Today’s latest restaurant concept: the delivery app. Trending now as a result: ghost kitchens are popping up everywhere, and some of them are backed by big-name investors.
The other day, someone asked me if I had ever eaten anything from a Ghost Kitchen. I honestly didn’t know. It’s unlikely I would know. It’s increasingly likely, though, that tomorrow’s lunchtime salad ordered online or in-app will be created in a kitchen-only facility lacking waitstaff and guest seating.
We’ve Heard of Them. But What Are They?
The terms virtual kitchen, virtual restaurant, and ghost kitchen are sometimes used interchangeably. There are subtle differences, however. Here are thumbnail descriptions.
A Virtual Kitchen typically refers to a brick and mortar restaurant's kitchen. But the ‘virtual’ aspect comes from the fact that the same kitchen can create different menu items or types of cuisine for other concepts sold primarily or exclusively through a delivery app.
A Ghost Kitchen has none of the things we commonly associate with a restaurant: servers, seating, and a sign. The Ghost Kitchen - sometimes called Virtual Restaurant, Dark Kitchen, or Cloud Kitchen - exists only to serve orders placed via mobile app or delivery service web page.
The Virtual Kitchen as Launch Pad for In-app Orders
Some owners with a brick-and-mortar location have seen the opportunity in delivery and pursued it.
Take, for example, Ricky Lopez, owner and head chef at Top Round Roast Beef in San Francisco. After having success with his brick-and-mortar restaurant, Lopez decided to jump on the potential upside of working with delivery services. Today, three of his four concepts exist only in people’s phones via delivery apps. He fulfills the orders for all four from his original dine-in location.
Greater Return on Fixed Costs
Starting up a new concept to get more orders—and more value—from your existing kitchen(s)’ fixed costs makes good business sense.
This is something that Alex Canter recognized. He has spent part of almost every day of his life in the family deli opened by his great-grandfather. “We signed up for every delivery service in our area,” says Canter. “Fourteen of them. And behind the counter we had as many devices to take in and manage orders.”
Today, online orders account for 30 percent of the Canters’ revenue.
This “tablet-juggling” is what led Alex to found Ordermark, the company and technology that consolidates orders from multiple providers into one app. Alex is Ordermark’s CEO.
From In-App Ordering to App-Only Concepts
The next step in the restaurant evolution for Canter and the family-run restaurant? Create an app-only concept. “I asked my dad: ‘If you could sell more of one menu item, what would it be?’ and he said ‘that’s easy: grilled cheese,’” says Canter. “So Grilled Cheese Heaven was born in the delivery apps. Our existing kitchens always stock the ingredients for the limited menu options, and the sandwiches are cooked on the same grills that serve on-premises guests.”
Right away, they sold 20 orders per day. And it will grow from there, without additional marketing. “The apps do most of the marketing,” remarks Canter. “To call this an exciting time in the restaurant business is an understatement. Restaurants have unprecedented opportunity to try new things, and even launch new businesses thanks to technology, specifically, mobile apps and delivery,” he adds.
The Kitchen-only Restaurants
If delivery apps are the unmapped wild west of opportunity, ghost kitchens are becoming the chief chuckwagon master. And they’re coming into their own.Their promise: lower rent and lower up-front costs. Here are a couple examples of brands that are moving to ghost kitchens:
In large cities with high rents restaurants have an especially hard time, with margins already razor thin. Cousins’ Subs turned to a ghost kitchen as a way to serve the downtown Milwaukee crowd.
Offering Gourmet Burgers and Dogs, Dog Haus will soon operate part of its business out of virtual kitchen locations slated to open by the end of 2020.
The Companies on the Forefront of the Revolution
Like Amazon reinvented retail, Deliveroo (funded by Amazon) is poised to reinvent restaurant. Based in the UK, Deliveroo is making rapid strides to disrupt the economics of the restaurant business. The company began as a marketplace aggregator through which restaurants could sell their food. Deliveroo offered delivery as a service, which was fulfilled by independent ‘freelancers.’ But it’s the company’s current (and next) moves that could prove truly disruptive: cloud kitchens set up in cities around the globe, followed by “Roo Boxes”. Think pre-fab kitchens-in-a-box that could make opening a kitchen incredibly streamlined and affordable.
This is just one example. Deliveroo and other such ghost kitchen ventures are being backed by big names and big money.
- Amazon quit delivery to invest in Deliveroo
- Google Ventures backs Kitchen United, which recently won a round of funding
- Former Uber CEO Travis Kalanick is helping kick start Cloud Kitchens
The Future? Ghost Kitchens are Here to Stay.
We’re seeing a paradigm shift in how restaurants get started, and in how they operate. Restaurateurs wanting to get in the game will have immense opportunities; it will just look a lot different than it does today. The opportunity is immense. The changes we’re seeing will provide unprecedented chances to experiment, test, and refine. Launch a new concept exclusively in a delivery app. Run multiple concepts from a single location. Meet demand for constant variety. Ghost kitchens and today’s digital-first world make all of this more accessible and manageable.
Many of the costs, once prohibitive and slow to recoup, will drop.
Despite the uptick in off-premises, brick-and-mortar restaurants won’t disappear. People will always want to go out for a dining experience, the key word here being experience. Accustomed to eating from food delivery containers in their home, guests who go out will crave and expect an experience that wows. Successful restaurateurs will be the ones that creatively differentiate on experience.
And who knows: that lunch you order tomorrow may very well come from a ghost kitchen. Enjoy it.
Christopher Sebes has spent his entire career in hospitality management and technology. He received a degree in Hotel and Restaurant Management in England and managed hotels and restaurants on three continents including multi-unit restaurant operations in Europe and the US. He created the first Microsoft Windows point-of-sale company, Twenty20 Visual Systems, which he sold to Radiant Systems. He went on to become the CEO of Progressive Software before founding XPIENT in 2004. XPIENT was sold to Heartland Payments Systems in 2015, and he was tapped to become the President of Heartland Commerce, later renamed Xenial Inc., a major player in restaurant and retail management technology. Today, Christopher consults with leading restaurant brands on strategy and technology