The Rise of Ghost Restaurants and Kitchens

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Ghost restaurants, sounding intriguing, is a new foodservice concept that has been trending in the US.  With the number of Americans who have chosen to order food by means of delivery services instead of dining in increasing rapidly to an extent that the current restaurants sometimes have trouble filling the demand, more and more family-operated restaurants are being re-modelled to benefit from this growing popularity of ordering out. Concurrently, more restaurants chains are turning to ghost kitchens, virtual kitchens, ghost restaurants or virtual restaurants in response to such highly-sought services. Restaurants failing under these never-seen-before categories are tailored to offer take-out only mostly without storefronts and dining areas. Customers often order dishes from these types of restaurants via food delivery applications offering a variety of foods by different restaurants and have the food delivered to their specified locations.

Typically, a virtual or ghost restaurant operates just like the traditional brick-and-mortar restaurant in the sense that foods are prepared once customers order them. A famous family-owned pizzeria in the US looks like a typical conventional restaurant with red chairs in the dining area and a black-and-white checkered floor. However, in the kitchen, the cooking crew prepares food for four later-established restaurants owned by the same business owner. These four restaurants do not have their own separate, physical spaces, and all the dishes that these restaurants offer are prepared in the same old kitchen and delivered via a third-party application while the pizzeria continues to serve their gourmet pizza to patrons that walk through the door. The owner set up the four restaurants, in a matter of weeks, earlier this year to make sure his business was ahead of this increasing trend. In addition to this operational remodeling by a family-owned business, a variety of major fast-food chains have also started to operate towards this growing trend on varying business models.  

Wendy’s has become the latest fast-food chain to bring up establishing their own ghost kitchens in the US by the end of this year in high food-delivery-demand areas without dining areas or storefronts as well as in areas in which the chain has yet to emerge due to high real-estate costs or other constraints. However, Wendy’s is not the only fast-food chain that is turning to setting up ghost kitchens to increase delivery sales by capitalizing on the increasing demand without having to fork out a large sum of money. 

Other major chains, such as the Halal Guys, Chick-fil-A and Sweetgreen have also started venturing into this trending market. However, instead of establishing their own ghost kitchens, they have partnered with a shared-ghost-kitchen provider, Kitchen United, to offer delivery from shared commercial kitchens. United Kitchen is a start-up that offers kitchen commissaries for restaurants that are planning to enter into the well-performing market by means of delivery or take-out only. This newly-established company has been backed by $50 million in funding from Google and other investors and currently has two locations in Chicago, Pasadena and California respectively. The company has formulated an expansion plan to set up 40 more shared commercial kitchens across the US. 

In addition to United Kitchen, Reef, which is a rebranded company that focuses on providing ghost kitchens, is operating on a different business model.  In lieu of only offering shared commercial kitchens like Kitchen United does to restaurants, Reef operates similar to a restaurant group, leasing ghost kitchens, in the form of trailers, to small restaurant owners while also offering cooks and workers on a fee basis to restaurateurs seeking for additional manpower. Reef places its shared commercial kitchens on the parking lots that the company owns. Currently, one of its parking areas is being occupied by three kitchen trailers leased to eleven different ghost restaurants. 

According to a food industry advisor, this online food ordering market is worth $26.8 billion, which is the fastest-growing source in relation to restaurant sales in the US. Digital orders are increasing approximately 20% each year despite only accounting for 5% of all restaurant orders. Setting up traditional restaurants generally involve high upfront investments and substantial overhead and operating costs. During their operation, these restaurants are also exposed to a higher level of competition. Approximately 26% of independent restaurants fail to survive in their first year. However, ghost restaurants or kitchens do not requirement substantial upfront investments and overhead costs, which in turn results in affordability for consumers. However, the only downside for consumers is that detailed reviews for ghost kitchen or restaurants are limited as most food delivery services only allow their users to rate restaurants with respect to their food quality by means of using a star-rating system. 

Taking into consideration these benefits and the growing demand for food delivery services, ghost restaurants and kitchens have become increasingly popular. Americans are getting more and more choices as the food delivery market undergoes rapid expansion, the extent of which is yet to be known. As the market evolves, these services are expected to become increasingly affordable and convenient for consumers. Given that most food delivery applications have yet to allow their users to upload reviews, consumers wanting to include wine as part of their food orders can check out the wine ratings by Sokolin before proceeding with the purchase.

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