We called out the rise of ghost kitchens as a trend to watch in 2019. While it’s not a new idea, the idea of operating one of these kitchens has evolved in the last few years, from shady delivery gimmick to an important way to do business in the restaurant industry. And according to one industry vet — Sterling Douglass, CEO of restaurant-tech company Chowly — “everyone” should be using ghost kitchens, from large chains to local mom-and-pop eateries.
To recap, ghost kitchens (also called virtual kitchens, cloud kitchens, dark kitchens) are spaces that serve delivery-only concepts or restaurants. There are no storefronts and no dining areas; if there’s space to wait for food, it’s usually reserved for the Uber Eats or DoorDash folks driving your meal around. The idea is that companies who want to grow their user base or meet the demand for delivery don’t have to open more restaurants to do so; they just need to find more kitchen space.
Chowly itself works with a number of ghost kitchens. The company’s software platform integrates the many different order channels coming into the kitchen nowadays with a restaurant’s in-house POS system, streamlining the process of managing tickets from different sources and saving the business from tablet hell plaguing the rest of the restaurant industry.
Douglass is optimistic about ghost kitchens, though, as he pointed out over the phone last week, it’s “a tough business, in some ways tougher than running a traditional restaurant. A lot of those challenges come down to financials: “When you think about the dollars per square foot and the expectation you have, a lot of that methodology doesn’t apply to virtual kitchens,” he says.
There are operational differences as well, and while I won’t go into too much detail here, suffice to say that a lot of folks are coming into the virtual kitchen space from traditional restaurants, so they have little to no experience managing delivery and/or off-premises. In other words, there’s a learning curve for many of these virtual businesses, and it involves everything from distributing labor costs differently to juggling multiple third-party services who are delivering the food.
Different types of ghost kitchens will help in different ways.
Commissary kitchens are shared kitchen spaces owned and operated by a third-party company rather than a restaurant. They house multiple restaurants (or concepts) under one roof, where workers share everything from refrigerator space to frying pans. For large restaurant operators looking to a) fulfill extra demand brought on by delivery or b) test out new concepts without incurring too much risk, these are ideal.
Kitchen United is one of the biggest names in this space, having netted a $10 million investment last year from CaliBurger CEO John Miller as well as other venture capitalists. Renting space there will get you cooking space and equipment, dishwashing services, data analytics, and bookkeeping guidance, to name just a few services. Kitchen United counts Barney’s Gourmet Burgers and Canter’s Deli among its clients, and has huge expansion plans for 2019.
For independent or family-owned restaurants with less traffic, Douglass points to the pop-up restaurant. Not to be confused with popup restaurants, which are dining concepts open for a limited time. Popups are cooking stations within the main kitchen of a restaurant dedicated to fulfilling delivery-only orders. Eater recently profiled a Dallas, TX-based chain called SushiYaa, which owns five physical locations but houses a couple dozen brands within them. The virtual brands are only available through Uber Eats.
The newest type of virtual kitchen is the pod: kitchens in shipping containers that can be placed pretty much anywhere, so long as you’ve figured out the zoning regulations. According to Douglass, larger operators are starting to experiment with pods, which can even double as drive-thrus. They’re not without controversy: The Guardian profiled the working conditions of Deliveroo’s containers at the end of 2017, painting a dark picture of work life in one of these pods. Douglass acknowledges the story as reality for some, though he adds that, “on the whole, the groups we talk to have pretty similar virtual environments to what we see in regular kitchens.”
Of these three types of ghost kitchens, he says it’s really too soon to tell which will return the best margins for restaurants, but that in 2019, we’ll start to see food delivered from all three on a more regular basis. One thing we do know: technology is making the restaurant industry change with the times a lot faster than it used to, and what’s relevant now may be defunct in six months. For those using ghost kitchens, operating with the structure of a traditional restaurant but the flexibility of a Silicon Vally startup is the surest means of survival nowadays.