Ghost kitchens are a relatively new business concept that have revolutionized the food service industry in the past few years. As the industry’s fastest growing revenue model, ghost kitchens have found a way to reduce operating costs while capitalizing on the growth of the multi-billion-dollar take-out market.
In 2019, the ghost kitchen market was valued at $43.1 billion, a figure that promises to reach $1 trillion by 2030, at which point it will represent half of the take-out and drive-through sector. Currently, there are several thousand ghost kitchens in North America, a number that continues to grow with the success of the concept.
But, What is a Ghost Kitchen?
Ghost kitchens, also referred to as dark kitchens, shadow kitchens, virtual kitchens, and delivery-only restaurants, are professional food preparation and cooking facilities that exist without restaurant dining infrastructure such as formal storefronts and indoor seating areas.
As such, ghost kitchens are developed as online brands that are solely marketed for take-out and/or delivery-only meals. They exist as back of house operations that effectively streamline the preparation, cooking, packaging and delivery of meals for a convenient off-premises food experience.
While the concept originated in 2015, pandemic conditions created the perfect environment for take-out and delivery-only restaurants like ghost kitchens to thrive.
Over a period of only three months in 2020, pandemic conditions accelerated growth of the sector by five years.
How to Capitalize on the Ghost Kitchen Market
Ghost kitchens provide a unique opportunity for tried and true brands to modernize, diversify and reach new customers, testing new products and concepts without the need for significant investment or sacrificing the tradition of their brand.
These concepts can be standalone, an extension of a brand or can house more than one brand simultaneously.
When compared to traditional restaurants, which can process up to 20 orders per hour with a full staff, ghost kitchens can handle triple that amount with a fraction of the staff. These efficiencies result in a number of cost savings.
Ghost kitchens cost less to launch and operate versus a traditional restaurant due to smaller real estate needs and less overhead including fewer infrastructure needs like seating and décor, and less staffing requirements, which is especially important during a labor shortage.
Alternatively, ghost kitchens also have some disadvantages. While third-party apps are a means to a wider market reach, their high fees eat into the profits enjoyed by the restaurant operator.
This reliance on third parties also leads to challenges with relationship management and accountability, since there is limited direct customer interaction.
For those who wish to offer their own delivery instead of relying on third parties, they are faced with the challenge of high delivery costs which are being exacerbated by rising gas prices and geopolitical events, so sometimes the associated fees and the additional marketing via third parties are worth it.
Tips to Effectively Launch and Establish a Ghost Kitchen
To make good on the countless advantages and to mitigate the risks associated with the challenges, there are a few simple tips to follow to optimize the launch and operation of your ghost kitchen.
1. Choose a Concept, Find Your Niche and Devise a Plan
One of the most important things to consider when launching a ghost kitchen is your business plan: what will you offer? Will your menu items travel well? Who is your competition and what makes you different from them? What structure will your operation take? Will you operate in private or shared, new or existing facilities?
From a cost standpoint, it is important to keep both delivery and food costs down as youth and low income individuals are most likely to utilize delivery services. It is important to understand your target market and develop a menu and pricing that people want and can afford. Make your menu accessible both in terms of cost and delivery.
2. Location! Location! Location!
Since ghost kitchens are delivery centric, they can operate out of almost anywhere including existing space, private space, shared space, rented commercial space and are not tied to central business areas since they do not rely on foot traffic.
For optimal reach from a delivery standpoint, ghost kitchens should be proximate to the target demographics and neighborhoods so the food can arrive promptly and to temperature.
3. The Right Distribution Strategy
The location you choose will lay the foundation for a ghost kitchen’s distribution strategy: will it be a delivery-only location? Will you offer in-house delivery or partner with a third party? Will pick up orders be allowed? Will pick-up orders be given a discount, if so? Do what makes sense for the location, the market and your bottom line.
4. Build your Brand Alongside your Business
Because ghost kitchens have less foot traffic and smaller physical footprints, more effort is required to build and market the brand.
Social media is a great opportunity to reach people, but efforts should go beyond a digital presence to include a carefully crafted logo, packaging and other customer-facing materials that will build the brand and the consumer relationship even where there is a lack of in-person interaction. In a saturated market, be memorable.
5. Equip Yourself for Success
From staffing levels, kitchen equipment and the ingredients themselves, procurement is an important part of any restaurant operation, but one of the most imperative pieces of equipment that will be needed is the technology that will power the entire operation: point of sales (POS) and customer relationship management software (CRM).
Ghost kitchens should think about owning the relationship with their customers while leveraging their own first party ordering system, which cuts down on third party commissions, and provides them customer data which is invaluable when growing their business sustainably.
These tools will not only facilitate the optimal functioning of the business, they will be the source of invaluable data and analytics from which the business can be further optimized and grown making it easier for the staff to do more with less.
A Pathway to Success
It is clear that the advantages of starting a ghost kitchen heavily outweigh the disadvantages, so, if care is taken to devise a strategic business and marketing plan, find the perfect locale, establish a distribution strategy and equip yourself with the right ingredients, tools and partnerships.
Whether the plan is to start from scratch or expand an existing operation, there is a growing number of service providers that offer turnkey and customized offerings to support the successful operation of ghost kitchens, from full kitchen infrastructure and complete restaurant management, and staffing.
About Smooth Commerce:
Smooth Commerce is an all-in-one digital commerce and customer marketing platform for restaurants that combines online and mobile ordering, delivery, loyalty, and powerful marketing tools to help you grow your business, while giving you access to your customer data to help grow your restaurant.
If you would like to learn more or talk to a representative from Smooth Commerce about how our platform can help you meet your loyalty goals, contact us at email@example.com.