The news is exploding with new ghost kitchens — a delivery-only foodservice model — popping up seemingly overnight. So why is everyone talking about them? And what are the benefits of ghost kitchens?
Ghost kitchens (also known as cloud kitchens) are the perfect way for existing restaurant owners to capitalize on down times or unused space because they bring in more revenue through delivery demand, scale business in a reasonable way, and create entirely new business opportunities.
Want to learn more about what it takes to run a virtual kitchen? Take a look at our breakdown of how to grow your virtual brand.
They boost your bottom line
Cloud kitchens allow you to offer more options in the same space as your original brand. They are a great way to diversify your menu and test out new items, food types, and cooking styles. By offering varied menus, you can acquire different types of customers and keep them returning time and time again to satisfy an entirely different craving.
Ghost kitchens also offer higher margins as they rely exclusively on delivery demand, reducing or potentially eliminating overhead costs for space, furniture, traditional POS software, and front-of-house staff. With the need for delivery already at an all-time high, investing in a delivery-only model that makes use of both in-house delivery and apps like Doordash or Grubhub is a smart move.
Cloud kitchens meet delivery demand
The delivery future is here. Online food delivery’s market growth is on track to accelerate by nearly 11%. Renting new kitchen-only space helps meet that extra demand that usually overwhelms your already busy staff.
The trouble can start when the business model that you built for in-venue gets too many delivery orders. The new demand becomes hard to balance and your brick-and-mortar kitchen can’t handle the overwhelming demand while still serving in-venue guests.
Restaurant operators can choose to sign a lease on kitchen space and hire their staff or sign an agreement to work with a pre-hired team. This added kitchen creates a new channel just for delivery, supplementing your current staff and restoring the balance to your brick and mortar location.
They help you reasonably scale
Starting a ghost kitchen is the best move for those looking to scale that don’t have the massive funds it takes to expand. Operators benefit from ghost kitchens when they’re ready to add a new location to the mix. However, for many, this scale comes with pitfalls.
When a restaurant makes its maximum revenue, it can double its locations once every two to three years. But this comes with strings attached — loans, high rent, and sometimes even partners to whom operators give up half of their ownership.
Ghost kitchen rents are lower than traditional brick and mortar space, allowing for much faster scale with a simple kitchen addition.
Virtual brands create new business opportunities
Using a brand and creating agreements to sell in other restaurants is a great way to spread brand awareness and create new revenue opportunities without additional hiring. DogHaus, known for its signature hot dogs, partnered with a ghost kitchen company to extend worldwide — no rent required!
C3, one of the biggest cloud concept innovators, has perfected taking brands and distributing them. If renting kitchen space isn’t the best route, restaurant owners can take their brand and have other locations sell their food or menu items. These brand-renters pay a fee for distribution, and the brand landlords reap the benefits of extra revenue and better brand awareness.
From benefit to practice
The tech landscape is always changing and evolving; ghost kitchens are the newest innovation within the hospitality industry. As the benefits of this new format become clearer, we expect to see the number of virtual brands steadily increase.
So what are you waiting for? Start learning if your operation can benefit from adding a ghost kitchen with our Restaurant Profit & Loss Calculator.