The Pros and Cons of Opening a Ghost Kitchen

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The Coronavirus Pandemic upended our lives, and in many cases, the way we do business. One industry that had to make major changes to stay afloat was the restaurant business. When restrictions went into place, many restaurants shifted their focus to takeout and delivery. Food delivery was already gaining popularity pre-COVID, and the pandemic has only increased the demand. According to Statista, the online food delivery market in the U.S. is booming. Statista’s data shows that:

Revenue in the Online Food Delivery segment is projected to reach 28,486m in 2021. 

Revenue is expected to show an annual growth rate (CAGR 2021-2024) of 4.30%, resulting in a projected market volume of $32,325m by 2024. 

The market’s largest segment is Restaurant-to-Consumer Delivery with a projected market volume of $16,564m in 2021. 

One restaurant model that has been trending due to the incredible uptick in demand for delivery options is Ghost Kitchens. 

What is a Ghost Kitchen? 

Ghost Kitchens operate online, allowing customers to place orders for delivery, without maintaining a physical location. Ghost Kitchens offer no dine-in options, there are no seats or waitstaff. The three most common examples of Ghost Kitchens are: 

Incubator Ghost Kitchens – These are restaurants that run a virtual kitchen inside their existing brick and mortar location. For restaurants that are already established, this can be a great way to increase revenue and expand their market. For example, a fine-dining Italian restaurant could launch a pizza concept, available for delivery only. 

Commissary Ghost Kitchens – These are a shared commercial kitchen space, available for rent. In this type of Ghost Kitchen, several independent brands share a kitchen facility simultaneously. These spaces are ideal for new chefs, with limited experience and resources, to launch their brand. 

A third Ghost Kitchen concept is typically known as a Host Kitchen. This is when a restaurant rents out its commercial kitchen space during off-hours, for either ongoing or single-use. 

As with any endeavor, Ghost Kitchens have their fair share of pros and cons. 

The Pros 

Low Overhead Costs – Booking time in a kitchen space can cost much less than building a new restaurant. A Ghost Kitchen will already have an established space and equipment ready for you to get started. Since virtual restaurants run online, it is also easy to change up the menu, without having to worry about the cost of printing new menus. 

Potential for a Wider Audience – A restaurants dine-in occupancy is limited, especially with social distancing guidelines. Profits are, in-part, dependent on table turnover. With a ghost kitchen, sales are not limited by the number of seats available. 

The Cons 

Online Reputation – When it comes to food delivery, reviews are particularly important. Consumers often look at reviews when deciding on where to eat. One con in this area are third party delivery services. Unfortunately, restaurants cannot control the quality of service these delivery companies provide. A bad experience due to delivery issues, could cause you to lose future business from a customer. 

Packaging Meals for Delivery – Not all food travels well. When deciding on a menu, ghost restaurants must think about things like food prep time and temperature. It is also vital to choose the correct packaging so that food remains intact during delivery. 

Delivery Costs – Third party delivery companies take a percentage of a restaurant’s earnings. Ghost kitchens can offset these costs by factoring it into their food prices. 

Conclusion 

While Ghost Kitchens come with their own set of challenges, they can be a successful and profitable approach for restaurants. The pandemic may have rocked the way we do business, but Ghost Kitchens are proof that a little ingenuity and perseverance can turn things around. 

If you are interested in renting out kitchen space for a Ghost Kitchen, or if you are interested in becoming a Host Kitchen, GotSpot can be an excellent resource. GotSpot is an online platform for sharing all kinds of commercial space. It is easy to browse our list of available spots, and free to list!

Interested in learning more? Email us at info@gotspotinc.com