Even before the pandemic, ghost kitchens were on the rise for their ability to ensure faster, less expensive food preparation and more efficient delivery to customers looking for off-premise dining options. Now, many restaurant operators are looking at ghost kitchens as a critical way forward at a time of great uncertainty for the industry. They may be on to something: Recent research from Euromonitor found that the global market for ghost kitchens could reach $1 trillion by 2030 – and in the process, capture big slices of industry segments including drive-thru sales, take-out foodservice, ready-to-eat meals, pre-packaged cooking ingredients, dine-in foodservice and packaged snacks. But when you’ve been running a traditional brick-and-mortar restaurant, what actions (and investment) are required to pivot to the ghost-kitchen model? Food distributor US Foods is aiming to give operators a hand with that transition through its newly launched US Foods Ghost Kitchens program. The company promises that for an average start-up investment below $5,000, they can help operators open a ghost kitchen concept in about three weeks and achieve an average profit margin exceeding 35 percent. The program includes market research, marketing support, a digital technology framework, menu optimization and management guidance.
The pandemic has made the need (and demand) for efficient restaurant food delivery even clearer. If you operated a dining room before but don’t see it being a practical business move going forward due to physical distancing and capacity requirements, you may be considering going the virtual route, with a focus on driving off-premise sales. This doesn’t necessarily require moving to a new location. Depending on your leasing status and the flexibility of your landlord, you may be able to transform your current business and space into a ghost kitchen. If you need help to convert your existing business into a digital business call Team Four Foodservice.
When it comes to restaurant food delivery, the numbers don’t often add up – for the operator, the customer or even the third-party delivery company. A recent New York Times report found in a survey of GrubHub, DoorDash, Postmates and Uber Eats – the four largest third-party delivery apps in the U.S. – that customers were paying as much as 91 percent more for food delivered via these apps. In the meantime, operators are trying to carve out razor-thin profits from delivery orders and delivery companies are struggling to make money in a sea of competition. But since off-premise demand continues to climb and restaurants are adjusting their sales models and even their physical structures to accommodate it, how can operators make the costs easier to swallow for both customers and themselves? Offering delivery by hiring in-house couriers can help, though it isn’t necessarily feasible for everyone. A Restaurant Dive report says industry analysts predict restaurants will adjust prices, use virtual kitchens, adopt their own branded platforms or renegotiate their commission rates with third-party delivery companies in an effort to get ahead. Renegotiation may come in the form of changes in sales structure too: Technomic says a key way that providers are evolving right now is by offering delivery subscriptions – all-inclusive delivery for a monthly fee, as well as delivery discounts for loyal customers – incentives that can come directly from restaurants too.
Looking to streamline your off-premise business? Many restaurant industry experts are placing their bets on ghost kitchens as the future of the industry. They have their benefits: For small brands and large, these spaces can help ease labor and rent burdens, meet growing off-premise demand and help restaurants connect their food with customers quickly. On the negative side, restaurants with ghost kitchens are generally relying on (and paying) third-party providers to deliver food to customers, and in the absence of a front-of-house team, they may also encounter challenges in connecting customers with their brand – unless it’s already well established. As the ghost kitchen industry expands, various models are emerging. Check out this map of the landscape from Spoon to get a sense of where different providers and restaurants are building a presence – and where you might fit in.
Team Four’s corporate chef identified the rise of food halls as a trend to watch in 2020, and for good reason: There are many significant food hall projects under development throughout the US and worldwide right now, the ones in operation have a strong track record of success (only three projects have failed of the more than 100 that have opened across the U.S.), and they offer low-risk, potentially high-reward environments for restaurant operators looking to take part. If you’re considering adding food halls to your restaurant marketing plan, Touchbistro says they offer a number of benefits and can reduce the substantial risks of opening a new restaurant, such as lower startup costs, shared maintenance expenses, shared infrastructure and shorter, more flexible contracts than you would have to agree to when signing for a conventional restaurant space. Newly added restaurants can hit the ground running in a food hall, benefitting from pre-existing foot traffic and fewer up-front marketing costs. Just bear in mind that a food hall experience may challenge your brand and require you to adapt your existing menu, service approach and marketing efforts. For instance, when you’re one stall in a crowded food hall, the experience of eating your food may feel different for guests than it would in a standalone restaurant – and the hundreds of options and long queues for food can cause overwhelm for some. How can you make your food memorable and your customer experience positive when your surroundings may be beyond your control?
If you think restaurant delivery is big now, there is more to come: The NPD Group said in 2019 that restaurant digital orders have grown at an average annual rate of 23 percent since 2013 and will triple in volume by the end of 2020. At the same time, consumers have yet to commit to one third-party delivery provider, so they are willing to accept promotions from the many companies angling for their business. If you offer delivery or are considering it, now is a good time to see how providing it through your own digital platform might work for you. Nation’s Restaurant News expects more brands to take this route in 2020 in an effort to build more permanent relationships with customers – all while maintaining control of data and avoiding third-party delivery fees. Physical restaurant structures are continuing to change as well, with more restaurants not just creating separate prep lines and pick-up windows, but investing in virtual kitchens and other satellite facilities in close proximity to delivery customers in an effort to compete for business. In fact, Michael Schaefer, Euromonitor global lead for food and beverage, recently told Restaurant Dive that virtual kitchens and drop-off points will be crucial to compete in the future of delivery.
If your restaurant is supporting people in need over the holiday season – whether through canned food drives, events or charitable donations – remember the equally significant impact you can have by redirecting food waste to causes that can put it to good use. As ReFED’s Restaurant Food Waste Action Guide reports, every year restaurants are responsible for 11 million of the 52.4 million tons of food that goes to U.S. landfills, where it can take decades to decompose. And as Restaurant Nuts reports, some third-party delivery companies are stepping up to make it easier for restaurants to redirect their excess food. Postmates, for one, is continuing to expand upon its Food Fight! program, which allows its partner restaurants in 23 cities and counting to request a pickup of excess food and have it delivered to a local shelter. Similarly, Doordash’s Project DASH makes it possible for restaurant operators to take food that would have been discarded and divert it to organizations that can use it. If you take part in efforts like these or others available in your community, promote it on your website and marketing materials. According to research from Toast, 51 percent of consumers are more likely to support a restaurant with environmentally friendly food practices.
The restaurant kitchen continues to evolve -- and Zume seems to have created a new category that blends a restaurant kitchen, food truck and virtual kitchen. The company recently announced that the brand &Pizza will use Zume’s mobile kitchen technology to expand their brand in new markets and test new menu items. But as The Spoon reports, Zume’s strength in predictive data analytics may be what helps it transform the pizza brand’s possibilities. Its technology currently considers data points such as days of the week and school calendars to predict what kinds of pizza will be ordered and from what locations. So ostensibly, &Pizza will be able to prepare pizzas at a central facility, store them in their mobile kitchen (which can position itself where orders are likely to be placed), then bake and deliver the pizzas once orders start to come in. Delivery drivers will have shorter distances to drive and can therefore make more drop-offs and keep food fresher because it hasn’t had far to travel. Zume opened up its data platform to additional cuisine types last year, so other restaurant concepts can adopt its model and customize their own mobile kitchens accordingly.
Digital ordering and delivery have grown 300 percent faster than dine-in traffic since 2014, according to Upserve. Thinking of isolating production lines in your restaurant to better accommodate off-premise traffic? Chili’s is seeing the value of it. The brand changed its kitchen structure to allow for better production-line preparation of menu items, and pared down its menu to include more profitable items. It has generated consecutive quarters of double-digit off-premise sales increases as a result. As restaurant operators contemplate how to adjust their business model to accommodate off-premise sales, companies continue to spring up to offer solutions. While ghost kitchens and cloud kitchens have made headlines, alternatives to those alternative spaces are becoming available. One example is KitchenPodular, a new company that develops modular, portable kitchen kits that contain electrical and plumbing, sinks, a walk-in cooler, and a ventilation hood and offer the option of a drive-through or walk-up window — operators supply their own oven and stove. The kit (each costs an average of $150,000 and ranges from 206 to 430 square feet in size) can be set up in a restaurant’s existing parking lot, on the outskirts of a city as part of a hub-and-spoke structure, or placed in another preferred location. KitchenPodular CEO Mike Manion, who was featured on a recent episode of The Takeout, Delivery and Catering Show, said these kits can provide restaurant with a turnkey solution for isolating production lines and churning out food to different customer bases more effectively. While they may not be for everyone — as The Spoon points out, they’re still facilities that need to be managed and staffed, and they don’t offer any shared labor for cleaning and dishwashing that one might find in a cloud kitchen — it’s another option to consider if you’re looking for a way to adapt on an ongoing basis to new streams of traffic.
Do you have an eye on trying a new concept, expanding locations or adjusting your service model this year? While there is no shortage of challenges to launching a new foodservice business, one area where operators have a lot of support for tapping into new opportunities is in shared kitchens. These kitchens are becoming increasingly common in the industry, and because they minimize the overhead expenses of launching a business or making significant changes to an existing one, they are making it easier to test new ideas. A Medium report indicates that these shared kitchens, typically offered via a membership fee or charged by the hour, are taking a variety of forms. Delivery-only or ghost kitchens (Kitchen United is one example) can provide not only food preparation space but also business intelligence that operators can use to build a delivery program. Culinary flex spaces might better serve operators looking to test new food concepts or launch a new idea with help from the latest tools and equipment. Incubator kitchens (Kitchentown in San Mateo, Calif. is one example) are another form of shared kitchen space giving foodservice entrepreneurs a boost right now. They’re good places for entrepreneurs to build community and find resources to fuel the expansion of an idea: It’s possible to connect with food industry consultants, access technology and manufacturing space, and potentially tap sources of growth capital. At another incubator, the Hatchery in Chicago, entrepreneurs can access a talent pipeline and find new employees to help launch an idea. Finally, food truck commissaries (Kansas City’s Food Truck Central is one) are helping operators test out food truck concepts by providing power and water, along with waste disposal services.