Ghost kitchens, a delivery-only restaurant model with no physical space for dine-in, have become essential lifelines during the pandemic. But even in a post-pandemic world, they are a wonderful way for restaurants to take advantage of the delivery boom, and perfect for new virtual or ghost restaurant entrepreneurs who are interested in a delivery-only enterprise.
Ghost kitchen start-ups have raised over $22.2 billion in funding over the last two years. While different operational strategies and business models are put to the test, one thing is clear – ghost kitchens are not a trend, they are the new reality as delivery and dine-at-home surge.
But behind the scenes, they suffer from the same challenges that plague traditional restaurants. Reef Global, a popular ghost kitchen provider has recently experienced three fireball explosions in one of their trailer kitchens, resulting in severe injuries. The company is also dealing with shutdowns and fines due to lack of permits, food supply disruptions, and the enduring labor crisis.
To avoid crushing your brand (or sizzling your staff), here’s what you need to know while comparing ghost kitchens providers.
Ghost Kitchen Business Model
The main premise of a ghost kitchen is that there are no indoor diners. Finding the cheapest, best real estate is the key factor in reducing restaurant property costs and increasing profit margins. Windowless basements, warehouses and trailers in hungry residential areas are perfect for this.
There are various operational models for ghost kitchens. Some utilize commissary kitchens serving numerous restaurants, while others bring mobile trailers or container kitchens to parking lots. In most instances, restaurateurs provide staff and food supplies. Some ghost kitchens provide basic supplies like delivery packaging and cutlery.
This low-asset business model is the best way for a new restaurant concept to quickly validate market viability, develop branding and pricing without committing a high capital investment upfront.
And for established eateries, ghost kitchens enable them to take full advantage of the boom in delivery orders without creating permanent changes to their business including rent,staff, equipment and so on. Most facilities boast short setup times of as low as 6-8 weeks.
Just like in a restaurant, different cuisines may come out of the same kitchen. But with a ghost kitchen, a restaurant can have multiple brands. For example, one for morning and brunch menus, another for healthy lunches, and a third for late-night comfort food.
Costs are usually dependent on the space, special equipment and duration of agreement. Most ghost kitchens report a $20,000 to 30,000 setup cost and around $4,000 to $6,000 in monthly fees.
What to Consider When Comparing Ghost Kitchens
4 Leading Ghost Kitchens Compared
1. Reef Global
Quality supplies and quality staff are the two key factors that determine what kind of experience off-premises diners receive. Especially now, amidst supply chain disruptions, investigating what supplies the facility provides, if any, and who delivers them is paramount. Make sure to pick an honest and trustworthy distributor.
Restaurant brands that are looking to tap into the eco- and social-trends in food-waste reduction, sustainable packaging and fair wages should inquire with ghost kitchens as to how they address these issues.
Make sure the location can provide proof of live utility hookups, waste removal, recycling, and proper permitting. These can take months to sort out if absent. Don’t forget to make sure they have high-speed reliable WiFi and parking. And finally, parking for delivery services is crucial if your dishes are to reach customers while they are still warm and fresh.
Reef Global was founded by ex-restaurateur Ari Ojalvo and operates modern kitchen trailers located in parking lots and other urban spaces. They offer a unique licensing model under which they take a percentage of sales, not a monthly fee.
Reef Global provides full service ghost kitchens, with everything from professional chefs to supplies and kitchen equipment.
Unique Value: Reef’s corporate backing means restaurants can choose from ~350 locations in over 200 cities. Reef’s strong data analytics help determine what to sell and where.
It also works the other way – when restaurants have an under-utilized kitchen, they can flip the model and cook for Reef’s brands.
CloudKitchens was founded by Uber co-founder Travis Kalanick. Their model rents out dedicated space, with customizable kitchen equipment, in their warehouses. At CloudKitchens, restaurant brands are responsible for hiring and training their own BOH staff.
Unique Value: CloudKitchens created Otter, an order monitoring technology that pools all delivery apps into one clean console.
Key features include:
- Optional cold and dry storage
- Hoods, sinks, grease traps
- Window and contactless pickup options for delivery drivers and diners
- Cleaning, maintenance, and security
- On-site fulfillment team that handles logistics
3. Kitchen United
Kitchen United offers a physical location, with dine-in and front-of-house staff. They curate and select the restaurants that get kitchen space at their commissary locations to make sure there is a mix of cuisines that meet local demand.
When selecting brands to work with, Kitchen United performs independent research and invests in the restaurant’s success. At Kitchen United, restaurants bring their own cooking staff.
Unique value: Kitchen United provides front-of-house and phone staff, with dine-in and pickup at physical locations with restaurant brand visibility.
- 2 locations in California and 4 others around the country. 10 more locations are under construction.
- Dedicated kitchen space, customizable to cuisine and operational needs
- Technology for order tracking
- Support in marketing and growing demand
- Back of house staff for cleaning and support
4. Colony Cooks
Colony Cooks operates solely in LA, and offers dedicated kitchen space in a high-end mixed residential and commercial area.
Unique value: Drive through and parking; dine-in customers can enjoy a well designed eating space.
- Dedicated kitchen space
- Full utilities, permits and WiFi
- Dedicated cold and dry storage and basic equipment
- Software for managing orders
One last ghost kitchen to keep an eye out for is DoorDash Kitchens. The leading 3rd party delivery app company has opened 2 ghost kitchen locations in California. One in San Jose which serves the Bay Area with 6 restaurant brands, and a Redwood City location serving the Peninsula.
They are a full service ghost kitchen that hire and train staff, procure and manage inventory and, of course, execute deliveries through their platform (only). Although restaurant brands have been pre-selected, keep an eye out for new locations.