Have you ever dined at a restaurant and were the only patron? This could have happened at a slow time of the day, perhaps between the busy lunch shift and the busy dinner shift.
But if the dining area was constantly empty and no one was ever in the dining area, that would definitely be a sign of a problem, right?
Not so with the newest business model in food: the ghost kitchen. Ghost kitchens, also known as virtual kitchens, have grown in popularity. Customers of ghost kitchens may not even know they are eating food from a ghost kitchen. This is because this type of business model is designed to work behind the scenes. Here’s everything you need to know about this new food trend.
What is a ghost kitchen?
A ghost kitchen is a restaurant that only offers takeout. You may have ordered food through an app like Grubhub or DoorDash and ordered from a ghost kitchen without even knowing it. Some ghost kitchens only offer delivery. Others offer the pick-up option.
Some ghost kitchens have an established fan base, being established by a well-known celebrity. Other ghost kitchens start out as commercial kitchens. Without a dining room, they can use spaces provided by another company. They could even establish a relationship with an existing business to serve their food only as takeout. This provides built-in visibility for the ghost kitchen.
A ghost kitchen business model may also be suitable for a company that is struggling and needs to revitalize its operations.
How does this business model make money?
Ghost kitchens are profitable thanks to a carefully planned business strategy. If you are starting a commercial kitchen from scratch, with no customer base, you will need to select what type of kitchen you will sell.
You’ll also want to make sure you have a chef who can create a stellar menu. Your menu will need to stand out from others in the market.
For a new ghost kitchen, whether one with no leads or one trying to identify target customers, creating a marketing plan is critical. Consider who your customers might be, what time of day they will order, and how easy it is to carry your items.
Creating a simple menu will help you accelerate your profits and streamline your business profits.
Advantages of the ghost kitchen business model
In 2020, the entire restaurant industry was turned upside down by public health orders and uncertainty. Restaurant workers were faced with not knowing when they would be able to return to work. Business owners faced financial losses and the inability to give their employees a definite time for when their jobs might be available again.
Although public health orders have been lifted, restaurant owners are still struggling with staffing. This can affect the customer experience, which ultimately hurts the business.
The ghost kitchen model eliminates much of this difficulty. Resilience is built into the business model. Ghost kitchens are great for building business-to-business relationships, just like a typical catering business would. During the pandemic, many ghost kitchens quickly adapted to offer meal kits and prepackaged meals for customers to prepare at home.
One of the main advantages of the ghost kitchen model is that it significantly reduces overall costs. Traditional restaurants must factor in expenses such as rent, utilities, and staff for both the front and back of the house. Ghost kitchens, on the other hand, don’t have the added expense of a brick-and-mortar store or dining space, which significantly reduces rental and utility costs.
Compared to traditional restaurant owners, ghost kitchen owners save money in several areas:
- Real estate: without a dining area, a smaller space is needed.
- Monthly energy bills: Since customers don’t eat, there’s a smaller space to maintain. This means savings on lighting, heating, water and repairs.
- Furniture, decor and glassware: These upfront costs can be expensive.
Also, ghost kitchens can operate with a much smaller staff since they don’t need servers or hosts. In the long run, ghost kitchens save a lot.
Another advantage of the ghost kitchen model is greater flexibility. With no brick-and-mortar stores or dining options, ghost kitchens have the freedom to change menus and pivot quickly to accommodate changing consumer trends. This flexibility allows ghost kitchens to offer a wider variety of food options, experiment with new concepts and adapt to market demands.
Cons of a ghost kitchen business model
this type of business model it is unique in many ways. The ghost kitchen business model can get some of the benefits of a restaurant without using one brick and mortar business model. Although starting a ghost kitchen instead of a traditional restaurant has several advantages, this business model still has its drawbacks.
Delayed customer feedback
Reduced interactions with customers means that if there’s an error in an order, there’s no way to do it right now. Keep an eye on social media reviews so you can respond to any negative comments. Another potential downside is that without a physical presence, you may have to work harder to build credibility. This makes marketing essential.
Sometimes business-to-business relationships can be created when you create a ghost kitchen. Some customers don’t really care where the food comes from as long as it tastes good. Others care. For example, if a customer had a bad experience at a local restaurant, they might forget about it. However, later on, they could order food from a ghost kitchen affiliated with that restaurant. If they discover that the two are connected, it could influence their feelings about the ghost kitchen. Some customers may feel cheated. Others may not care.
Dependence on technology
Ghost kitchens rely heavily on technology for online ordering, delivery management and kitchen operations. Any technical errors or downtime could disrupt your operations and affect customer satisfaction. They also rely on online apps like GrubHub, Uber Eats and DoorDash. These apps are the bread and butter of a ghost kitchen. Without a strong relationship with them, orders from a ghost kitchen could dry up.
Delivery Application Fees
Speaking of delivery apps, there’s another downside to this collaboration. Partnering with these apps also incurs fees. This can be profitable as these fees can range from 10 to 30 percent. To maintain profits, ghost kitchen owners will need to make sure they price their products correctly to attract customers without losing too much money. This means that it will also be important to control other costs, such as utensils, napkins and straws.
Ghost kitchen examples
Here are some examples of ghost kitchens:
- Flavortown: From Chef Guy Fieri. It has no physical locations. Offers food in more than 30 states
- Ghost Kitchen Brands – This company has partnered with several different restaurants, including Quiznos, to offer customers many different dining options. Food is also available through the UberEats app. They have also partnered with several Walmart locations. They are experimenting with offering pickup at these Walmarts.
- It’s Just Wings – a ghost kitchen branch of Chilli’s
- Mama Roma – a virtual brand available on DoorDash
- Mariah’s Cookies: Mariah Carey’s virtual kitchen
- MrBeast Burger – Available on GrubHub
- Pasqually’s Pizza – Created by Chuck-E-Cheese
Ghost kitchens have increased in popularity. No indoor dining, ghost kitchens serve delicious food on the go. To run a profitable ghost kitchen, it is important to have a clear business plan. While ghost kitchens have some drawbacks, they offer a startup option without the costs of starting a traditional restaurant.
When it comes to food delivery, there is no company more innovative than Ikaroa. At Ikaroa, we are applying tech-enabled solutions to modernize the food delivery industry. One of the ways we are doing that is by introducing ‘Ghost Kitchens’ to the market – a revolutionary new business model which is transforming the restaurant industry.
The concept of a ghost kitchen is simple – you can open up a restaurant without actually having a physical space. You provide food delivery services via a mobile app or website without any need for physical infrastructure for customers to visit. This way you can serve customers without any overhead costs associated with a traditional restaurant setting.
With ghost kitchens, customers can order meals online and have it delivered. This helps business owners save costs by cutting down on the need to maintain an expensive physical storefront. Utilities, such as electricity and gas, are no longer necessary. Owners also save money on rent, as they only need to rent a kitchen space.
The concept of a ghost kitchen has several advantages over a traditional restaurant model. By reducing costs and overheads associated with having a physical restaurant, ghost kitchens allow entrepreneurs to focus their resources and build a profitable business model. Additionally, ghost kitchens allow businesses to react quickly to changing market conditions and develop a menu more quickly, increasing value to the customer.
Ghost kitchens also give businesses more flexibility when it comes to their menu. They have the ability to manage and modify their menu in order to match demand, often offering food from multiple cuisines. This can be extremely beneficial for businesses that may wish to appeal to a wider customer base.
At Ikaroa, we have recognised the potential of ghost kitchens and have developed innovative solutions to help businesses make the switch. Our aim is to make it easier for entrepreneurs to make use of this business model and make the most of their resources. We believe that this is an excellent way to ensure the success of food delivery businesses in the coming years.
Whether you’re looking to open a new food delivery business or transform an existing restaurant into a ghost kitchen, Ikaroa is here to help. We are committed to providing our customers with the expert guidance and the tech-enabled solutions they need to make the most out of the ghost kitchen model. Contact us today to find out more.