Ghost kitchens (also popularly known as cloud kitchens, dark kitchens, virtual kitchens, central kitchens, shadow kitchens, commissary kitchens, satellite kitchens, or headless kitchens) have been popping up around the world and changing the way customers dine and restaurants operate. Thanks to the big four delivery apps (Grubhub, Doordash, UberEats, and Postmates), US consumers started to order delivery or takeout from their favorite restaurants at least once a week, sending big money to the businesses willing to keep up. This demand for takeout and delivery services is only set to grow over the next four years, with a number of users ordering food online expected to hit a whopping $2.9B by 2025. The delivery revolution also birthed the (ominous sounding) ghost kitchens – a concept that promised to expand delivery and takeout services at a minimal cost. Restaurant Business predicts that ghost restaurants will outlast the pandemic as their sales are projected to rise 25% each year for the next five years. Their future looks bright, with Euromonitor estimating that they are positioned to become a $1 trillion industry by 2030. How did they get this popular? In this article, we dive into some of the top questions on ghost restaurants including their business model, and how you can get started with your own profitable ghost kitchen business.
What is a Ghost Kitchen?
Ghost kitchens are in simple terms restaurants without a dining space built to focus solely on fulfilling delivery or takeout orders. These virtual kitchens operate as a digital storefront with only a few staff members working on fulfilling customer requests. The customer orders are picked up by a delivery partner or a customer and enjoyed off-premise. Central Kitchens have risen in popularity over the years due to several perks they offer.
Here’s why ghost kitchens are so popular these days:
Benefits for Restauranteurs:
- Unprecedentedly low startup and overhead costs
- Lesser time to launch vs a traditional restaurant
- Lower average time to breakeven vs a traditional restaurant
- Adjustable menu that can be experimented with
- More traffic from online consumers
- Ability to meet modern day takeout and delivery demands
- Reduced worker headcount
- Less legal paperwork to deal with
- Quick and inexpensive way to test a concept
Benefits for Customers:
- Convenience of takeout or getting food delivered at the door
- Lower order totals due to overall lower costs for the restaurants
- Variety of food and restaurants to choose from – almost like ordering from an online mall
- Shorter lines and lower wait times that come with order delivery and pick-up
Ghost Kitchen Business Models
As it so happens, this unique 21st-century business can be run in many ways, ranging from adding the opportunistic delivery-only brand to an existing restaurant all the way to running shared kitchens housing multiple brands.
There are four different ghost restaurant business models so far, and as time progresses we expect newer versions to pop up.
- Independent Ghost Kitchens: As the name suggests, these kitchens prepare a single menu of items for their customers to order. These businesses heavily rely on third party apps to fulfill their delivery requests and they don’t own their customer data. This cuts them off from having any interaction with their customers and so they cannot retain customers without the help of partnered delivery services. More on this later in the article.
- Multi-Brand Ghost Kitchens: These ghost kitchens operate similar to independent ghost kitchens but the difference between the two models is their scale. The multi-brand uses a single kitchen space to prepare multiple central kitchen menus. The anonymity of virtual kitchens allows preparing vastly different menus in the same space without raising eyebrows. This ghost kitchen concept increases the total orders while also broadening customer reach.
- Incubator/Pop-Up Kitchens: Incubators are attached to traditional brick-and-mortar store but are built to fulfill only online orders. They serve the purpose of reducing the pressure of online orders on the restaurant crew. This business model is highly appealing for restaurant owners as it allows to rapidly create new revenue streams and offers a structured way to test new food concepts.
- Shared/Commissary Kitchens: Another business model that puts back money in the pocket. In this business model, multiple restaurants share kitchen space, tools and appliances and use third-party delivery services to fulfill orders. The fast growing startup CloudKitchens, sells turn-key shared kitchens to the businesses and restaurateurs assume operations from Day1. All of this without spending substantial money for the previleges.
The common denominator in all of these ghost kitchen business models is the heavy reliance on 3rd-party delivery services. As much as they help with the bottom line, they bring their own set of risks. These days the delivery services are pushing for brand ownership for getting monopoly status in the delivery market and to have control over the businesses that use them. It is these delivery companies that own the customer data and control customer access and not the central kitchens. It is because the central kitchens are at their mercy for business, they can continually raise fees. BUT- the good news is – there is a way out of this and more.
The Win-Win-Win Arrangement For Ghost Kitchens
How would you like a solution where you get to:
- Keep all the customer data
- Save big on delivery/pickup costs and keep your profits
- Own your brand and your business
- Not worry about driving traffic to your store
- Not worry about customer service and satisfaction
- AND not pay big commissions
No catches. No buts. No coconuts. You can get this and more with Fish – the all-in-one chat-based ordering platform – built to connect customers with businesses.
With Fish taking care of your sales and marketing, you can focus on the more important things like – starting your own ghost kitchen.
How To Start A Ghost Kitchen?
Due to increased demand for food delivery and takeouts, rising real estate prices, booming gig economy, innovation in kitchen tech, and exploding power of digital marketing, ghost kitchens are here to stay and the best part is you too can start a successful one. This is how:
- Decide on what you want to sell. Pick a niche and stick to it as it will help define your brand.
- Once you have decided on the cuisine/niche, perform market research to gather insights on the food trends. It will help you create a menu of items that people are looking to eat.
- While deciding on a menu, it’s a good idea to pick items that can be cooked in bulk and delivered.
- After you have a concept, you should decide on a business name. Ideally, the brand name should be fewer than three words in length and should convey the food you sell
- The type of food you cater will dictate the equipment you will need. If you’re looking to keep costs low, it’s best to buy second hand.
- When it comes to deciding on space, you’ll need adequate room for equipment, surface area to prepare and package the food. These days pop-up kitchens can be rented for as little as $25 an hour.
- When you choose packaging, think bio-degradable containers that provide heat insulation and regulate temperature.
- Prepare for operating legally. Make sure to have the right insurance, training, and certificates in place.
- Start selling with Fish.