Ghost kitchens (also called virtual kitchens, cloud kitchens, dark kitchens) are delivery-only spaces that have the back-end without the front. No seating areas, no counters, no servers, no real “ambience,” not even a physical takeout space.
In a society where the sharing economy is growing more important and driving innovation, it’s an idea for our times. Everything is ordered online, prepared in the ghost kitchen, and delivered by third-party marketplaces like Uber Eats, Skip the Dishes, DoorDash and Foodora. Customers interact with the delivery company only. (See Exhibit 1.)
This technology-driven concept lowers overhead for staffing and site costs. As rents have gone up and margins shrink, more operators are enticed by the lure of doing away with front-of-house expenses. In short, it can make the numbers work where they might not otherwise. But there can be challenges if not done properly.
Virtual flexibility
Depending on the brands being served, ghost kitchens can turn out more than one type of cuisine and can feed various menus or sites. That’s especially appealing if you want to move efficiently from one market segment to another to take advantage of trends and growth. And it can be a great way to help counter the ebb of seasonal fluctuations.
“Chefs and restaurateurs have to maximize their capacity,” says Dana McCauley, associate director of new venture creation, University of Guelph. “You’ve got an asset that you need to run as many hours a day as possible to make the numbers work.”
Focusing on making, delivering and marketing food while reducing overhead is a saavy strategy, McCauley observes. “Today’s technology is making it possible. A solid online presence through websites and Instagram and various services are offsetting the importance of neighbourhood storefront locations to build visibility and diner loyalty.”
“Virtual kitchens are a blend of technology plays and restaurant plays.”
Sterling Douglass, co-founder and CEO of restaurant-tech company Chowly
Technology feeds operations
To succeed, ghost kitchens require a tech setup that fits with their operational flow. “Often, virtual kitchens are being run by technology companies and missing key operational steps,” says Sterling Douglass, co-founder and CEO of restaurant-tech company Chowly.
“Virtual kitchens are a blend of technology plays and restaurant plays,” Douglass says. “The teams building these technologies need a significant amount of experience in both areas. Lacking in technology experience will hurt volume and affect operations. Lacking in restaurant experience will decrease food quality, margins, and guest experience.”
He recommends operators answer the following key questions:
- How are concepts separated?
- How are they communicated to cooks?
- How are they bagged and prepped differently?
- How is the driver handoff different?
Know what you don’t
Ghost kitchens present a learning curve for bricks-and-mortar restaurant operators and those new to the industry. That includes everything from understanding the different labour costs to juggling multiple third-party services which are delivering the food.
Thinking about entering the ghost kitchen sphere? Chowly CEO Sterling Douglass offers four pointers:
- Concepts should be data driven
- Menus should be small and VERY simple
- POS integration is a must-have
- A very deep margin analysis should be conducted before launching
Delivery services typically take a 30 per cent cut from every order, though larger operations can negotiate more favourable rates.
On the virtual edge
Ghost kitchens can be found in shared commissary spaces and back ends of storefronts, and some other places, too:
- Popup cooking stations within the main kitchen of a restaurant that fill delivery-only orders from one, two or even a half dozen brands.
- Pod kitchens in shipping containers that can be placed wherever zoning permits. Some double as drive-throughs.
It will be important that operators can efficiently serve both dine-in consumers as well as those ordering takeout or delivery. Also, expect to see more restaurants forego dine-in altogether and experiment with delivery-only stores, especially in partnership with third-party delivery services.
Exhibit 1. (Referenced in article)
