Ghost kitchens had been the buzz since the pandemic hit and people had been asking whether ghost kitchens really are the future of restaurants. Euromonitor recently predicted cloud kitchens could be a $1 trillion market by 2030. U.S. currently has 1,500 ghost kitchens across the country, China with 7,500, and India with 3,500.
In this article we’ll talk about ghost kitchens, find out whether this business model for restaurants holds some promise, and how you can start one for your business.
What Exactly Are Ghost Kitchens?
Ghost kitchens offer food services similar to restaurants but without a physical storefront. It goes by different names – dark kitchens, cloud kitchens, virtual restaurants, etc. Unlike traditional restaurants, they only do deliveries and the brands themselves may only exist virtually in food delivery apps (spin-offs of actual brands).
They’re often housed in large facilities with shared kitchen spaces for multiple brands and restaurant startups. Cloud Kitchens, Kitchen United, and Kitopi are just a few examples of companies that rent out commercial kitchens.
Meanwhile, popular brands such as Dog Haus and Wow Bao operate their own ghost kitchens and are among the most successful ones in the area.
The whole idea of running a ghost kitchen vs. traditional restaurant is to reduce overhead cost by taking service staff and dining space out of the equation and replacing them with automation and quick delivery service.
Although ghost kitchens have been around for quite some time, they’re still considered nascent and needs further testing in terms of viability as a restaurant substitute in the not too distant future.
How Ghost Kitchens Work
Ghost kitchens need at least 3 components to work well: kitchen space (preferably commercial kitchen), cooks, and food delivery service.
To get more traction, fresh startups may need a 4th component: marketing/online presence. In most cases, third party apps handle both the marketing and logistics side of things.
During the current pandemic many restaurants resorted to taking online orders, curbside pickups, and delivery, essentially turning their brick-and-mortar business into a virtual restaurant.
The problem with most restaurants is they’re also paying the rent for every square foot of dining space that’s underutilized.
This is where the idea of having a ghost kitchen comes in. With ghost kitchens, they only pay a fraction of the cost or even free if they own a space large enough for a commercial kitchen. Restaurant groups like BBQ Holdings, Brinker International, and Fat Brands swear by it.
“We’re very happy, very pleased with the results. This will really be a focus of our growth over the next year at least.” (Jeff Crivello, CEO of BBQ Holdings)
Brinker International’s spin-off ghost kitchen, It’s Just Wings, is on track to exceed $150 million during its first year in operation. For Andy Weiderhorn, CEO of Fat Brands, it’s like hitting two birds with one stone.
“The ability to use virtual restaurant gives our franchisees access to sell more products and make more money, and we get incremental royalty.”
Why Some Ghost Kitchens Fail
Ghost kitchen startups that went bust seem to follow a similar pattern – they got lost in a sea of generality and eventually sank to the bottom. They fell into the trap of becoming just another chicken or burger joint. At times, it’s just a case of not putting much time and effort into marketing and promoting their own product.
Moreover, by not having a physical presence, ghost kitchens are at a disadvantage to well-known established brands. This might change, however, as countries across the world face a long-drawn-out battle against the pandemic. The ghost kitchen’s ability to quickly adapt can tip the balance as it gives them a head start through online marketing, CRM, and sales and marketing automation.
Having too narrow of a market segment and not enough diversification is also one of the reasons why ghost kitchens fail. They don’t create the needed sales volume to stay in business. And lastly, as more ghost kitchens enter the space, competition only grows ever fiercer where being good or just okay won’t cut it.
How to Stand out as a Ghost Kitchen
1. Market your business across multiple platforms
The success of ghost kitchens is driven by the fact that they can be everywhere whether it’s blog, social media, online marketplace, mobile app, or third-party delivery app.
They’re not bound by location or dine-in capacity, thus enabling them to scale much faster than traditional brick-and-mortar restaurants. They also proved to be very resilient even during a pandemic.
One of the best solutions is to get a restaurant CRM like DeliveryBizConnect where you can market your ghost kitchen across multiple platforms with things like:
- sales funnels
- landing pages
- simple website
- email marketing
- social media marketing
- SMS marketing
- push notifications
- mobile app (your brand)
- joint venture module (for creating your own promos and referral programs)
You can skip the process of looking up all these different tools and start right away using DeliveryBizConnect. Note: we offer a done-for-you (DFY) package for those of you who want to expedite the whole process of setting up.
2. Partner up with a restaurant-friendly delivery app
Ghost kitchens rely heavily on third-party delivery apps for sales, marketing, and delivery. They don’t have much of a bargaining power compared to traditional brick-and-mortar restaurants so they’re much more susceptible to unfair, predatory practices by these third-party apps. Worse, they could be booted out from the app leaving them to take orders and do deliveries on their own which is extremely hard for this kind of business.
DeliveryBizConnect isn’t just any restaurant CRM; it’s an all-in-one restaurant solution designed to help restaurant owners, or any kind of business, not only survive the pandemic but come on top with things like:
- Online Ordering
- Mobile App
- Driver App
- Driver Matching Service
- Route Optimization
- Exclusive Driver Hours
- Split-tipping (tip the restaurant or the driver, or both) and
- 3.33% per delivery compared to 15-30% commission fees of major third-party apps
You basically get the same technology and service offered by major third-party delivery apps at a much lower rate, thereby increasing your profit margins by at least 25% per order!
3. Be creative with your menu
Ghost kitchens are a great place to experiment on different menu creations. Customers won’t have to settle for the same old stuff over and over again and you might even come up with a lot of concepts and menu items that hits the palate.
Other strategies include spin-offs of your menu items, creating a separate niche market, say one for chicken wings creations and another for burgers, steaks, and so on.
Give it a new name and logo and repeat the process. You get more customers by being more specific with your product line while at the same time covering a broader segment of the market by offering multiple brands.
Tell Us How You Want to Start Doing Deliveries
If you need any help on how to jumpstart your own food delivery service, feel free to book an appointment with us for a 30-minute Complimentary Restaurant Sales Expert Call. We’re on a mission to help restaurant owners get back on their feet and increase sales like never before.