Delivery and takeout have been gaining more and more traction over the last few years, and with the outbreak of the COVID-19 pandemic, this trend in the industry is only likely to continue.
Since 2015, the ghost restaurant, a concept that caters exclusively to delivery and collection, is becoming an increasingly popular option to capitalize on this trend.
Ghost restaurants, also known as virtual restaurants, dark kitchens and delivery-only restaurants, take advantage of the increased demand for delivery (more than 300% compared to dine-in) by cutting down on all of the costs associated with the traditional restaurant experience.
Without any waiters, dining room, dirty dishes and table reservations, virtual restaurants focus exclusively on bringing food to their customers through third party-apps or through their own website and delivery platforms. A virtual brand is developed for the restaurant, with some companies opting to operate multiple restaurants from the same kitchen!
The concept is flexible, and it’s being explored by existing brick and mortar restaurants such as Canter’s, in Los Angeles, a traditional deli that operates 3 ghost kitchens alongside its location on Fairfax Avenue.
What do you need to operate a ghost restaurant?
The bare minimum you will need to get started is a kitchen that complies with health and safety regulations and a tablet connected to a food delivery app. All you’ll need to focus on is ensuring your food is up to standards and that it’s ready within the time estimate you specified in the third-party app (or on your own website).
That being said, virtual restaurants aren’t only being used by entrepreneurs who want to start a new business from scratch. The other two types of business you’ll often see branching out into the concept of ghost kitchens are:
Established brick and mortar locations with enough wiggle room in their kitchens to start making food for a different menu. The business owner is looking to sell dishes that could match well with their existing inventory, but which don’t match their brand concept (eg. an italian restaurant that wants to sell mexican food online under a different brand).
Virtual kitchens that already run one or more brands from their location. If you implement it right, the ghost restaurant business model can scale very well, and entrepreneurs often decide to create multiple brands based in one kitchen, helping cut costs even further.
Shared kitchens where multiple brands owned by different entrepreneurs share the costs of rent and equipment, you could even consider ordering food together to save on delivery costs!
What are the biggest downsides to running a ghost kitchen?
At this point you might be thinking that opening a ghost restaurant seems like an attractive prospect, but before you start looking for a location and whipping up a logo for your brand, you need to consider if the business concept you have in mind is well suited for a delivery-only kitchen. Some of the challenged you might find include:
It’s harder to keep your kitchen in order
If you’ve ever heard the saying “too many cooks spoil the broth”, you don’t need to look any further for a real-life example. If you’re just focusing on creating one brand for your kitchen, this shouldn’t be an issue, but if you’re trying to get your staff to keep track of multiple menus in a packed kitchen, even the most experienced chefs will start to break a sweat.
Limited selection of dishes
First of all, you need to take a cold hard look at your menu, and decide whether most of your dishes will still be worth the money after 30 minutes in a thermal bag. If you know that your dishes are going to get soggy, dry or lose all their flavour while they’re in transit, you might want to go back to the drawing board.
Once you’ve chosen a few dishes that can travel well, you’ll soon realize that most other delivery businesses are already offering a similar range of products, and that while the food delivery market isn’t saturated yet, it sure is crowded.
You’ll have to make your pizzas or burritos really stand out if you want to keep converting new customers into regulars. However, given the rapid growth in demand for delivery food, you’ll still have an opportunity to continue developing your concept as you grow your business.
Factoring in delivery costs
If you’ve already worked with third-party delivery before, you’ll be familiar with the same dilemma that troubles so many other business owners in the industry: while companies like Uber Eats and DoorDash have helped bring more demand to restaurants, having to pay up to 30% in fees is going to eat into your profit margin, and it’s even driven some restaurants to failure.
This is why we recommend finding an integrated restaurant management system that allows you to create your own website, and use it alongside third-party deliveries. This way, you can get the ball rolling with the help of these big platforms, and once you’ve established a strong client base, transition towards a more independent business model.
Managing the visibility of your restaurant
The most obvious downside is that you won’t get any of the traffic that comes with having an inviting storefront, a good location on a busy street, or just having the smell of your delicious food luring customers in.
But besides having to make up for the lack of a physical location, you’ll find that for ghost restaurants it’s doubly important to establish a solid online presence. You’ll have to double down on social media promotion, addressing negative reviews and encouraging customers to leave you new reviews if you want to stay relevant.
But don’t forget about the advantages
So while there are some challenges you will encounter along the way, it’s not all gloom and doom. This success of ghost restaurants hasn’t just been a fluke, and there’s a good chance you can leverage the benefits of this business model to make the most of your brand concept:
If you’re running more than one brand from your kitchen, or if you’re sharing your location with another business owner, you should engineer your menus strategically, to guarantee that you can reuse ingredients needed from any one of your menus.
This will give you a great opportunity to cut down further on costs, and you can also market yourself as being more eco-friendly!
Reduced operational costs
Without having to worry about front-of-house staff, renting a large property to accommodate all of your guests, and the impact that table turnover and other metrics can have on your bottom line, you’ll be better prepared to focus on the essentials.
And with lower overhead, comes less risk
For one, your initial investment will be much lower. This is why ghost restaurants are such an attractive prospect to entrepreneurs who are new to the industry: not only do they require a slightly smaller set of skills than you need to run a full-fledged restaurant, you can also get your virtual kitchen started by putting less capital at risk.
Starting your virtual restaurant
If you’ve decided that a ghost restaurant is the way forward and you want to get started, we recommend that you prioritize the following tasks:
Finding the perfect kitchen and equipment
Even more than with a traditional restaurant, your business should be focused on maximizing efficiency, and especially if you’re going to take up the challenge of running multiple brands from one kitchen, you don’t want to have your chefs struggling with clunky equipment, ovens and stoves that don’t heat up fast enough, or not having enough space to move around comfortably.
Come up with a solid marketing plan
Like we mentioned earlier, a strong marketing plan will be more important than ever if you're hoping to open a ghost kitchen. You'll need to leverage strong
Get all the required licenses
Before opening for business, you’ll need to get all of the necessary licenses and permits sorted out. Luckily, you’ll need fewer permits for a ghost kitchen than for a traditional restaurant, but be sure that the local authorities will be holding up you to the same standards as everyone else!