Ghost kitchens have become an increasingly popular option for entrepreneurs and chefs, especially during the COVID-19 pandemic. This approach to building a brand reduces overhead costs and uses technology to connect with customers. For those who have dreamt of opening a restaurant, but have struggled to find investors and come up with the funds to cover starting costs, a ghost kitchen may be a more feasible alternative.
What is a Ghost Kitchen?
Essentially, a ghost kitchen is a place where virtual brands are created. The term virtual brand is a relatively new one and refers to delivery-only food brands. Everything is sold exclusively online and delivered by a third-party service like UberEats, DoorDash, or Grubhub.
The actual model of a ghost kitchen can vary. In some cases, restaurants or food trucks that have a physical location will use a ghost kitchen to utilize leftover ingredients or experiment with new dishes. This allows brands to utilize popular food apps and existing equipment rather than renting out an entirely new space.
There are also entire facilities dedicated to providing space for virtual brands. For example, Travis Kalanick, the founder of Uber, has opened both Kitchen United and Clouds Kitchen in Los Angeles. Brands can rent kitchen space to produce their food and sell it online. Another option is for a management team to own a facility where several different brands are being developed. Either way, there is no actual brick-and-mortar location or dine-in option and ghost kitchens do best in densely populated areas.
The Cost of Starting Ghost Kitchens
Compared to the cost of starting a small restaurant, a ghost kitchen is a bargain. Entrepreneurs looking to open a new restaurant in an urban area where there will be high demand can cost $750,000 to $1.2 million. Leasing a ghost kitchen location that is fully equipped and training staff will typically cost around $50,000. Existing restaurants that want to build a new brand in their existing space can get started for just $5,000. Starting a ghost kitchen, no matter what form it takes costs just a fraction of what it would to start a traditional restaurant.
At the same time, ghost kitchens are incredibly profitable. The food delivery market is exploding and chefs are looking to get ahead of the curve. Restaurant investors and PR people are also jumping on board as it continues to look like the future of food will rely heavily on delivery. Traditionally, restaurants tend to lose money with delivery apps, but ghost kitchens may have fixed this problem. In fact, Euromonitor, a market research firm, is predicting that ghost kitchens will be a $1 trillion industry by 2030.
How COVID-19 Shaped the Ghost Kitchen Era
The potential for ghost kitchens to change the way people eat and how food brands operate has become especially apparent during COVID-19. Before the pandemic, the average American ordered food at least once a week. A full 20% of Generation Z ordered out at least three times a week. Those numbers have only increased as people have been forced to stay home.
Ghost kitchens also provide a way for restaurants to utilize unused space. Most restaurants aren’t operating at full capacity, which means empty dining rooms that are depleting funds without offering any return. With a healthy gig economy and the prevalence of contracted delivery app drivers, restaurants with ghost kitchens can easily deliver food and optimize their square footage.
Advantages of Ghost Kitchens
- Low overhead costs. With rising real estate prices, ghost kitchens are an especially cost-effective option. Renting space and doing away with all the costs associated with a dine-in experience creates an affordable opportunity.
- Faster launch times. A ghost kitchen drastically reduces the time between concept and launch.
- Flexibility. Virtual brands can quickly adapt to trends and changing customer behaviors.
- Opportunity for additional revenue streams. Existing restaurants can earn more by creating a virtual brand or renting out space to other brands.
- Convenience. Customers appreciate being able to enjoy restaurant food in the comfort and safety of their own homes.
While COVID-19 has certainly had an impact on the increased popularity of ghost kitchens, chefs and business owners are also looking for ways to make creating brands more accessible. Sharing kitchen space has made it possible for more virtual brands to emerge. Ultimately, this is good news for customers, chefs and restaurants wanting to get the most out of their resources.
What is a ghost kitchen? What is a virtual brand?
A ghost kitchen is a facility that creates food for delivery-only. They don’t have brick-and-mortar locations.
How do ghost kitchens work?
Several individual brands can share a kitchen or a management team can oversee several brands in one location. Restaurants can also rent out some of their space or create another delivery-only brand that utilizes existing resources.
What is a ghost kitchen concept?
Kitchens United and Cloud Kitchens are both ghost kitchen facilities that are located in densely populated areas. Brands can rent space and then partner with delivery apps like DoorDash and Postmates.
How much does a ghost kitchen cost?
Purchasing a ghost kitchen can cost $50,000 while simply launching a brand with the help of ghost kitchen facilities can cost just $5,000.
Are ghost kitchens profitable?
Yes, especially during COVID-19. Certain demographics are ordering out more than three times a week. Combine that with low overhead costs, and ghost kitchens and there are plenty of opportunities for profit.
What are the advantages of ghost kitchens?
Some of the advantages of a ghost kitchen include low overhead costs, flexibility, faster launch times, convenience, and the potential for additional revenue streams.