to pick up takeout, and no parking. In fact, the only cars stopping at a ghost kitchen are delivery drivers. Given “dark” and mysterious names because these extensions of a business are something customers never actually see, these seemingly elusive kitchens became one of the hottest trends in the restaurant delivery game, expected to skyrocket into a $1 trillion industry by 2030.
Simply put, ghost kitchens are delivery-only haunts with no internal space for customers to drink or dine. Though they can technically coexist on the grounds of an existing restaurant in a completely separate kitchen, ghost kitchens are often based in smaller, less-expensive, and undesirably-located commercial facilities or host kitchens.
But regardless of where the kitchen is located, these operations are for delivery only and customers order exclusively online.
Benefits of the Ghost Kitchen
Cuts overhead costs. No front-of-house means no servers, wait staff, bussers, hosts, or bartenders to pay, and more space for actual cooking, allowing the focus to be placed strictly on the food.
Makes better use of space. Because there is no need for dining rooms, waiting areas, or bars, the space can be used more efficiently and creatively. What once would have been a dining room can now be a fresh pasta-making station, organic greenhouse, roasting pit, or a cake decorating center. This allows flexibility not only in what a single kitchen can offer but provides room for endless expansion.
Expands customer base. For restaurants that have already established physical locations, ghost kitchens can be a way to adapt to shifting trends, create a new revenue stream, and expand delivery range, allowing for penetration into untapped markets. And since there are no front-of-house labor costs or other related expenses tied to rent and building upkeep, they are extremely cost-effective.
Allows for creativity. Customers in traditional brick-and-mortar joints demand consistency over innovation, which can lead to menus that stagnate, chefs that get bored, and drop in food quality. In addition to widening the customer base, restaurants can use the ghost kitchen concept to experiment with entirely new menu options.
Ghost Kitchen Delivery
Similar to delivery at a brick-and-mortar restaurant, customers contact the ghost kitchen through the restaurant’s website, social media, or a mobile app.
Once the customer places the order, the kitchen staff is notified, and food preparation begins. When the food is ready, a delivery driver picks up the food and transports the meal to the customer.
Guests never know the location of the kitchen. Only the kitchen and order-fullfiment staff and delivery drivers know where you are. These locations are a mystery, keeping guests in the dark. Hence the names.
Where Ghost Restaurants Live
A dedicated space within an existing brick-and-mortar kitchen
A separate space where food is prepped, packaged, and picked up for delivery
Inside an independently owned host kitchen that houses multiple kitchens for multiple restaurants
In a food truck
Ghost Kitchen Chef
Pros and Cons of Ghost Kitchens
All in all, there are certainly many measurable benefits of the ghost or dark kitchen, but there are still a few drawbacks. Before considering a delivery-only model, it’s a good idea to first weigh the advantages against the drawbacks.
Advantages of a Ghost Kitchen
Boost sales with multiple brands. The ability to target multiple segments of the market with laser precision simultaneously is one of the biggest advantages of the delivery-only food business. Driven by data, delivery-only restaurants can pinpoint the customer needs in an area and satisfy it with multiple brands. Able to run a pizzeria, burger joint, and a health-conscious salad bar out of the same kitchen, for example, ghost kitchens can multiple different demographics at the same time, while benefiting from economies of scale across the brands.
Lower start-up costs and overheads. The most obvious benefit of a ghost kitchen compared to a traditional restaurant is the lessend barrier to entry and lower on-going costs. You need less space because you don’t have to accommodate dine-in guests.
Lower labor costs. Not only don’t you not need front-of-house staff at all, but with the efficiency of a data-driven approach, when you optimize for delivery-only, you need fewer back-of-house staff too. That also means savings on ingredients, equipment, computer systems, utilities, and storage space.
Location factor off the table. Because there’s no need to worry about an area's aesthetics, parking, proximity to corporate centers, or foot traffic, virtual kitchens can be situated in unassuming buildings with lower rental costs and located basically anywhere that’s accessible to suppliers.
Flexibility. In addition to running multiple brands, a ghost kitchen also allows you to be more flexible and adaptive. A data-driven operation, ghost kitchens are able to pivot whenever necessary, staying on top of trends, what’s working and what isn’t, and continually optimizing and reevaluating to constantly improve. If the market changes or a competitor makes a move, ghost kitchens can adapt to satisfy demand.
Improved profit margins. A smaller, minimal viable menu means you can improve the efficiency of your production and fulfillment processes, then use the data you gather to predict high and low volume periods and optimize your operations and staff levels accordingly.
Singular focus. Unlike brick-and-mortar establishments that offer delivery, ghost kitchens don’t have to worry about balancing off-premise orders with in-person dining. The focus can be on the food only.
Drawbacks of a Ghost Kitchen
Lack of a physical storefront. Though the lack of a physical presence is a huge advantage to operating a ghost kitcen, it can also be a significant challenge. Ghost kitchens don’t have the advantage of walk-in business and don’t have the benefits being a part of a community brings, making it harder to build up a natural fanbase.
Over-reliance on third party delivery platforms. While third-party delivery providers offer greater visibility in the marketplace, these platforms charge high commissions that eat away at profits fast. Partnering with commission-free companies like Sauce, that allows customers to order directly through a business’s own website or social media channels, counteracts this problem by providing an independent digital presence and keeping revenue in the business’s pocket.
Complicated menu management. Because many ghost kitchens tend to use a number of delivery partners to maximize the exposure and sales potential of their brands, uploading, updating, and managing menus and menu items on multiple sites can be a time consuming and thankless job. And the more brands you run from your ghost kitchen, the more complicated this task becomes.
Greater reliance on reviews. Because your customers are dining exclusively off-premise, the only things they’ll notice is delivery and food quality and as is the nature of consumerism, most won’t review your business unless they’re extremely pleased or terribly unhappy. Yelp reviews become more important to the virtual kitchen because even one bad review can send your rating plummeting.
Virtual Restaurant
Unlike a ghost kitchen, a virtual restaurant shares a direct tie to the brick-and-mortar restaurant, complete with front-of-house staff, seating, and sometimes a parking area.
By using an existing kitchen, the cost of renting a separate or shared remote kitchen space is eliminated. With careful planning, establishments can use their existing kitchen as a virtual restaurant while developing a profitable delivery-only model.
Not the same as simple delivery, a virtual restaurant can offer an entirely different menu than the one offered to in-house guests, with a dedicated website and an entirely different brand. For example, a Mexican bistro can operate a virtual restaurant that serves burgers only, or an American cafe can offer wings to go, exclusively.
Other virtual restaurants may just offer a select number of unique items in addition to the restaurant’s dine-in menu. In either event, the traditional restaurant and the virtual restaurant operate in conjunction with one another to service customers and drive additional revenue.
Take Away
According to Linkedin, the ghost kitchen market size was valued at USD 43.1 Billion in 2022 and is projected to reach USD 90.0 Billion by 2030. And in a ever-evolving, increasingly digital world, the low risk and adaptable nature of the delivery-exclusive model could make ghost kitchens the restaurants of the future.
Whether to jump straight into a delivery-only, ghost kitchen model or incorporate a virtual restaurant depends largely on each business’s market and future goals. While ghost kitchens can have unlimited variations, the ability to operate multiple brands and reach untapped markets, and an endless source of new revenue opportunities, adding a virtual restaurant may be a smaller adjustment for an existing business and could be a logical first step.
But whether you expand your operation within your existing walls or take the leap and start a separate ghost kitchen, don’t be afraid to jump on the delivery-only bandwagon. Or the missed opportunity could haunt you forever.
By Eileen Strauss
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