What Are Ghost Restaurants?
The phrase "ghost kitchen" refers to food service establishments that provide delivery and, on occasion, takeaway but do not have a dining area. To take orders and deliver meals to consumers, most ghost kitchens use third-party delivery services.
The ghost kitchen business model helped restaurateurs navigate through the COVID-19 pandemic's tough times. They are still significant in the post-pandemic food service scene because they enable operators to satisfy new consumer expectations, cut costs, and expand menus quickly.
Names for Ghost Kitchens
The food service sector refers to ghost kitchens by a variety of names because they are a developing phenomenon. In most cases, the terms are used interchangeably to describe restaurants that do not have a physical location. Some industry specialists, on the other hand, desire standardized titles to distinguish ghost kitchen business types. For the time being, you can use the following words to refer to any restaurant that does not have a physical location:
- Ghost Kitchen
- Cloud Kitchen
- Dark Kitchen
- Virtual Restaurant
- Satellite Kitchen
- Ghost Restaurant
How Do Ghost Kitchens Work?
Typically, meals are prepared in ghost kitchens when they are ordered in a commercial kitchen equipped with commercial fridges and kitchen equipment without a dining area. Due to the high cost of setting up a delivery service, most ghost kitchens rely on third-party delivery services.
Ghost kitchens build strong social media presences and invest in digital advertising strategies because they can't rely on walk-in customers. Virtual restaurants aren't home chefs selling their wares on the internet, nor are they food distributors. They're on par with sit-down restaurants in terms of size and menu variety.
A commissary kitchen is used by the majority of virtual restaurants. A commissary kitchen is fully equipped with commercial fridges and kitchen equipment that may be rented. While a commissary kitchen can be shared, most virtual restaurants rent private commissaries since their needs differ from those of other commissary customers. Caterers and mobile kitchen operators, for example, require the commissary to prepare meals ahead of time, while dark kitchens require it during typical restaurant hours.
Are Ghost Kitchens Profitable?
Since 2014, the digital ordering and delivery industry has expanded 300 percent faster than dine-in traffic, demonstrating that ghost kitchens are a highly profitable company. In high-rent locations with a glut of restaurants, ghost kitchens are a particularly profitable option to owning a dine-in restaurant. Virtual restaurants save money on starting costs, building maintenance, and front-of-the-house personnel. The hefty costs imposed by third-party delivery apps, which can collect between 15% and 30% of each order, are the biggest danger to a cloud kitchen's viability.
Ghost Kitchen Business Models
Ghost kitchens, like brick-and-mortar restaurants, vary in scope and dining style. We'll go through five alternative virtual restaurant business models so you can figure out which one best suits your needs and budget.
- Independent Ghost Kitchen Business Model
In a restaurant without a storefront, an independent ghost kitchen prepares a single menu to order. The majority of ghost kitchens work with a variety of third-party delivery apps. Independent ghost kitchens prepare orders in their kitchens equipped with commercial fridges and kitchen equipment, then leave them at the front desk for the paired driver to pick up. They rely on third-party apps to take orders and do not have control over their clients' data. Without your partnered delivery providers, you won't be able to communicate with or keep customers if you don't possess customer data.
- Multi Brand Ghost Kitchen Business Model
Multi-brand ghost kitchens work in the same way as single-brand ghost kitchens in terms of receiving orders and delivering them. The scale of multi-brand and single-brand ghost kitchens differs. A multi-brand corporation will make various virtual restaurant menus using a single kitchen space.
Preparing multiple virtual dining concepts expands your customer base and raises your total orders. While customers are cautious of physical restaurants that promise to serve both the best sushi and the best pasta in town, the anonymity of satellite kitchens allows you to create dramatically different cuisines in the same place without raising suspicion.
- Operator Managed Ghost Kitchen Business Model
Operator managed ghost kitchens or virtual franchises are when brick-and-mortar eateries prepare a virtual restaurant's menu in their cooking space. The virtual concept will not be listed on their physical menu. Customers can use third-party delivery applications or the virtual concept's primary meal order website/mobile app to place their orders.
When virtual restaurant guests can pick up their orders, they attract customers who would otherwise shun ghost cooks in order to avoid delivery fees. Bakery and cafe operators that don't use their kitchen during the day will benefit from incorporating a virtual franchise. The operator managed ghost kitchen business model is also being adopted by several grocery stores, such as Kroger.
- Mid Ground Ghost Kitchen Business Model
Ghost kitchens in the middle ground process orders in a kitchen with a little storefront where clients can pick up their purchases if they choose. Many mid-ground satellite kitchens are switching to an off-premise dining business model based on drive-through alone, but a basic pickup window will serve. While having a pickup area may cost you a little more in rent, because delivery services can take up to 30% of each order, you'll still be able to keep more of your revenues.
People can place orders directly through mid-ground ghost kitchens, allowing operators to maintain contact with their customers even if their delivery service changes. Furthermore, because many consumers like the convenience of eating at home but do not want to pay a delivery cost, mid-ground ghost kitchens have a larger clientele.
- Brand Owned Ghost Kitchen Business Model
Ghost kitchens that are controlled by a brand join up with a single third-party delivery service and agree to only accept orders through their platform. Third-party delivery firms are increasingly striving for brand ownership in order to gain a monopoly on the delivery market and control over the businesses that utilize them.
Businesses that sign brand-owned arrangements are at the mercy of the third-party delivery service they use since the third-party delivery firm owns customer data and controls customer access, not the ghost kitchen. Because the virtual restaurant can't make a change without losing all of its customers and having to start over, the delivery service can keep raising rates.
Locking yourself with a single delivery provider has its drawbacks, but it also has its benefits. If you own your ghost kitchen, the delivery app will want you to thrive and will often send you additional business. You'll most likely rank higher in the app's search results page and receive other promotional materials.
Advantages of Ghost Restaurants
Here are some advantages of operating a ghost restaurant over a traditional eatery:
- Concept Flexibility: Because your restaurant is digitally based, you may modify the concept without having to change the signage or decor.
- Adjustable Menu: You can swap out bill of fare items without having to reprint your menu if you wish to try a new recipe, an ingredient becomes too expensive, or produce goes out of season.
- Smaller Investment: Virtual restaurants require a smaller investment because many costly features of running an on-premise dining facility (such as design, signage, crockery, and seats) do not apply.
- Reduced Staff: Satellite kitchens reduce the need for front-of-house staff, allowing owners to focus on attracting and retaining top chefs and investing in high-quality supplies, commercial fridges and kitchen
Disadvantages of Ghost Restaurants
The price and obstacles of establishing a commercially viable delivery business are the most significant disadvantages of operating a ghost kitchen. Because setting up an in-house delivery system is expensive and time-consuming, most satellite kitchens employ third-party delivery services. Third-party delivery firms not only take 15 to 30% of each order, but they also own your customers' information. You do not own your consumers because they place their orders through third-party apps; they do. You'll lose the customer base you acquired through your third-party delivery app if it becomes too expensive to utilize.
Third-party applications also act as search engines, determining which restaurants display first when consumers look for food. You must pay a third-party delivery provider an advertising cost to appear on their first search page. Establishments who agree to utilize a delivery service exclusively are given first priority, increasing pressure on restaurants to commit to a single delivery partner.
Overcoming Third-Party Delivery Challenges
As a ghost kitchen operator, the best thing you can do is secure access to your clients' data. Include flyers in customer orders inviting them to join your social media pages and sign up for loyalty programs. You may also make giveaways that need customers to enter their email address in order to participate.