How an army of ghost kitchens are challenging traditional restaurants

Monday 22 February 2021

UberEATS, DoorDash and GrubHub have ushered in a new era in restaurants. The past few years have seen a rise of ‘ghost kitchens’ (aka cloud kitchens), restaurants with no in-person ordering or in-person dining. These kitchens are set up never to see a customer. Rather, they are optimised for the food delivery platforms.

By one industry estimate, there are over 100,000 ghost kitchens operating in the US. These customer-less restaurants can be split into two groups. Firstly, stand alone ghost kitchens, that have been optimised for food delivery and online discovery (i.e. having SEO friendly names like ‘Pizza of New York’ or ‘Omelette Farm’). The second group are ghost kitchens for major restaurants chains, which in theory take the pressure of managing delivery orders off other stores. One example, Chipotle, recently opened their first ghost kitchen in New York’s Hudson Valley.

This segment of the restaurant industry is only going to grow as the food delivery platforms convert more people to users. Research firm EuroMonitor predicts that ghost kitchens will be a $1 trillion industry by 2030. Uber founder Travis Kalanick raised hundreds of millions of dollars to build his business CloudKitchens and the delivery apps are pouring money into the space, for example Deliveroo operates shared kitchens in London and Paris. 

Plenty of opportunities come with ghost kitchens. No longer do restaurants have to cater to just one type of cuisine. One shared kitchen, owned and operated by the same team, could have a number of restaurants listed on the food delivery apps. Burgers, hot dogs, pizza, laksa, dumplings, any cuisine you can think of, can all be cooked by the same team in the same kitchen, but for a customer it appears as all different restaurants each specialising in their own cuisine. The cost to start a ghost kitchen is also far less than a traditional restaurant. In an urban centre, a ghost kitchen can be opened for roughly 5% of the average cost of opening a traditional dine-in restaurant. 

There have also been instances of misleadings customers. Chuck E. Cheese, famous in America for its children’s playgrounds, listed its restaurant on delivery apps as ‘Pasqually’s Pizza & Wings’ and Applebee’s listed as ‘Neighborhood Wings’. 

This will be a fascinating industry to watch develop. There are already businesses that are looking to franchise ready-made digital restaurants (e.g. Local Culinary, a Miami-based startup, has 50 restaurants to franchise). It wouldn’t be a surprise if the next major chain restaurant (think McDonalds, Starbucks, KFC) started as a ghost kitchen using the cheaper start up costs to quickly achieve scale.

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