The ghost kitchen concept exploded when shelter-in-place orders were enacted. And the trend continues today as many eateries opt to open a ghost kitchen as an additional form of revenue. Some patrons may be back in restaurant seats quickly, but others may be reluctant to sit down and eat for years to come.
In this article, we're going to explain how to start a ghost kitchen, discuss ghost kitchen startups, and more.
What is a Ghost Kitchen?
Before going into the ghost kitchen business model, it's crucial to understand what these kitchens are in the first place. It's hard to define this type of restaurant, but essentially, they're:
- Off-premises facility kitchens
- Offering online ordering
You can't walk into an eatery and request a ghost kitchen menu. Instead, you offer online ordering options. As you can imagine, the ghost kitchen startup cost is significantly lower than a place that needs to worry about:
- Indoor liability
- Decorations
- Utilities
- Other overhead
Many entrepreneurs are trying their restaurant ideas through these ghost kitchens first because they allow you to determine demand and profitability before the massive, upfront investment is involved.
Minimal costs and risks have led to the success of these kitchens
You can launch a ghost kitchen as its own brand, or restaurants can leverage this concept to expand their current delivery ranges. In all cases, it's a concept that both owners and patrons seem to love.
Ghost kitchen rental costs are lucrative for restaurants that have additional space. We're seeing many brick-and-mortar operations use existing staff to run their own ghost kitchens as a separate brand.
Some of these entities are going as far as using existing staff for deliveries so that they don't need to rely on costly, third-party vendors.
Understanding the Ins and Outs of Ghost Kitchens
Ghost kitchens run out of an existing restaurant. Either the brand decides to open a new brand as a ghost kitchen, or an entrepreneur rents space in a commercial kitchen to run their own ghost kitchen.
From a patron's standpoint, they'll notice little difference in the way these kitchens work:
- Patrons browse through online menus
- Customers place orders on an app or restaurant website
- Bills are paid using a credit card, etc
On the back end, the following happens:
- Once the order is placed, the staff is alerted
- Staff members will begin food prep
- The delivery deliver picks up the food
- The driver delivers the food to the customer
Once the customer receives their food, the transaction is complete, and the restaurant earns money. It's much like regular food delivery, but you cannot go and sit down at a ghost kitchen. Instead, these are online-only orders with kitchens that are only open to staff.
Advantages of Opening a Ghost Kitchen
Ghost kitchens make a lot of sense to open because they're advantageous to owners. A few of the key advantages of this type of kitchen are:
- Overhead cost is kept to a minimum, so trying a new food concept or generating revenue is less costly.
- Restaurants must meet the demand of online delivery, and ghost kitchen concepts allow for this demand to be met.
- Streamline workflow without needing to worry about front-end operations.
- Capture a larger market share with new food concepts.
- Generate additional revenue that can augment slower restaurant occupancy.
Additionally, if you offer delivery, you're not limited to the number of guests that you can serve. For example, if you run a small restaurant with seating for up to 50 people, you're likely only catering to a select few people in your area.
Patrons may love your food, but without more seating capacity, they may go to your competitors.
However, ghost kitchens deliver food to wider audiences so that you can earn more money from your operations. The volume of sales is only limited by your delivery capabilities, which are easier to expand compared to putting an addition on your restaurant.
Your ghost kitchen is not forced into the limitations that most restaurants are confined to because of their space.
Disadvantages of Opening a Ghost Kitchen
While a ghost kitchen calculator may point to this as a good opportunity to generate higher revenue, there are many disadvantages to opening ghost kitchens. Some of the disadvantages of a ghost kitchen are:
- Delivery requires you to be very diligent with food storage and delivery range. If your food is cold when it reaches guests or the quality degrades during the process, it may lead to bad reviews and low orders.
- Restaurants that only offer online delivery are at the whim of patrons who leave reviews. You'll need to cater to your patrons with the utmost diligence and provide top-tier service to keep customers happy.
- Third-party delivery services will require you to pay fees for delivery and may not provide the exceptional service you do when delivering. Many delivery apps take 30% of the earnings from orders, so it's a significant cost.
If you weigh the pros and cons and still want to open up a ghost kitchen, consider the tips below to make setup easier.
6 Tips for Setting up a Ghost Kitchen
- Optimize your menu to ensure that the food is in demand and that when you deliver it, it's still fresh and of high quality.
- Choose your delivery range and location to help support the first point and keep food as fresh as possible.
- Determine if you'll hire delivery drivers or use a third-party delivery service. Consider the cost of each option before making a choice.
- Delivery costs should be factored into your menu price so that you can still maintain high enough profit margins to stay in operation.
- Always adhere to health and safety guidelines.
- Experiment with new, unique food options to find what works and doesn't for your business.
Ghost kitchens are a great option for many restaurants that want to try new concepts, generate additional revenue, or just get started with their new operation. With the right approach, these kitchens can be very profitable.