Also known as virtual kitchen, shadow kitchen, commissary kitchen, cloud kitchen or dark kitchens, ghost kitchens are meant to address the demand for off-premise restaurant dining. In 2018, consumers spent $10.2 billion on orders through third-party delivery platforms like UberEats and GrubHub, according to Technomic.
Most operators launch a ghost kitchen to capture more of the hot delivery segment. U.S. food delivery sales topped $19.4 million in 2019, and Euromonitor recently estimated that ghost kitchens could potentially top $1 trillion in revenue by 2030. Restaurants that aren’t equipped to handle high-volume delivery may face certain challenges – but those that are equipped stand to make a big profit from the seemingly permanent shift to off-premise dining caused by COVID-19.
A ghost kitchen is a professional food preparation and cooking facility set up for the preparation of delivery-only meals. However, a ghost kitchen differs from a virtual restaurant in that a ghost kitchen is not necessarily a restaurant brand in itself and may contain kitchen space and facilities for more than one restaurant brand.
They can provide a double door to profits with: A lower investment cost than existing brick-and-mortars, The ability to use your existing kitchen, Expanded customer reach with a higher profit margin
A ghost kitchen contains the kitchen equipment and facilities needed for the preparation of restaurant meals but has no dining area for walk-in customers. Ghost kitchens have emerged as a business model in response to the rapid growth in consumer demand for restaurant delivery meals, and the lower costs incurred by using kitchen facilities located outside of high-rent, high-foot-trafficked urban locations. Using a ghost kitchen allows established restaurants with dining-in service to expand their delivery operations without adding stress to the existing kitchen, frees up parking taken by the delivery vehicles, and allows them to enter new neighborhoods at lower cost.
An individual can set up a ghost kitchen to start their own brand, which is identified with their own online restaurant. One might choose to start up a ghost kitchen because setup costs are lower, and the time taken is shorter, than for a kitchen that also serves a walk-in restaurant. It might take only 3 or 4 weeks.
Due to the money saved by not having a dining room and not hiring waitstaff, ghost restaurants have significantly lower overhead (even taking into account the expense of operating a delivery service or the fees charged by third party delivery companies like Grubhub and Caviar) and thus higher profit margins.
Without a brick-and-mortar dining location to renovate, front-of-house staff, and paper menus to reprint, companies can also try out new brands and cuisines with less effort and expense.
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Kitchen in the Cloud
For the last five years, Gaurav Jain has been thinking about the potential opportunity of virtual kitchens. Jain, the co-founder and managing partner of Afore Capital. He uses the analogy of Amazon Web Services, the arm of the e-commerce giant that gives companies — both large and small — access to cloud computing. In his mind, Zuul will do the same for restaurants’ ability to meet delivery demand.
Former Uber CEO Travis Kalanick acquired a ghost kitchen company in 2018 and has since been making deals in China, India and the United Kingdom.
CloudKitchens is a real estate company that provides smart kitchens for delivery-only restaurants. They provide infrastructure and software that enables food operators to open delivery-only locations with minimal capital expenditure and time. It was founded in 2016 and is headquartered in Los Angeles, California, United States.
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CloudKitchens
Ghost kitchens (or cloud kitchens) caught investors’ attention when Uber co-founder and former chief executive Travis Kalanick raised over a hundred million dollars to make the idea his next big bet after Uber. Interest and investment into the model, which sees companies offer food prep and storage spaces for would-be food truck and delivery entrepreneurs, soared. Kalanick’s CloudKitchens have gone on to raise several hundreds of millions of dollars and spawned competitors like the Pasadena, California-based company Kitchen United.
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JustKitchen operates cloud kitchens, but the company goes beyond providing cooking facilities for delivery meals. Instead, it sees food as a content play, with recipes and branding instead of music or shows as the content, and wants to create the next iteration of food franchises. JustKitchen currently operates its “hub and spoke” model in Taiwan, with plans to expand four other Asian markets, including Hong Kong and Singapore, and the United States this year.
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Cloud Kitchens Are Now Serving
Cloud kitchens are restaurants built around food delivery rather than sit-down service, and they are increasing in popularity as COVID disrupts the industry, write Lena Ye and Geoffrey Jones.
The economics are appetizing: Cloud kitchens are much cheaper to set up than brick-and-mortar restaurants; there’s no need for them to be in prime locations, no need for cool designs, and no need for seating space. One estimate we heard was that a brick-and-mortar restaurant in New York City costs $1 million to $1.5 million to set up, while a cloud kitchen can get up and running for $100,000.
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The REEF Platform
Enables underutilized real estate to be tailored to meet the diverse needs of the surrounding neighborhood. We have built our foundation on top of the traditional parking infrastructure allowing us to get essential products and services closer to the customer than ever before.
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Ghost Kitchens Could Be the Future of Restaurants | US Foods
Terri Bloomgarden, co-owner of Canter’s Deli in the Fairfax neighborhood of central Los Angeles, says kitchen logjams drove her to open an off-site commissary dedicated to delivery orders. “We do a lot of takeout and delivery, and if you don’t have a separate area for that, customers don’t understand what you’re doing when they are in the restaurant, waiting in line,” she says. Reaching a potential new market – downtown Los Angeles – factored in as well.
For Terri, the off-site kitchen was the answer, but restaurants with larger kitchens, and those who are currently operating on limited dine-in capacity, can go ghost in their existing kitchen. The ghost kitchen concept can be turned on at the times most convenient and profitable for the operator.
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Are Ghost Kitchens the Future?
The boom in off-premises business has some restaurants considering the virtual kitchen model.
“Virtual kitchens reduce the burden on restaurants’ four walls,” says Craig Cochrane, executive vice president of marketing for Pasadena, California–based virtual restaurant facility Kitchen United, which just opened a second location in Chicago. The company’s two-part model comprises shared kitchen space for companies looking to test and launch new products and a multi-kitchen virtual restaurant to help brands expand delivery or cheaply and quickly get into new markets. Securing a $10 million investment last year led by Google Ventures, Kitchen United aggressively aims to open 10-15 facilities by year-end.
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Kroger and Ghost Kitchens
The Kroger Co., one of the biggest grocery chains in the Midwest, is dipping its toe into on-demand delivery and the ghost kitchen craze through a partnership with an Indianapolis-based startup, ClusterTruck.
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ClusterTruck is a one-of-a-kind delivery restaurant that brings people restaurant-quality food wherever they are—at home, work or their favorite haunts. We believe hungry people should never have to compromise between the convenience of fast delivery, the food quality they’d get at a sit-down restaurant and the personality of street food, so we created a service that offers all of the above. Unlike other food delivery services out there, we make all of our own food in one central kitchen and never start cooking until there is a driver available to deliver the food to you. That’s how we’re able to deliver meals that are hot and fresh, every time. Our delivery zone currently covers downtown districts in Indianapolis, Indiana; Columbus and Cleveland, Ohio; Kansas City, Missouri; Minneapolis, Minnesota; and Denver, Colorado. You can go to ClusterTruck.com and enter your address to check whether we’re delivering in your area.
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Why Are Ghost Kitchens Becoming So Popular?
The simple answer is because food delivery is exploding. With the growth comes PR, chefs jumping in to get ahead of the curve, and investors who want to take advantage of the trend.
To explain further, ghost kitchens are a bet that the future of food lies in delivery. And because most restaurants lose money when they use delivery apps, ghost kitchens appear to be an attempt to fix the problem. Whether it works or not is still to be seen, so we encourage readers to view ghost kitchens for what they are, an experiment that is still running.
Apps like GrubHub, Postmates & DoorDash have ushered in the golden age of delivery in America: growing 300% faster than dine-in over the last 5 years. Well over half of U.S. consumers now grab delivery at least once a week, translating into big money for businesses willing to keep up.
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Celebrity Chef Eric Greenspan
Recently launched several delivery-only brands from a single commissary in downtown Los Angeles.
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Chef or Entrepreneur Just Starting Out
If you have no experience in the food industry, ghost kitchens may seem like a great way to test out your food concepts. With lower upfront costs and no need for marketing, putting up a virtual brand on delivery apps and seeing what happens seems like the lowest risk option.
