Are the benefits of ghost kitchens more spectral than real?

Discussion
Photo: @Konarthnsu via Twenty20
Dec 29, 2020
Matthew Stern

Ghost kitchens are one of the operational innovations that have experienced a drastic increase in interest thanks to the surge in online ordering triggered by the coronavirus pandemic. Some experts in the foodservice world, however, say that the benefits of ghost kitchens might be more illusory than real for many restaurants.

Despite their growing popularity, operators continue to be uncertain about how well ghost kitchens (AKA “cloud kitchens”) work and for whom, as The Spoon’s Jennifer Marston points out. Ghost kitchens and their ability to facilitate digital ordering and pickup orders emerged as a natural fit for the pandemic because, during lockdowns, delivery and carry-out have represented the only way for restaurants to do business.

However, some have pointed out since March that ghost kitchens may not be ideal for restaurants with no foundational customer base and brand recognition. Ms. Marston details other concerns as well: ghost kitchens could take away from the appreciation of individual chefs and their creativity in higher-end restaurants, could tie restaurants to expensive and limiting deals with third-party delivery services and could contribute to the problem of packaging waste.

Ghost kitchens were already on their way to prominence, particularly in fast-food, before the pandemic, with Wendy’s in late 2019 naming the fulfillment model as central to its planned expansion, according to Business Insider. Around the same time, Chick-Fil-A, Sweetgreen and The Halal Guys announced a partnership with ghost kitchen startup Kitchen United to run some delivery operations from a shared kitchen.

More recently, Chipotle announced that it was opening a pilot “digital-only restaurant” which, like a ghost kitchen, would function solely to fulfill online and mobile pickup orders and would have no dine-in options.

The restaurant space is not the only area where ghost kitchens, cloud kitchens and other new methods of food pickup and delivery fulfillment have grown increasingly popular.

In late 2019, Kroger announced that it would begin utilizing dark kitchens to facilitate speedier food delivery in three urban and suburban test markets. Kroger rolled out the service in partnership with ClusterTruck, a third-party vendor with its own menu of delivery options that has been operating since 2016.

DISCUSSION QUESTIONS: Is the industry overplaying the potential of ghost kitchens? What determining factors make ghost kitchens a good option for restaurants and how might that change post-pandemic?

Please practice The RetailWire Golden Rule when submitting your comments.
Braintrust
"I expect ghost kitchens to remain a feature of the foodservice landscape but I think brands, rather than third parties, will eventually lead the way with this."
"The business model works especially well for quick-serve and fast casual brands that have an established customer base and name recognition."
"Full-service restaurants are all about the in-room dining experience, and QSRs would be ideal for ghost kitchens."

Join the Discussion!

16 Comments on "Are the benefits of ghost kitchens more spectral than real?"


Sort by:   newest | oldest | most voted
David Naumann
BrainTrust

Ghost kitchens are for real and will continue to be more prevalent in some retail segments. Fast food and quick serve restaurants that have historically succeeded at drive-thru and delivery are prime candidates for ghost kitchens. Now the pandemic has “trained” many consumers to be proficient at online ordering and have made take-out, drive-thru or delivery a habit for many restaurant “experiences.” Full-service restaurants are not a good candidate for ghost kitchens, as guests are paying for and value the ambiance and personal service they receive.

Ken Morris
BrainTrust

I don’t think they are overplaying anything. They are trying to survive and this is one way they can make it through 2021. I believe ghost kitchens make sense for national brands going forward. They have the brand equity and scale to make ghost kitchens a complement to their total business portfolio. This isn’t an all or nothing proposition but a lifeline to live another day with the potential to stick around forever.

Neil Saunders
BrainTrust

There is a big difference between a ghost kitchen operated by a brand to fulfill its own digital orders and a generic ghost kitchen that is shared by many different brands. A lot of restaurants have concerns over the latter as it is more difficult to control things like quality and presentation. For higher-end restaurants, generic kitchens can’t replicate the skills of the individual chefs which is a big point of differentiation. As such, I expect ghost kitchens to remain a feature of the foodservice landscape but I think brands, rather than third parties, will eventually lead the way with this.

Bob Phibbs
BrainTrust

I think many of the touted successes of shared resource ghost kitchens resemble mall food courts with multiple brands cranking out food for different brands visible to the consumer. Restaurants will be back in full force in six to eight months and consumers will outstrip demand. Having a brand that is consistent with an established brand makes sense but it is a smaller percentage of operators I read about who are just start-ups.

Cathy Hotka
BrainTrust

Ghost kitchens have enabled meal delivery services, like Fresh Flamingo in Sarasota, to offer online meal ordering without the pricey Main Street rent. We’re going to see a lot more of this until everyone feels safe dining at restaurants again.

Gene Detroyer
BrainTrust

Ghost kitchens make ultimate strategic and operational sense for some types of restaurants, namely fast food. Both operations could be streamlined to meet the different output demands.

The key, however, will be to be sure the ghost kitchen is producing the same output as the restaurant. Will the ghost kitchen develop shortcuts? Will they skimp on quality and value because they don’t have to face a customer? Will they eliminate items because the demand isn’t great enough?

Logically, the next step is the development of companies that provide one ghost kitchen operation for multiple restaurants. That would be followed by those same companies developing only delivery/pickup for a newly named restaurant.

As Uber Eats will GrubHub cook?

Jeff Hall
BrainTrust

Ghost kitchens are a fantastic option for some types of restaurant operators, but not all. The business model works especially well for quick-serve and fast casual brands that have an established customer base and name recognition. In an industry generally over-built with physical brick and mortar locations, ghost kitchens are a cost-effective way to expand into new markets, without significant capital outlay and risk. Ghost kitchens are also ideal for testing customer demand and/or menu items in new markets.

Georganne Bender
BrainTrust

I think Neil hit it on the head when he said there is a big difference between a ghost kitchen operated by a brand and one used by many. Ghost kitchens have provided restaurants a way to stay in business.

I order takeout weekly from local restaurants to support them. The food is good but I am craving the restaurant experience and I know I am not alone in that thinking. Once the pandemic is under control and restaurants reopen I see more people going to the physical location rather than staying in for takeout. We’ve been grounded from the things we enjoy for too long, we’re anxious to get out and experience what life has to offer once again.

Scott Norris
Guest

The food truck scene in the Twin Cities stayed strong all the way up to a couple weeks ago, well beyond what anyone expected. Traditional venues with their high fixed costs are shuttering, but “people still gotta eat” and crave variety/something new. I see the ghost kitchen setup as a way for entrepreneurs and chefs to get in the game/stay in the game as we all now see the convenience of online ordering. And centralized kitchens may finally create some scale economies for delivery service. So I see this as a long-term development (even though I can’t wait to sit in a restaurant again!).

Georganne Bender
BrainTrust

Scott, I’m jealous that you had food trucks. I live in a small town so food trucks usually don’t happen here. I am for anything that helps entrepreneurs and chefs stay in the game!

Rick Moss
Staff

In cities, ghost/cloud kitchens may be a smart strategy for launching a brand. In addition to home delivery, one could use the facility to supply food trucks and kiosks at outdoor festivals and to the indoor food halls that rose in popularity pre-COVID — all without taking on the huge burden of urban retail rent. New-era restauranteurs have become so savvy with Instagram and other social channels that it has become possible to build a brand “virtually” and figure out if you need a physical dine-in space down the road.

Brandon Rael
BrainTrust

It’s a matter of survival and resilience at this point for both restaurants and QSRs. Ghost kitchens have become a necessity in a world where social distance measures and quarantines are in place. With the upwards of 75 percent traffic shortfall in restaurants, the emergence and prominence of delivery and restaurant pickup services are a critical operating model shift during very uncertain times.

From a longer-term perspective, many consumer preferences of eating at home and takeout will remain during the post-pandemic world. However as customers slowly and cautiously return to inside dining, larger restaurants may outsource to ghost kitchen operations as another revenue stream. Full-service restaurants are all about the in-room dining experience, and QSRs would be ideal for ghost kitchens.

Lee Peterson
BrainTrust

Funny question because, in essence, fast food restaurants have already proved the model out — most of them were doing anywhere from 70 to 85 percent of their business outside of the dining room pre-COVID-19, so they just have to figure out how to pick up that 15 percent or so (with delivery?). P.S.: The movement by large brands to dark stores (ghost stores, whatever) is already underway, especially by QSRs. And anyone who doesn’t follow will travel the road of the retail brands that kept believing in stores as the primary point of sale during the beginning of the century; a truly dark road.

Mel Kleiman
BrainTrust

Ghost kitchens offer lots of benefits to all the segments of the restaurant market and are a trend that will become mainstream.

Look at just some of the benefits:

  • Lower rent;
  • Lower labor costs;
  • Greater flexibility in the offering;
  • Low-cost way to try new ideas.
Craig Sundstrom
Guest

Remarkable, methinks that a term that probably didn’t even exist a few months ago except maybe within the restaurant industry can now garner half the votes as a “must have”…hmmm.

As with any tool, they likely have their uses, but I remember back from school when outsourcing was starting to become “the” thing, and we discussed the concept of a company that was nothing but hired components. The question was, what makes for a(n) company/organization/brand, and can it really exist if every part of it belongs to someone else?

Oliver Guy
BrainTrust

Another word for these is “Dark Kitchens.” Once a brand is established they have great potential — situate close to population centers, keeping pick-ups away from customers at eat-in locations etc.
They offer huge possibilities for expansion.

Alternatives are to provide branded easy-cook at home meals. The UK has a few players in this area: Cote at Home — a spinoff from a large restaurant chain is one — but there is also a chain of Indian restaurants who sell their wares in supermarkets.

The benefit of dark kitchens, however, is that they require much less work to establish — no need to build a supply chain of find a packaging company etc. Consequently, the dark kitchens are the only realistic expansion option for smaller restaurants and chains.

wpDiscuz
Braintrust
"I expect ghost kitchens to remain a feature of the foodservice landscape but I think brands, rather than third parties, will eventually lead the way with this."
"The business model works especially well for quick-serve and fast casual brands that have an established customer base and name recognition."
"Full-service restaurants are all about the in-room dining experience, and QSRs would be ideal for ghost kitchens."

Take Our Instant Poll

Will ghost kitchens become a must-have strategy for most restaurants after the pandemic?

View Results

Loading ... Loading ...