In 2020, many restaurants had no choice but to close their doors due to the global COVID-19 pandemic. On the other hand, there was a huge increase in online food delivery. In fact, online food delivery sales in the U.S. reached $28 billion in 2021. That’s when the ghost restaurant or ghost kitchen concept started gaining popularity.
A ghost restaurant isn’t as scary as it might sound. This restaurant concept helped food establishments continue operations but in a slightly different manner. It’s an innovative restaurant concept that allows businesses to offer takeout and delivery options without the extra costs and logistics of a dine-in experience.
Online food ordering and food service delivery have made it easier than ever for people to enjoy restaurant-quality meals at home. With an increased demand for food delivery services, more restaurant owners are looking into the ghost kitchen and restaurant trend.
Is a ghost restaurant a business idea that you want to explore? Let’s get down to the basics of, “What is a ghost kitchen?” and what a virtual restaurant brand can cost you.
What Is a Ghost Restaurant or Ghost Kitchen?
A ghost restaurant or ghost kitchen is a restaurant that doesn’t have a storefront like normal. It doesn’t provide the opportunity for consumers to have a dine-in experience. However, meals can be prepared and then sent out through various food delivery platforms. These include DoorDash, Grubhub, UberEats, or in-house delivery.
The meaning of a ghost kitchen refers to a smaller restaurant concept with a virtual brand. With that being said, there are fewer staff and a smaller footprint with a business model like this. This means there’s no need for wait staff or bar staff. Instead, you might look into allocating funds for different types of chefs and a restaurant manager.
Ghost kitchens rely on online orders to connect with their customers. Renting a kitchen space instead of a brick and mortar shop for a restaurant can make owning this kind of business more affordable.
Existing dine-in restaurants, like fine dining establishments, tend to explore ghost kitchen opportunities when they want to test out new concepts. Ghost kitchens tend to be more appealing due to their low overhead expenses and faster startup process.
Benefits of Opening a Ghost Kitchen
Becoming a restaurant business owner might be a dream of yours. However, the responsibilities that come with it–like managing front-of-house staff–aren’t always easy. A ghost kitchen only requires you to worry about the back of house staff.
Opening a ghost kitchen comes with several benefits including:
- Low overhead costs
- Simpler startup efforts
- Lower risk
- Increased delivery range
- Opportunity to capitalize on online ordering demand
Low Overhead Costs
A ghost restaurant doesn’t have a storefront which means that there are no overhead costs associated with leasing or buying a commercial restaurant space. Menu updates won’t require re-printing. Instead, they’ll just require some online updates, similar to a restaurant QR code menu.
Simple Startup
Opening a brick and mortar restaurant can be challenging as there are a lot of steps involved. This can be true when starting a bar, opening a coffee shop, opening a bakery, and opening a grocery store. However, for a ghost kitchen, the startup process is a lot simpler, similar to opening a food truck.
You can decide to lease a kitchen space and even get one equipped with all the necessary equipment and restaurant technology. These are turnkey operations that will help you get your business up and running sooner and at a more affordable rate.
Lower Risk
With reduced overhead costs and lack of sit-in dining, you reduce the standard risks that come with opening a restaurant. However, just like any business in the hospitality industry, a ghost restaurant still has risks. You can oftentimes minimize these risks by working with companies that provide expertise, turnkey operations, and staff.
Increased Delivery Range
The ideal way to test a new niche market in the restaurant industry is through a ghost kitchen. If you operate a single restaurant and use third-party delivery services (see What Is 3PL), you can have a limited delivery range.
You can expand your customer base by opening up a ghost kitchen in a different location. This can increase production and delivery range as you’ll be able to offer delivery-only services to additional areas.
Opportunity to Capitalize On Online Ordering Demand
Since the COVID-19 pandemic, there has been an increase in food delivery services. With a ghost restaurant, you can sell your food through different third-party delivery platforms and through your own delivery services.
By opening a ghost kitchen, you can capitalize on the increased demand for food delivery services. It’s a way to expand your existing restaurant business and dive into the industry for the first time.
Cons of a Ghost Kitchen
There are also a few cons that come with opening a ghost kitchen, as with every business. The cons of a ghost kitchen can include:
- Reputation management. Word of mouth and online reviews are crucial for your reputation since there is no customer-facing service.
- Limited customer base. A ghost kitchen can limit your customer base to only delivery or takeout customers. Limits can also be present in terms of delivery range.
- Third-party delivery fees. If you use third-party delivery platforms such as UberEats or Grubhub, you’ll have to pay the fees that come with it.
- Increased marketing pressure. Building your brand online is crucial since you don’t have a physical location to draw people into. You may also consider incorporating a loyalty program.
Ghost Kitchen Examples
Many restaurants have decided to open up ghost kitchens as an expansion of their existing establishment. Others have chosen to embrace restaurant industry trends by offering food delivery services through these virtual kitchens.
Here are some ghost kitchen examples:
NASCAR Refuel
In August 2021, NASCAR Refuel made its big debut at the Coke Zero Sugar 400 in Daytona, Florida. It’s a virtual restaurant that caters to NASCAR fans who crave the race day experience. They also target anyone who enjoys delicious stadium food. The fan favorites from NASCAR Refuel include the Daytona Dog and the Refuel Burger.
It’s Just Wings
Two restaurant giants–Chili’s and Maggiano’s–teamed up to work with It’s Just Wings, a ghost restaurant. This ghost establishment operates out of a total of 1,050 Chili’s and Maggiano’s locations. They offer pick-up and delivery services.
Krispy Rice
C3 (Creating Culinary Communities), an omnichannel brand and distribution platform, has numerous US locations. That’s where Krispy Rice prepares their sushi and rice dishes. Krispy Rice offers delivery services from their ghost kitchens and will also start offering their food at PF Changs, TGI Fridays, and Hooters.
How Much Does a Ghost Kitchen Cost?
The cost for opening a ghost kitchen can vary as there is no fixed price. The cost is based on whether you decide to rent a commercial space or use a commissary kitchen. Ghost kitchens are known to have fewer overhead costs when compared to brick and mortar restaurants. This is what will allow a business owner or entrepreneur to avoid costly rent prices.
A brick and mortar restaurant can cost an average of $100 to $800 per square foot. However, these costs don’t include the cost of menus, dining chairs, tables, and similar equipment. Ghost kitchens don’t require this kind of equipment. In fact, they save a significant amount since they only need a kitchen.
Lower startup and operating costs are common for ghost kitchens. Since this kind of establishment is smaller, there is no need for decorations, cutlery, glassware (bar glasses), and drink refills.
A smaller footprint means lower rent costs. You don’t have to choose a prime retail area for your ghost restaurant. Labor-spend will drastically decrease since there is no need for servers, hosts, or bussers.
The food cost may also be a factor which is where the food supply chain comes into play. Look into, "what is the food supply chain?" for a better understanding.
Frequently Asked Questions About Ghost Restaurant and Ghost Kitchen Meaning
What Is the Difference Between a Ghost Kitchen and Brick and Mortar Restaurant?
The difference between a ghost kitchen and a brick and mortar restaurant is that a ghost kitchen can only be ordered from online, whereas a brick and mortar restaurant operates out of a dine-in restaurant location. Ghost kitchens typically don’t have a brick and mortar counterpart. They’re known for their pick-up and delivery options.
Why Is It Called a Ghost Kitchen?
The ghost kitchen meaning comes from the fact that there are no waiters, public presence, or dining room. Food prep operations are done from a kitchen and sent out through delivery services to the customers. The only human contact is between the delivery driver and the customer.
Why Are Ghost Kitchens So Popular?
Ghost kitchens grew in popularity following the COVID-19 pandemic due to the increase in the demand for food delivery services. The price of real estate is also a factor. Many people who want to own restaurants can’t afford to spend money on prime locations and properties which is why they choose to test out the market with ghost kitchens.
How Do Ghost Kitchens Differ from Ghost Restaurants?
Ghost kitchens refer to the actual physical space where the food is prepared, which can serve multiple virtual or ghost restaurant brands. Ghost restaurants are the food service brands that exist solely online and operate out of ghost kitchens. Essentially, ghost kitchens are the infrastructure that supports the operation of ghost restaurants.
How Do Ghost Kitchens Impact the Restaurant Industry?
Ghost kitchens are transforming the restaurant industry by introducing more flexible and cost-effective ways to operate. They allow entrepreneurs to experiment with new concepts and expand their reach without the significant financial burden of opening traditional restaurants. Additionally, ghost kitchens enable existing restaurants to increase their delivery capacity and test new markets.
Can Existing Restaurants Benefit from Ghost Kitchens?
Yes. Existing restaurants can benefit from ghost kitchens by using them to expand their delivery services, reach new customer bases, and test new menu items or concepts. For example, a brick-and-mortar restaurant can launch a virtual brand operating out of a ghost kitchen to serve a different cuisine or cater to a specific dietary preference.