In the last couple of years the way food service businesses operate has completely changed. What used to be the traditional setup with a restaurant in a fixed location, with a kitchen and staff working from prep to dinner service, has now shifted towards food trucks, pop-ups and delivery services. Ghost kitchens are a perfect example of this new type of food service operation.
What is a ghost kitchen?
A ghost kitchen (also known as a delivery-only restaurant, virtual kitchen, shadow kitchen, commissary kitchen, cloud kitchen, or dark kitchen) is a new restaurant concept where a chef, or chefs, run an independent restaurant without having their own physical location, but instead they work out of a previously established commercial kitchen. The term “ghost” refers to the fact that it is operated in someone else’s kitchen such as at a catering company, college campus, church group, or corporate space. Ghost kitchens can work within brick-and-mortar restaurants or function as standalone facilities.
How do ghost kitchens work?
A ghost kitchen works like an online store for take-out food. People order food on the internet and receive hot meals directly to their doorstep within 1 hour after having placed an order. Customers can go to a website or use an app to order food and see the profile of each restaurant. They can then select one or more dishes that they want to buy, enter their delivery address and payment information.
Once the order is confirmed, the customer will receive an email containing a QR code with all the information needed for delivery. The ghost kitchen will prepare the food in its commercial kitchen, pack it up in thermal boxes made of foam or vacuum-sealed plastic and deliver it to the restaurant or directly to the customer’s house, depending on what is written in the confirmation email.
History of ghost kitchens
The term “ghost kitchen” was first used in a 2015 NBC New York article. The article took a critical look at ghost kitchens in New York City, where restaurant owners were found to be listing their restaurant under multiple different brands on delivery applications such as Seamless and Grubhub. These kitchens had names and addresses that failed to match any listing on the city’s database of restaurant inspection grades. Several of these locations did not have restaurant permits to sell food directly to customers. Consequently, the virtual brands were taken off of Seamless and GrubHub and each company passed policies to fact-check restaurant information and give transparency to customers using the delivery applications.
A few years later, in response to the rapid growth in consumer demand for restaurant delivery meals, the rising usage of third-party delivery applications, and the need to cut costs of operating a restaurant, ghost kitchens have emerged as a business model. With the global pandemic shattering the restaurant industry, the growth of shadow kitchens and virtual restaurants has skyrocketed.
What is the business model behind a ghost kitchen?
Ghost kitchens have a few potential revenue streams depending on how they are set up. As mentioned above, these setups can include being part of an existing restaurant space sharing the kitchen and equipment, working out of a shared space such as a church kitchen or catering hall, and even operating out of an entirely new commercial facility.
Financial revenue can come from the sale of food to clients who order in advance for pick-up or delivery. Many ghost kitchens also have a catering arm which can bring in substantial business depending on how high volume the kitchen is capable of producing.
Pros and Cons of the ghost kitchen concept
The ghost kitchen concept has many positive aspects. The advantage for customers is that they can choose from a wide variety of restaurants and menus, as opposed to having fewer options in one particular neighborhood. For restaurants, it’s a great way to be discovered by people all over the city, not just those living close by.
The advantage of a ghost kitchen over a traditional restaurant is that they have low overhead and can start making money from day 1. In fact, there’s no need for any staff at all other than the chef who runs the business. All they need is a working space with an industrial kitchen and a reliable internet connection so they can accept orders. They will simply purchase the ingredients and do all the cooking, packaging and delivery of meals directly from their kitchen.
Aspiring restaurant owners can use a ghost kitchen concept to test the market before opening a physical restaurant. It gives them the ability to test recipes and concepts in an existing kitchen, which is less expensive than setting one up from scratch.
The biggest disadvantage of a ghost kitchen is that it can be difficult to get high-quality food and service. The business model of these kitchens revolves around volume, so they must produce hundreds of meals per day in order to survive. This means that their ingredients are purchased in bulk and dishes may not be made with the same care as traditional restaurants that prepare dishes one by one for each order.
What do you need to set up a ghost kitchen?
The most important thing to have is, of course, a commercial kitchen that is permitted for use by the local Department of Health. If your area does not have any available kitchens or if you are looking to upgrade from an already-existing kitchen space you can try joining another restaurant. Many restaurateurs who operate multiple venues share their resources and it’s not uncommon to find successful places that have several kitchens for different menus.
If you don’t want to share kitchen space, another option is to work out of a shared or commercial kitchen such as those that cater halls offer. A caterer will be familiar with the requirements needed by the Department of Health and can help make sure those requirements are met.
Another option is to rent a commercial kitchen such as those that mobile food carts use for storage and prep space. Many of these work just fine as ghost kitchens provided certain safety items are in place – one example would be adding an external vent hood above the stove top if there is no ventilation already built into the kitchen area.
There’s no minimum investment required to open a ghost kitchen. All it takes is an industrial kitchen space with the right permits to use it. Once you have that, all you need are some basic cooking tools and ingredients.
How do you get clients for a ghost kitchen?
The internet is your best friend when it comes to getting your name out there. There are several online food delivery platforms that list thousands of restaurants, including new ones. Some of the most popular platforms are GrubHub, Seamless and Uber Eats. These aren’t just for ghost kitchens but also traditional restaurants that might not have their own delivery service.
It is very important to get good reviews from your customers on these platforms or on independent restaurant review sites such as Yelp. Not only do good reviews make your business look more reliable, they can also attract new customers.
Many ghost kitchens rely on repeat customers to build their business, which is why they offer discounts and promotions to get people through the door (and onto their phone).
Another way of getting clients is by reaching out directly to local offices and universities. These can be a goldmine for meal orders because they have plenty of employees and students to feed on a daily basis, all from one location.
What is the operating cost of a ghost kitchen?
How much does it cost to build a ghost kitchen? While it is possible to operate a ghost kitchen on a shoestring budget, the costs can add up quickly. Start-up expenses will vary from business to business but there are a few things they all have in common.
The rent is going to be your biggest expense so it makes sense to look out for cheap or shared spaces. Kitchen equipment isn’t too expensive, but if you want to serve a wide range of dishes it can end up costing a pretty penny – plan on spending at least $2000 for pots and pans alone. If your kitchen appliances aren’t up to code, you’ll need to hire professionals to get them up to standard which will cost even more.
You’re going to need some form of transportation to get ingredients and finished meals around the city and that’ll mean gas and car maintenance costs. You can offset that by getting a van or a truck – they’re great for transporting food – but that’ll end up costing you more in the long term.
Even with the most basic of kitchens it’s important to have insurance, especially if you’re using a shared space. This is the only way to protect yourself in case something goes wrong.
Most ghost kitchens work on a subscription model, which means you’ll need to invest in a POS (point of sale) system. Having all orders processed through an electronic payment system is the only way to effectively manage your inventory and sales data. You can choose between the pay-as-you-go model (the most expensive option) or monthly subscriptions for POS.
To sum it up, running a ghost kitchen can cost anything between $5000 and $10,000 per month.
Is a ghost kitchen same as a virtual restaurant?
A ghost kitchen differs from a virtual restaurant in that it is not a restaurant brand in itself and may contain kitchen space and facilities for more than one restaurant brand. A virtual restaurant is a separate food vendor entity that operates out of an existing restaurant’s kitchen. This is in contrast to a ghost kitchen which is a co-working concept for meal preparation with no retail presence that a restaurant/brand or multiple restaurants can buy into.
The demand for comissary kitchens is increasing as food delivery apps such as UberEats and Postmates grow in popularity. Many restaurants are now offering these services to broaden their income opportunities, which means there’s a growing market for those who can supply the food items.
If you have always dreamt about launching a restaurant but worry about the up-front cost, you should try a ghost kitchen model and ease into the industry. It’s best to start off with a simple menu and expand gradually as you grow your customer base. Your food delivery platform or office clients might appreciate new choices but you want to make sure that your existing customers are always happy before adding new dishes.