Do You Believe in Ghost Kitchens?

Between operational disruptions, government restrictions, labor shortages and other challenges, restaurants have been one of the hardest-hit industries during the COVID-19 pandemic. The rise of digitally enabled ghost kitchens — typified by lean operations without any on-site dining option — is a testament to the restaurant industry’s ability to pivot. As COVID-19 vaccination rates rise and cases wane, restaurants that invested in ghost kitchen operations at the height of the pandemic might be spooked that demand for this type of establishment will drop. However, there is evidence to suggest that ghost kitchens’ popularity will remain long after the specter of another lockdown passes.

Customer appeal

Everything from telehealth appointments to online banking to ecommerce saw an uptick in adoption during the pandemic. Consumers have grown accustomed to a standard of convenience that is only expected to rise in the coming years. Ghost kitchens meet this standard, allowing customers to place orders through mobile apps that empower them to set delivery times and even alert them to available offers and discounts. App-enabled perks are an incentive for customers to continue placing orders for delivery and pickup, a practice that 53% of U.S. adults consider essential to the way they live, according to the National Restaurant Association’s 2021 State of the Restaurant Industry Report.

Business boons

According to proprietors, partners and investors — like Planet Hollywood founder and CEO Robert Earl — ghost kitchens are a viable venture for both individual restaurateurs and international organizations with multiple outlets. Kitchen spaces can be highly customized to fit customer demand and menu items. The space required for a ghost kitchen versus an entire brick-and-mortar restaurant is significantly smaller, allowing resources traditionally allocated to real estate to be redirected to food quality, menu diversity, marketing, kitchen logistics and maintenance, as well as transport structure. It is even becoming common for different ghost kitchen facilities to share the same premises. Facilities also do not need to be physically near their market, further helping ghost kitchens save on real estate.

Delivery of orders can be handled in-house or outsourced to established transport companies. The latter option is often preferred because the transport industry offers ghost kitchens existing and/or modifiable packages that are more effective and efficient than setting up transport logistics (such as vehicle maintenance and driver/rider verification processes) from scratch.

Key considerations

The ghost kitchen space is highly competitive. New enterprises are taking advantage of low operating costs to offer customers high-quality food at lower rates, forcing existing ghost kitchens to get creative. In addition to maintaining market share in an increasingly competitive landscape, operators are required to place a high degree of trust in order and delivery processes. Order management systems can fail or experience glitches, denying customers efficient access to food items. Technical challenges could negatively impact the business in a fickle market with many alternatives. And once an order leaves the preparation site, it is out of the kitchen’s purview. Operators must have faith that the order reaches the customer in good condition within a reasonable timeframe.

Ghost kitchen: An apt name for a phantom fixture

Like an apparition, the ghost kitchen is a sign of the past that lingers into the future. Ghost kitchens’ cost efficiency and ability to tap into consumer demand make a well-managed ghost kitchen a viable investment in a restaurant industry that places increasing importance on digitalized convenience. With the ghost kitchen sector projected to reach $71.4 billion by 2027, it’s clear they are here to stay.

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