Everything You Need to Know About Ghost Kitchens

Ghost kitchens: they’ve been heralded as the future of restaurants, and they’ve been damned as the death of restaurants. They go by half a dozen names (at least) – and despite all the industry attention they’ve been getting over the last few months, they’re still relatively misunderstood.

Ghost kitchens are back in the news because of some high-profile launches. Mayor of Flavortown Guy Fieri launched ‘Guy Fieri’s Flavortown Kitchens’ – a delivery-only concept that operates in over 23 states— and MrBeast teamed up with Virtual Dining Concepts to launch MrBeast Burger. The new virtual brand operates out of existing restaurant kitchens, adding revenue to restaurants without affecting their normal operation.

RELATED: Get the Exclusive Ghost Kitchen 101 Infographic

These are two of the latest successful ghost kitchen launches, and the trend shows no signs of stopping. Euromonitor International, a market research company, believes ghost kitchens could become a $1 trillion opportunity over the next decade, making it one of the fastest growing industries.

So, what actually are these ghost kitchens, and can they work for you? Read on to learn the basics of ghost kitchens and virtual concepts.

Ghost Kitchen 101

Essentially, a ghost kitchen is a facility set up with off-premise dining in mind. It can be a stand-alone kitchen, an existing restaurant kitchen, or a specially-made facility housing multiple operations. Often, they’re state-of-the art ‘smart’ kitchens, optimized for delivery with all the tech needed to keep food and labor costs down, and maximize profit. Typically, ghost kitchens operate on a delivery-only model, and rely on third-party apps like GrubHub and UberEats to bring in customers and fulfill orders.

Restauranteurs can use ghost kitchens to expand into new markets, without the financial output a traditional brick-and-mortar store requires. Some estimates claim that a well-run ghost kitchen can cut labor costs by 80%, real estate costs by 90% and food costs by 50%, making them a cost-effective way to expand within an existing market. Look at Wendy’s, they’ve partnered with Reef Kitchens to open in markets like Toronto, where real estate is at a premium.

Virtual Concepts, Real Money

Ghost kitchens are also incubators for a new type of restaurant called a virtual restaurant, or a virtual concept. People often use the terms interchangeably, but they’re not the same. A ghost kitchen is the facility that houses a virtual restaurant. A virtual restaurant is a concept with no brick-and-mortar location. It’s a 100% digital restaurant, something that would have been unthinkable a decade ago.

Virtual concepts are the result of an increasingly digital world. Restaurant delivery has grown 300% faster than dine-in traffic since 2014. As a result, customers are used to ordering from a restaurant sight-unseen. In fact, many people don’t even realize when they’re ordering from a virtual restaurant (and they don’t really care, as long as the quality is good and the price is right).

How to Stand Out in a Digital Market

Delivery apps are a relatively saturated market, and it is difficult for a restaurant to stand out without existing brand recognition. As a result, virtual restaurant operators tend to approach the market in one of two ways. Either they seek to dominate a specific market by creating multiple brands of the same category (for example, they might have five pizza concepts, or five burger concepts), or they create a variety of brands across categories that all use the same ingredients. Because they’re using one space and a core group of ingredients across multiple brands, they keep their labor and food costs super low.

Virtual concepts can also be franchised, so restaurant owners can use their existing kitchens to make extra revenue, as is the case with MrBeast Burgers. We’ll talk more about the brands that are doing this next week – so check back in to learn more.

How will Ghost Kitchens Shape the Future?

Despite their popularity, ghost kitchens are still very much an experiment, and their long-term repercussions remain to be seen. Whether they will destroy restaurants as we know them, or become the industry’s savior remains to be seen. For the moment, consider them an exciting new development that offers room for growth and expansion to savvy restauranteurs.

Check back next week to learn more about the top ghost kitchens in the country.  

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