Ghost Kitchens: What They Are & Why You Should Be Paying Attention

When you order delivery, you picture your food being prepared in the same kitchen, by the same staff, that cook your favourite dishes in the same way as they always have.

But what if I told you that your Wednesday Night Wings were not cooked in the same kitchen as they are when you dine in-person?

What if I told you that the people who cooked your wings were not even employed by your favourite restaurant?

What if I told you that your wings came from an entirely different area of the city altogether?

This novel concept is called a Ghost Kitchen; a facility used for the sole purpose of producing food for delivery or takeout.

And they’re here to stay — according to research firm Euromonitor, ghost kitchens are set to be a $1 trillion global market by 2030.

So what are they again? And why should you care?

First, some definitions:

Ghost Kitchen: A professional-grade food preparation facility used solely for the production of delivery & takeout food.

Virtual Restaurant: A restaurant that uses its own brick-and-mortar locations to create additional offerings for delivery or takeout exclusively.

Virtual Brand: A delivery-only food concept sold exclusively online with no physical space for guests to interact with the brand.Simply put, ghost kitchens are restaurateurs’ attempt at capitalizing on the recent boom in off-site dining; whether it be takeout, delivery, online orders, etc.

And their attempts have been successful. According to Euromonitor, about 60% of the cost of a typical restaurant menu item represents the costs of staffing and rent. Now, imagine that you could subtract the premium for operating in high-traffic areas, the cost of support staff like hostesses, servers, greeters and bussers, and subtract the cost of renting a space large enough to house all of your guests.

And here’s the kicker: you’re able to hold your prices the same as they were with all of those extra costs.

Do I have your attention yet?

Before you get too excited, ghost kitchens are excellent strategies in some cases, but not all. Here are some situations in which a ghost kitchen could be a great move for your business:

1. You already have a solid brand name and your kitchen is a bottleneck
2. You want to expand your product selection without compromising your brand name
3. You want to gain market share in one food category
4. You already are operating off-site-only, and it’s going great

But if none of these situations apply to you, don’t worry. You might just want to do a little more research before you make the leap.

Lastly, let’s talk about what the rise of ghost kitchens means for the industry.

Rising costs, increased competition, and high risks make it difficult to open a restaurant; more than 80% of restaurants fail within five years of operation.But unlike traditional restaurant spaces that require a long-term contract (often 10 years), ghost kitchens provide restaurant owners the opportunity to rent fully-equipped kitchens on a month-to-month basis for a fraction of the cost of a brick and mortar.

This provides a nearly irrefutable opportunity for many restaurants, which means that these ghost kitchens are here to stay.

But without the human interaction of customers with kitchen staff, this shift could potentially pave the way for fully automated kitchens that would further decrease costs. Strange, to think that your next McDonald’s burger could be made by a computer, and you would be none the wiser.

Whether you are on board with ghost kitchens or adamantly opposed, it is undeniable that they are fundamentally shifting the dynamics of the restaurant industry. This is a trend that everyone should be paying attention to.

Take-Home Message: Research shows that working with a 3rd-party delivery system raises sales (on average) by 20%. What could you do with a 20% increase in revenue? Join the DineEasy network here.

P.S. Check out a great example of a successful Vancouver-based ghost kitchen: Brick ’n’ Cheese