The What, the Why, and the How of Ghost Kitchens

by | Oct 26, 2022 | Restaurant Trends

A woman holding a takeaway bag from a ghost kitchen servicing station

After NBC first reported about the rising number of ghost kitchens back in 2015, the concept continues to rise in popularity with diners and operators alike. Initial reports warned the public that when placing orders online, they could be ordering from unregulated operators working in the shadows around New York City. Since then, virtual kitchens have continued to pop up as hospitality workers and restaurant owners pivot to this operating model. Consumers, for their part, support these operators for a variety of reasons, and the legal frameworks that govern what ghost kitchens are and how they should work continue to evolve. 

Ghost kitchens emerged as a definitive alternative to in-person dining during the pandemic. From there, it’s become a global phenomenon, and experts suggest that ghost kitchens will have a 50% market share of the drive-thru and takeaway industry by 2030. Funding is flowing to startups who want to franchise their ghost kitchens in the same way co-working locations flipped the paradigm for office work. Ghost kitchens and virtual restaurants are here to stay as they cater to a growing market of consumers who prefer to order in or collect takeaways instead of sitting down to eat in brick-and-mortar establishments. The rising popularity leaves many wondering what ghost kitchens are, how they operate, and why they are becoming more successful than traditional operating models. Below, we discuss the what, the why, and the how of today’s ghost kitchens. 

Key Takeaways:

  • Ghost kitchens are becoming more popular with celebrity endorsements, startup funding, and major restaurant brands embracing this new operating model
  • A ghost kitchen is similar to a virtual restaurant, but the main difference is that it operates independently, without any front-of-house operations
  • The main benefits of a ghost kitchen are reduced overheads, shorter times to market, more flexibility, and diversified revenue streams  

What Are Ghost Kitchens?

Ghost kitchens are physical spaces where operators prepare food for off-site consumption. There is no front-of-house operation, and often, multiple operators may use the same ghost kitchen to prepare a variety of foods. With no storefront, waiters, or in-person diners, consumers can only place orders via phone, online, or third-party apps like Grubhub or DoorDash. When viewing a ghost kitchen restaurant over these servicing channels, they are indistinguishable from regular operators. 

Although the terms virtual restaurant and ghost kitchen are similar, there are key differences to consider. Ghost kitchens operate primarily without any front-of-house operations, and one operator may create multiple menus for different cuisines to service different appetites. The main difference between a virtual restaurant and a ghost kitchen is:

  • Virtual restaurant – Usually operates from a normal brick-and-mortar restaurant with in-person dining but expands the menu for delivery- or takeaway-only options. Examples include It’s Just Wings, which operates from existing kitchens of the Chili’s and Muggiano’s brands.
  • Ghost kitchen – These operators are not associated with existing brands and create entirely new takeaway-or delivery-only dining experiences. The commercial kitchen focuses solely on food preparation and delivery using online marketing and fulfillment options, often for multiple brands or types of cuisines.

A definition of what ghost kitchens are in comparison to virtual restaurants

Image Courtesy of Gordon Food Service

How Do Ghost Kitchens Work?

Operational models for ghost kitchens may differ (serving foods directly to the public or carrying out meal fulfillment for other businesses), but the general concept remains the same. Operators rent a commercial space in a facility close to a populated area. After creating a menu, setting up an online presence, and registering with a food ordering and delivery service, the ghost kitchen is operational and can start fulfilling orders. Depending on the menu options and brands running out of the same kitchen, the packaging resembles any other takeaway or delivery meals, and consumers usually aren’t aware that there is no storefront restaurant involved. 

 Five steps that show how ghost kitchens work in today’s online food marketplace

Image Courtesy of MenuDrive

Why Run a Ghost Kitchen or Delivery-Only Restaurant?

Regulators have valid concerns about ghost kitchens due to the lack of transparency available from these operations. However, running a ghost kitchen benefits restaurateurs and delivery-only operators. When only renting a kitchen in a commercial facility, there’s a reduced overhead while allowing maximum flexibility to experiment with different menus that attract a larger group of consumers. The commercial kitchen will operate under the stringent safety regulations that apply to the food industry and often provide additional services that streamline your operations. 

The benefits of running a ghost kitchen may include:

  • Quicker time to market – Setting up an in-person dining establishment can take months compared to designing a menu and creating an online ordering service
  • Increased revenue streams – Dedicating a restaurant to a single type of cuisine limits revenues, whereas a ghost kitchen allows you to prepare multiple types of food in the same space
  • Reduced overheads – Commercial kitchens will have a greater technology stack with less overhead as the facility services multiple different restaurants that share the costs
  • Shared resources – You can service different menus using the same staff working from set recipes while also pooling ingredients for more cost-savings

There are challenges with this operating model. Firstly, ghost kitchen brands have less name recognition and will have to excel in the food they prepare to remain profitable. If a person orders from the establishment and the quality isn’t up to standard, they won’t just stop ordering from you but also tell their friends about their experience. The customer’s experience is essential to running a ghost kitchen successfully. 

Secondly, you may have to rely on third parties for taking orders and meal fulfillment. The share of profits for each order is only one factor to consider as a poor quality delivery service can also limit revenues and affect customer satisfaction. Finally, you won’t have any of the income associated with walk-in traffic. To keep orders coming, you’ll need to adapt your strategy to attract more customers online using modern approaches, including professional photography, search engine optimization (SEO), and digital transformation for all your operations.

Uncovering New Opportunities in the Food Industry with Ghost Kitchens and SIAL America

SIAL America hosts one of the biggest generalist food and beverage events in the United States. Exhibitors include major chains and startups involved in every facet of the food industry. By attending SIAL America, you can learn about all the trends and developments reshaping the food services industry, including how ghost kitchens will evolve over the coming years. 

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