Everything You Need to Know About Operating a Ghost Kitchen

In 2018, consumers spent $10.2 billion on food delivery services. Considering the fast rise of food delivery, this is soon expected to hit the $200 billion mark. One of the prime reasons for this rising trend is ghost kitchens, also known as the virtual, cloud, or dark kitchens.

If you’re considering opening a ghost kitchen or turning your existing restaurant into a kitchen-only operation, there’s good news. For entrepreneurs, the ghost kitchen model means lower costs and faster time to market. Also, adding ghost kitchens is a relatively low-risk way to expand operations to new areas for existing brands.

Ghost Kitchens 101

Ghost kitchens, also known as cloud kitchens, are restaurants that operate without any dine-in or even pick-up options, in some situations. They’re entirely composed of staff members, an online platform, a kitchen, and delivery vehicles.

Ghost kitchens strip away the fancy décor and dining areas from the traditional restaurants, leaving just a large kitchen where food is prepared and packed to be delivered to customers. Typically, multiple restaurants can work together in a single ghost kitchen location.

Ghost kitchen menu items are chosen based on its ease of production and food quality upon delivery. As ghost kitchens tend to be located in industrial complexes away from the town, they sometimes feature driver parking, driver waiting areas, and check-in stations for easy delivery pick-up.

Furthermore, cloud Kitchens are tech-enabled. This means they leverage data collected from food delivery apps on customer smartphones to come up with valuable insights. For instance, the data can show which dishes are more popular at a given time frame and location. To learn more about how these modern restaurants operate, you can watch this ghost kitchen video series published by Thrillist.

The Rise of Restaurant Alternatives: Why Now?

In 2020, the COVID-19 pandemic took the world by utter surprise. No one could have anticipated that ghost kitchen strategies would become a necessity for restaurants across the globe.

As people are forced to stay-at-home due to the strengthening pandemic, the majority of the world’s restaurants had to shut down operations, unless they resorted to delivery or take-out model. However, this posed an array of questions to the traditional table service restaurants: What dishes are appropriate for delivery? How to connect with delivery apps? Will there be enough sales to cover the costs of remaining open?

Thanks to innovation, many restaurants essentially turned into ghost kitchens, offering delivery and take-out only services to customers. And, now that these restaurants have had a taste of running a cloud kitchen, they may not let go of this popular option. No one knows when the pandemic will end, however, one thing’s for sure—the post-coronavirus world is going to be challenging for the restaurant industry.

Advantages of Ghost Kitchens

• Lower Operation Costs– Ghost kitchens wipe away a lot of operational costs associated with traditional restaurants. This includes rent for the larger space to labor, remodeling, and décor costs. Additionally, unlike traditional restaurants, ghost kitchens don’t have to invest in various areas of business. Thus, virtual kitchens can price their menus more reasonably which leads to improved customer satisfaction and more sales.
• Minimized Risk– The lower upfront expenses make cloud kitchens a great option worth considering for small ventures like home-based cooks, and food trucks who wish to step foot in the restaurant industry but have no prior experience.
• Cheaper Advertising– Ghost kitchens being online-based businesses make social media an even more efficient marketing channel. With the right social media strategy, these restaurants will be able to reach out to their target audience without spending much on advertising. Email and SMS marketing are also other powerful options worth exploring.
• Cloud-Based POS Systems– In a report titled, ‘Is the Kitchen Dead?’ published by the Swiss investment bank and financial services company in 2018, most meals in 2030 are predicted to be ordered online. Evolving technologies like QR code scanning and delivery apps are projected to make this happen. According to the reports, ghost kitchens can further reduce cost by investing in technologies like a cloud management solution for kitchens that makes managing operations easier.

Disadvantages of Ghost Kitchens

• Online-Only Visibility– As ghost kitchens are online-only ventures, there will be very little customer interaction. This makes building the brand and earning your customers’ trust and loyalty a challenge.
• Technology-Dependent– Cloud kitchens are completely dependent on technology. Though huge advances are expected in the technological field, one cannot turn a blind eye on the snags. Regardless of how small or big, such interruptions will definitely pose a problem to basic operations.

All Things Considered

The ghost kitchen concept is similar to other areas of experiential retail. Instead of physical storefronts, companies operate out on the cloud and bring the experience to customers leveraging technology. Nevertheless, modern customers want a more personalized and convenient experience. When opening a cloud kitchen, you’ll have to be careful about meeting those needs. Put together a strategy to engage people, and do the research on your part to win the game.