The restaurant industry is another arena that is ripe for disruption. With more customers ordering food online for delivery, virtual restaurants are becoming a popular option for both diners and entrepreneurs. Virtual restaurants are also commonly known as cloud kitchens, ghost kitchens, pop-up kitchens, or shared kitchens. No matter what you call it, the concept is the same. Essentially, a virtual restaurant offers a full menu for pickup or delivery but doesn’t host diners. This model is allowing chefs to experiment with new menus while also decreasing overhead costs, which makes starting a restaurant more accessible.
One reason that virtual restaurants are becoming more popular is that customers are open to the idea of virtual dining. Spending time eating in the restaurant is no longer a requirement for enjoying a good meal. Instead, customers are ordering from their smartphones or computers. The order is then sent to the kitchen where the food is prepared and packaged for pickup. Typically, a third-party delivery driver from a company like Sixdots, Uber Eats, DoorDash, Grubhub, or another service will pick up the food and deliver it directly to the customer. It is a convenient way to experience new food at home.
How to Start a Virtual Restaurant
If you are considering starting a virtual restaurant, there are some pitfalls to avoid and proven approaches to achieve success.
- Create a concept that will optimize delivery. Food trucks enjoyed a surge in popularity over the past decade, but even these operations come with a variety of challenges. There is the cost of operating and maintaining the actual truck, legal restrictions that dictate where you can park, lost sales due to bad weather or lackluster events, fees from offering various payment options, administrative challenges, and the burden of moving food and supplies on and off the truck. At the same time, brick-and-mortar locations come with overhead costs that result in minimal profit margins. To help increase profits, many restaurants have embraced delivery, but their menu and space may not be optimized for delivery. That is what virtual restaurants have to design a menu that is delivery-friendly. Keep in mind that customers will expect their food to arrive within a reasonable amount of time and at the right temperature. Focus on simple dishes that make the most of affordable ingredients so that it is easier to consistently deliver high-quality food. Taking all these considerations into account from day one will help to set you up for success.
- Find your niche. Identifying an existing gap in the market is a great first step towards building a successful virtual restaurant. Think about who you can cater to in your area. You can even take to the streets and survey locals to learn more about your target demographic. If there are already five pizza places downtown, you may not want to enter that competitive market, but that could mean there is a demand for fresh, healthy salads that isn’t being met.
- Create your brand. Since you will only be interacting with customers online, you will want to invest in creating a memorable logo and professional website. Fortunately, services like Wix and WooCommerce make it easy and affordable for anyone to launch a site. Your website should be user-friendly, tell your story and let consumers know what makes you and your food special. Also, be sure to clearly display contact information and social media profiles so that you can connect with customers.
- Locate a commercial kitchen. Legally, any food for sale must be produced in a licensed commercial kitchen. Fortunately, shared-use kitchens are becoming more common. This model allows you to rent space. Usually, the kitchen is home to multiple restaurants. You can search for available options in your area through The Kitchen Door.
- Most kitchens will have some basic questions and requirements that you should be prepared for:
- Do you have a business license? You can apply to establish an LLC. This process typically costs $50-$500 and you can use services like LegalZoom to save time and money.
- Have you earned your ServeSafe Food Handler Certification? The National Restaurant Association provides this nationally recognized food safety course. Certification can be completed in-person or online. The course lasts one day and comes with a $195 fee. Fortunately, the certification is valid for three years.
- Choose the right pricing plan. Each kitchen will offer different pricing plans. There may be hourly rates that come with discounts for working during off-peak hours. Depending on the demands of your restaurant, a pay-as-you-go option might be the more economical choice. Work with the kitchen to find a pricing plan that fits your needs.
- Purchase liability insurance. In most cases, you will need to purchase a $1 million liability policy so that the kitchen can be co-insured. Typically, this policy will cost between $300 and $500 annually. The Food Liability Insurance Program offers comprehensive coverage at competitive rates.
- Schedule an inspection. The local health department may have to inspect your space before you can legally start selling food. They will look at your food storage, workflow, and production techniques. All of this information will also need to be documented in written form as part of your application.
- Partner with suppliers. Food distributors and suppliers are key to your business. Research both local and national providers to find the right combination of ingredients and price. You will also need to decide which third-party food delivery services you want to work with. As you look at different delivery services, don’t be turned off by commission fees of up to 30%. These services are essential to your business and often include marketing and advertising tools that can improve search engine rankings.
- Launch your virtual kitchen. Before you go live with your restaurant, be sure to test different packaging options and run through the entire production and delivery process to ensure that there aren’t any glitches.
- Build your marketing plan. Running an online-only business requires ongoing marketing efforts to reach new customers. Take advantage of social media, make sure that you are engaging with customers, host events, ask for reviews to help build your reputation and get creative with how you build customer loyalty and connect with new customers.
For chefs and entrepreneurs looking to start a business, virtual restaurants are the wave of the future. Not only does this model address the changing habits of diners, it also eliminates overhead costs that can be prohibitive. More people can enjoy the opportunity to share their vision and food with their communities and build a beloved brand.
What is a virtual restaurant?
Virtual restaurants are also known as cloud kitchens, ghost kitchens, pop-up kitchens, or shared kitchens. These are all different names for online restaurants that don’t have a dine-in option. Food is ordered online and then delivered to the customer.
What is virtual dining?
Virtual dining has become an increasingly popular way of enjoying restaurants during COVID-19. Diners can order from an online menu and have food delivered directly to their door.
How do you create a virtual kitchen?
Design a business model that is delivery friendly, find your niche market, establish your brand, partner with a commercial kitchen, find the right suppliers and delivery apps, launch your virtual restaurant and continue to market the restaurant.