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.
As restaurants have struggled to accommodate the need for meal delivery during the pandemic, a number of cities have stepped up to limit the steep fees third-party delivery providers can charge. Restaurant Business reported in late July that Philadelphia – which had just joined the effort alongside cities including New York, Los Angeles, San Francisco, Oakland, Portland, Ore., and Washington, D.C. – would immediately cap total fees on delivery orders at 15 percent. The report said delivery commissions could not exceed 10 percent of the order total, and separate nondelivery fees could not surpass 5 percent – until 90 days after the end of the current public health emergency. As for what happens in other cities, and, for that matter, across the country after the threat of this pandemic passes, restaurants need to dissect their data and understand their customer base so they can negotiate the best terms of third-party contracts. Even with the major providers, there is room for small restaurant brands to bargain – particularly as provider consolidation remains likely. This Fast Casual report (https://bit.ly/33vocmi) provides some tips about the best ways to secure a fair deal with third-party companies – including what you should know about your profits, customer habits and existing ordering channels to get the best leverage when negotiating an agreement. If you think in-house delivery might work for your restaurant with a little guidance, you can also check out the Native Delivery Best Practices Work Group, an effort launched by the Restaurant Technology Network.
Everyone needs to eat – but the experience of eating at a restaurant or enjoying restaurant food is something that will keep consumers coming back to your business, particularly if they have had to cook for themselves for several weeks on end. Recent Toast research found that 78 percent of Millennials would rather spend money on an experience such a restaurant or activity than on an item at a store. Whether guests are dining at your restaurant right now or opting for delivery, you can fine-tune the experience you offer. First, focus on making your brand come through effectively via delivery. Ensure your menu of delivery items travels well and represents the best of what you can offer off-premise – and take care to update it online, particularly if you have introduced new items recently. When you send out an order, help customers connect with your business – Deliverect suggests small acts like a handwritten note or a smiley face on a receipt can go a long way, or you can enclose a small photo of your team to introduce customers to the people who are working hard for them behind the scenes right now. Provide vouchers or other promotions to increase future deliveries and in-house orders. Think about how you can get people back to your restaurant once people are ready to dine out again: Stay in touch with other business owners in your community to plan potential events together, and keep your conversations with guests going on social media (share some photos too) so you’re front of mind for them when they are ready to dine out.
To be sure, there are plenty of gloomy news headlines about the restaurant industry right now – and more than ever, restaurants need the support of their communities to recover. But at a time when it is easy to feel overwhelmed by the multitude of challenges standing in the way of rebuilding business, take heart in the examples of operators who are somehow doing better than ever right now. They are succeeding, seemingly, through a combination of letting go of ego, ignoring the desire to keep items on the menu out of sentiment, being willing to flex to new business conditions each day, and focusing on what people need right now – even if it doesn’t necessarily mesh with the polished brand the restaurant had in its beginnings. Take Alinea veteran Eric Rivera of the Seattle restaurant Addo. A report from Wired details, Rivera has been offering an ever-changing menu of items ranging from $9 food bowls, to meal-and-wine packs, to eat-at-home versions of his 20-course tasting menu during the pandemic. He has even thrown in some Game of Thrones- and Seattle Mariners-themed dinners to mix things up. The constant changes give him some new fodder for social media promotion on an ongoing basis, and people are linked from Addo’s social media posts to its Tock sales platform, which allows customers to order meals in advance (and Rivera to better manage inventory and waste). Addo’s dining room now looks more like a warehouse and the employees who once served a roomful of guests are now staffing in-house delivery for the restaurant.
In recent months, your business may have offered more bulk meals or meal kits to customers looking to enjoy restaurant-quality food during the lockdown. Are these options worth carrying over as people begin to return to dining at restaurants and gathering with more people? Simon-Kucher & Partners, a global strategy and marketing consulting firm that works with a range of major restaurant brands, addressed this question in a recent study they conducted about consumer behavior after COVID-19. The findings, as reported by QSR Magazine, indicate that the answer is a probable yes. Prior to the pandemic, it found that 33 percent of consumers favored home-cooked meals, while 67 preferred food prepared away from home. Contrast that with preferences during the pandemic (55 percent vs. 45 percent) and preferences projected between six and 12 months post-lockdown (37 percent to 63 percent). In many areas, it will likely take a number of months before consumer routines return to what they were like prior to the pandemic. Providing some core menu items that can be offered as family-style meals, or packaging up ingredients that can be combined and cooked at home, can offer some additional freedom to guests – and perhaps tip the scales in your favor when consumers are considering where to order their next meal.
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.
A recent Forbes article pointed out that before the pandemic, the average person visited a store to buy food 2.2 times per week but, according to Zagat, went out for lunch or dinner 4.9 times per week. Pre-pandemic, were restaurants missing opportunities to create new business streams with customers via packaged foods and products – whether those products were directly related to the restaurant or not? As many restaurants are currently offering specialty food items, housewares, branded products and even everyday household goods like flour to bring in business during the pandemic, these changes are ones that could well be worth making permanent if they can help you build closer connections with your customers. As many people are getting into a cooking rut during the pandemic, could you provide a recipe along with specialty olive oil, sauce, cheese, wine or bread could help them recreate a part of your restaurant experience at home? Partnering with other local businesses to find opportunities to cross-sell products or plan future events can bolster your public perception too. Brand perfection isn’t necessarily critical right now either – your ability to be human and understand people’s needs is most important. Are there hidden revenue streams – or opportunities for community support – that you can uncover right now?
In restaurants just a couple of weeks ago, having a solid plan for off-premise business was highly recommended but perhaps not essential. Well here we are – and for restaurants across the nation, takeout has suddenly become the only option to allow business operations to continue for the time being. Whether you offer off-premise menu items such as takeout meals that customers can pick up outside your door, or you have food delivered, restaurants can play an important role in providing a sense of normalcy and community in these unsettling times. Try to think of your menu and marketing in a new way. What items available through your regular suppliers can be included in care packages to be sent home with people who are house-bound right now? Can you create meal bundles complete with appetizers and comfort food that may appeal to families looking for relief after a day of managing remote learning? Do you have a popular house-made beer that people may crave to relieve some stress at the end of the day? (Note that state regulators have begun to allow delivery of cocktails.) Can you create partnerships with other restaurant operators to pool resources on a temporary basis? How can you think outside of the box and provide food and some much-needed positivity to your customers through the weeks ahead? When spreading the word about your takeout options, think beyond the usual channels – on your social media and email list, encourage people to help promote you to friends at their schools, houses of worship and other local organizations that are eager to help people in your community the weeks ahead.
As the coronavirus has spread and restaurants have had to transition to a takeout-only model, what are restaurants to do to protect themselves and the customers they serve – and to somehow keep business coming in? Despite the many tech advances that have swept the industry, restaurants – until very recently – have been social places where people are on the front lines. A recent Restaurant Business report, which includes advice from a law firm specializing in employment issues, advises clear communication with employees in several areas: share your plan with them (and make sure it covers employee concerns such as your sick leave policy and your plan of operation during school closures) and provide training to ensure everyone knows what procedures to follow if they develop symptoms of COVID-19 or are diagnosed with it. Day to day, increase your efforts to sanitize door handles and kitchen and bathroom surfaces more often. Some operators are placing hand sanitizer at their building entrances, as well as outside the restroom and at stations in the back of the house. And while delivery was once considered a nice-to-have service, it’s now critical. Even if you don’t currently offer mobile ordering tech, now is the time to adjust your menu and offer a simple takeout menu that can be picked up outside of your establishment or dropped off outside a customer’s door for contactless delivery. Right now food delivery is considered a public service for people who are elderly, vulnerable and isolated, so promote on social media and to neighborhood news groups that you are open and ready to help, and provide your menu and contact information. Finally, encourage people to pick up the phone and call you – it’s old-fashioned but people are missing the social connections that restaurants have long been able to provide. You can provide a valuable way for people maintain those community ties as the industry pulls through this time of uncertainty.
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.