Throughout the pandemic, ghost kitchens have enabled many restaurant operators to keep business going behind the scenes when dining rooms were closed. But as it turns out, operators may be able to build more trust with the public if they pull back the curtain on the foods they’re preparing in ghost kitchens. According to a Datassential survey, three-quarters of consumers said they would support a local restaurant that “goes ghost” in order to stay in business. At the same time, they’re sensitive to restaurants using ghost kitchens to present multiple faces to the public: 55 percent of respondents said they think it’s dishonest for a restaurant to sell the same food under a different name and two-thirds said virtual brands should share their locations and state that they are digital-only concepts. If you operate a ghost kitchen, consider telling your customers why you’re doing it – and how it helps improve the final product they receive. Instead of turning them off, it may actually help you build trust with them.
Are you squeezing as much revenue as possible out of your kitchen? Your restaurant technology can help you create a virtual, delivery-only brand – and it’s one way restaurants will be maximizing their existing ingredients, food expenditure and labor in the years ahead. Consider where you have extra capacity to better capitalize on a daypart (or create one where it didn’t exist before), reinvent a dish for a different customer base, use an ingredient more broadly, or make better use of your staff’s hours and skills. Could you create a new brand with your existing resources, then use your kitchen technology to tap into a delivery network and expand your base of customers?
Not so long ago, a food truck was often perceived as a potential means for a fledgling restaurant concept to develop a following with the public before launching a brick-and-mortar location, or for a smaller independent restaurant to spread its brand awareness. Now, established brick-and-mortar brands are looking to food trucks as a way of modernizing to suit the constraints of the Covid era. Take Au Bon Pain. Nation’s Restaurant News reports that Tabbassum Mumtaz, the CEO of Ampax Brands, which is the new franchisor of the Au Bon Pain bakery and café brand, considers food trucks – along with ghost kitchens – to be important tools that the brand can use to modernize itself. Research from IBISWorld found that from 2016-2021, the food truck industry has grown at an annualized rate of 7.5 percent, surpassing the growth of the broader foodservice sector. To be sure, food trucks have their disadvantages – at the time of this writing, most small, independently owned food trucks weren’t eligible for the Paycheck Protection Program or Economic Injury Disaster Loans. However, they do offer a key advantage – namely flexibility – that happens to suit the current times extremely well. While the pandemic has decreased demand for food truck business in office parks, it has increased opportunities for it in residential neighborhoods, hospital and grocery store parking lots, and highway rest stops.
As evidence of their growing prominence in the restaurant industry, ghost kitchens are now getting their own events. In June, the Ghost Kitchen Conference in Dallas addressed this new and growing segment of the restaurant industry and how brands are approaching everything from menu development to digital marketing to site selection. Nation’s Restaurant News reports that ghost kitchens are demonstrating potential and an ability to gain competitive advantage in a few key areas. Service is one. While demand for delivery and off-premise restaurant food is high, the experience of eating this food can be lacking and difficult for operators to control. There is opportunity in the ghost kitchen segment to condense the physical distance between restaurants and customers and also channel more resources into building stronger relationships with delivery providers in an effort to make delivery a higher-quality experience (Fazoli’s, for example, treats delivery drivers to breadsticks.) Because ghost kitchens are small, nimble and flexible, there is also potential for them to push the boundaries of the segment. They can easily plug into grocery stores, airports, hotels or other facilities with a captive audience for restaurant food. Finally, these kitchens are lowering the barriers of entry into the industry. No longer does opening a restaurant require a substantial investment or attractive real estate (though the challenges of marketing ghost kitchens without brick-and-mortar counterparts surely generate new challenges related to marketing and customer engagement).
It may seem like ghost kitchens have experienced a lot of growth in the past year, but there’s still a long way to go. According to Euromonitor, ghost kitchens could create a $1 trillion global market by 2030. Between now and then, expect a lot of innovation in the space, along with a range of ways for operators to make them a part of their business model. If you’re considering a ghost kitchen as a means of diversifying your sales capabilities, make sure you start from a place of strength when it comes to your digital brand. If you plan to have a scaled down brick-and-mortar presence, you still need a reliable way to get in front of consumers – particularly a strong digital connection, such as an Instagram account that gets regular engagement from followers and a customer database that allows you to segment your mailing list and target guests with informed promotions. On the latter point, operating a ghost kitchen will be most effective if it is set up within a small radius of the customers most likely to buy food from it, so understand the tastes of the surrounding area. If you have the brand connection with customers and you’re close enough to them that you can get their favorite dishes to them shortly after they’re out of the oven, you’re in a good position to succeed – and if you’re sharing your ghost kitchen space with complementary businesses that can enhance your own promotions, all the better.
According to a recent poll from global data intelligence firm Morning Consult, 59 percent of Americans now say they feel comfortable eating at a restaurant. So as pandemic-related dining restrictions are lifted and consumers look for more in-person dining experiences, where does this leave ghost kitchens? In the near future, some ghost kitchen operators that didn’t start as brick-and-mortar locations may have greater challenges in getting the word out about their brand. Others like C3 are even considering reverse-engineering into small physical locations – how quickly times change. But delivery isn’t going away, and though we can hope there won’t be another pandemic any time soon, business disruptions happen and restaurants need to have plans in place to manage both large and small challenges that arise. Regardless of what portion of sales you generate from off-premise business, the big lesson of the pandemic may be to build a business model that can flex as much as possible – and to adopt the tools that enable quick pivots. For restaurants, that could mean having some kind of customer-facing physical presence (even just a small brick-and-mortar location or food truck) to keep the brand interesting and front-of-mind for consumers, ensuring that every square foot of your real estate footprint is paying for itself, leaning on delivery to scale business up or down in response to a range of conditions, and adopting technology that can help you adjust staffing, inventory and menus on short notice.
On-demand food delivery is just getting started – and restaurants may be just one part of it. Uber announced recently that it had partnered with the on-demand delivery startup GoPuff to offer items from grocery and convenience stories in 95 cities within the next couple of months. (This is on top of its recent acquisition of Drizly, enabling the delivery of alcohol.) As grocery stores offer more ready-to-eat foods and companies like Uber appear to be making it easier for consumers to have food and drink delivered when they want it from businesses beyond just restaurants, where does this leave restaurants? To be sure, developments like this hint at how third-party delivery companies could be shifting gears to promote greater profitability after the pandemic – and potentially become less reliant on business from restaurants. In any case, as life begins to return to normal, restaurant operators need to continue to think about how they can innovate. That means studying developments in delivery and identifying new ways to make it work financially, whether through in-house options, partnerships with other restaurants or other avenues. It’s also about looking for new opportunities to get a restaurant’s brand in front of consumers – via such routes as ghost kitchens and partnerships with grocery stores that can offer hot or prepackaged restaurant food to go – or elevating and differentiating the in-restaurant dining experience so consumers feel the need to make it a bigger part of their lives again. A recent report from Restaurant Hospitality shared some things operators are doing to innovate, ranging from delivering food to lockers in apartment buildings to finding creative ways to minimize food waste.
Among the many aspects of life that are evolving because of the pandemic is residential real estate – perspectives are changing about the best places to live and people are looking for their living environments to fill a wider variety of needs. While flight from urban areas might not be as pronounced as media reports might have you believe, according to a Barclays Capital report on commercial real estate, urban developers are still feeling the need to redesign communities to attract and retain residents in creative ways: Think multifunctional spaces that allow people to live, work, socialize, work out and eat without leaving the complex. As a result, these developments are becoming a growth area for ghost kitchens. The Spoon reports that the virtual restaurant network C3 has partnered with an apartment developer to serve up meals for delivery, as well as for onsite service in bars and pool areas at communities in Phoenix and Nashville, with other cities being added soon. If your restaurant is looking for a new niche, consider making a pitch to self-contained living environments – from extended-stay hotels to apartment complexes to senior living condominium communities. These facilities may not only have the kitchen space your business needs but also the concentrated demand for food that feels special.
The ghost kitchen segment has plenty of room to grow, with less than 5 percent of restaurants adding delivery from ghost kitchens as an option during the pandemic. These kitchens also boast a range of potential benefits, ranging from improved scalability to decreased overhead costs. After a year in which restaurant operators have been forced to pivot on a daily basis in order to survive, ghost kitchens have become the poster children of flexibility, allowing operators to churn out a rotating range of menu options – often items rarely seen together on a menu – in response to consumer whims. Operators are also uncovering new and often cost-effective places to open ghost kitchens, from college campuses to hotels to really any centrally located space that has a professional kitchen. But just as the pandemic has required the restaurant industry to be flexible in its accommodation of off-premise orders, coming out of the pandemic may require a different kind of flexibility. As this Grub Street report explains, a lot of the magic of eating in restaurants (and the improved quality of the food experienced on-site) just can’t be replicated by the ghosts. While consumers crave convenience, they also appreciate a special experience – communing with others and trying foods they wouldn’t have otherwise considered, which is generally more likely to occur onsite. That may be especially true as people look to make up for lost time after a year spent close to home and away from gatherings (according to a new report from Paytronix and PYMNTS, more than two-thirds of the restaurant food ordered last year was eaten at home). So going forward, whether you’re considering new real estate, kitchen equipment or ingredients, look for flexibility: As you shift your operations to support off-premise sales, consider the potential that you might want to shift back.
In recent months, consumers have ordered restaurant meals via third-party delivery companies in increasing numbers: Marketwatch reports that throughout the course of the pandemic, food-delivery apps’ business has more than doubled. Restaurants have long regarded these apps warily, weighing the benefits of being able to serve convenience-loving customers against the risks of having a delivery app’s fees dissolve their profits. Those fees aren’t likely to come down anytime soon, but what if other restaurant operating expenses can? Ghost kitchens are helping to make that possible by removing expensive overhead – like décor, prime real estate and large dining rooms – and freeing up revenue for delivery expenses. To be sure, the experience of dining in a restaurant is appealing to consumers (and something they will want to return to post-pandemic), but your food is at the core of people’s desire to order from you. Stripping your business down to its key ingredients – quality food and people who enjoy it – is about having space to prepare it and a means of connecting customers to it. That means locating a professional kitchen (minus the pricey real estate), setting up a technology platform through which people can place orders smoothly, and having a partnership with a vendor who can ensure your food arrives promptly and safely. The pandemic has made ghost kitchens a key growth engine for the restaurant industry at a time when few others exist. Businesses that already have strong brand awareness and delivery customers may find that a ghost kitchen can help them turn a more stable profit. Consider a ghost kitchen an opportunity to test a new concept for minimal investment, or to shift an existing concept to a delivery-only mode for minimal investment (especially if the kitchen is shared by multiple businesses). These kitchens aren’t likely to go away after COVID-19 is behind us – consumers have had too much time to get used to their convenience – so they may be one of many lasting changes to emerge from it. There are many ways to approach them. If you want to discuss whether a ghost kitchen could be right for your operation, contact Team Four.