Ghost Kitchens: What Are They?

The recent evolution of ghost kitchens has had quite an impact on the hospitality industry. Also referred to as cloud kitchens, dark kitchens, or virtual kitchens, the concept of a ghost kitchen essentially refers to a physical space that can be used to prepare and cook food. The popularity of ghost kitchens is on the rise with more people starting to make investments in these facilities. Below, we have created a guide that covers everything that you need to know about ghost kitchens, how they work, why they are changing the industry, and how you can set up a ghost kitchen. 

chefs cooking in a ghost kitchen

What is a Ghost Kitchen?

Although the term “ghost kitchen” may have mysterious implications, it is the name given to a commercial kitchen that does not have a sit-in space or a collection area for customers. Instead, these kitchens are used to prepare food that is distributed by a delivery service. Rather than having a physical business that customers can visit to place their orders, the presence of these kitchens is purely digital and the owners of these kitchens will usually work with a lot of third-party food ordering apps. Due to the novelty of this concept, there is not yet a single concrete definition of a ‘ghost kitchen’, however, they are typically operated via two teams. The first team consists of a team of chefs and kitchen workers that are responsible for cooking and preparing the orders so that they are ready for distribution. The second team consists of a group of delivery drivers who deliver the food to the customers. These off-premise facilities can be set up in warehouses or repurposed retail stores and because they are not trying to attract customers to their physical location, you will often find that they are set up in quite unexpected places. 

person delivering food from a ghost kitchen

The History of Ghost Kitchens

It is difficult to pinpoint exactly when the first ghost kitchen was opened and who it was opened by, however, the growth of these establishments has escalated significantly over the last two years in particular. The term is believed to have been used for the first time in an NBC New York article that was published in 2015. Now, these facilities are used by businesses of all sizes and some well-known fast food establishments are also taking advantage of the convenience of running a ghost kitchen. 

How are Ghost Kitchens Structured?

Whilst ghost kitchens operate in the same way in the sense that they offer a delivery-only service, there may be differences in how they are structured. Below, we have identified a few of the most common ways in which the majority of ghost kitchens are likely to be structured. 

A Rented Shared Commissary Kitchen

inside of a ghost kitchen

A commissary kitchen is a space that is used by chefs to prepare, cook and store food which will then be delivered. As the premises are rented, those using the space do not own it and are not responsible for maintaining it. Typically they will be used and shared by several independent brands simultaneously. Although the chefs do not work for the same restaurant they will be working close to one another. 

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A Rented Kitchen Restaurant 

As the popularity of ghost kitchens increases, many restaurants are starting to rent out their kitchens to those who are looking to set up a ghost kitchen. Although these restaurants will not own the ghost kitchen brand, they will earn an additional stream of income as they make money from the rent. In some instances, couriers will have facilities that they rent out to be used as a ghost kitchen. 

A Chain-Owned Virtual Kitchen

doordash ghost kitchen

Many well-known restaurants that offer a dine-in service are now launching their own virtual kitchens that operate via delivery only. These are essentially spin-off restaurants and they can launch a few at once. All of the food is prepared in the same space and then delivered to their customers.

Why are Ghost Kitchens Becoming so Popular?

There are several reasons why ghost kitchens are becoming so popular and appealing to business owners. Due to the current climate, more people are now choosing to order online rather than visiting a physical restaurant. As we have mentioned, ghost kitchens work in conjunction with delivery services and this allows them to respond to orders and prepare them in time to ensure that they are delivered promptly. An increase in the cost of real estate provides another reason why ghost kitchens are increasing in popularity. Dine-in restaurants require a substantially sized space to accommodate customers. However, you can open a ghost kitchen in a much smaller space as you only really need an area to prepare and cook the food in. This is going to result in lower rental costs and you are also going to save money because you do not need to invest in dining furniture. Ghost kitchens are super versatile and allow you to target a vast customer base. This is because you can use this one facility to make a selection of products, whilst establishing several different brands. You are not going to need a huge labor force to run a ghost kitchen. For example, you do not need waiters to greet and take the orders and you also do not need a cashier or designated cleaning staff. In a ghost kitchen, you will need someone that is going to be responsible for managing proceedings, chefs, a group of people to pack the prepared orders, and couriers to deliver them. 

person ordering food on their phone from a ghost kitchen

For customers, ghost kitchens offer convenience. This is because they can place their order online and do not need to leave their homes to enjoy excellent, restaurant-quality food. Whilst there is work involved in setting up a ghost kitchen, they take less time to open in comparison to dine-in kitchens. The facility that you need to rent is already going to exist so all that you need to do is equip it with your necessary equipment and then you are ready to go. You don’t need to spend time decorating the interior of a restaurant so that it suits your vision or getting the space furnished. Less food waste is a benefit associated with running a ghost kitchen. When placing their order online, customers are responsible for making sure that their order is correct and you are not liable if they order items that they do not actually want. As such, you are going to have to replace as many orders and you will only be using ingredients to make the specific dishes that are listed on each order that you receive. Owners of ghost kitchens also have the benefit of being able to respond quickly to any changes in the food industry. As such, it is easier for them to keep track of the latest trends and they can then make sure that they provide their customers with what they want. 

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How do Ghost Kitchens Differ From Brick and Mortar Delivery Services?

The majority of brick-and-mortar restaurants offer a delivery service alongside their dine-in business, so what makes this service different from the service that is provided by a ghost kitchen?Workers in a brick-and-mortar restaurant have a few different services that they need to dedicate themselves to. Unlike ghost kitchens, they do not only operate a delivery service but they have to cater to customers that are dining in or those that are collecting orders to take away. As they are not committed to one service independently, there is a higher chance of errors occurring. There is also a chance that they may be less efficient because they have to try and balance orders from customers inside their restaurant along with online orders. This does not mean that the delivery services provided by brick and mortar restaurants are less worthy of your custom, but you should bear in mind that they do not have the capacity to fulfill as many orders in the same amount of time as ghost kitchens.

What are the Steps Involved in Setting up a Ghost Kitchen?

Are you considering setting up a ghost kitchen? If so, you may be wondering what steps are involved in the process. It isn’t overly challenging and doesn’t require a significant amount of capital. Although ghost kitchens are a popular concept, it is still quite a new idea that is still evolving and because of this, when conducting your research into running a ghost kitchen you will likely find that there are not many resources available. You may find it helpful to speak to business owners who have taken the step into setting up this type of business. They can provide you with advice for guaranteeing the success of your ghost kitchen. 

woman serving food from a ghost kitchen

Before you start thinking about where you are going to set up your business, you will need to think about what type of restaurant you want to set up. What type of foods do you intend to offer? Do you have many competitors? If so, how do you plan on making your business unique so that it stands out? Where are you going to source your ingredients from and what couriers are you going to work with? Considering each of these factors is a very important part of the planning process.Next, you will need to find somewhere to set up your ghost kitchen. You will not require a huge amount of space, of course, you are going to have equipment but some ghost kitchens can occupy less than 200 square feet of space. Regular restaurants that offer a dine-in service have to think about things like passing traffic as this will help them attract customers. This does not apply to ghost kitchens because the customers will not be visiting the facility. As such, you do not need to be as fussy when it comes to picking the location for your business, just make sure that it is going to be easily accessible for the couriers. When choosing an existing building you need to make sure that it is suitable for food prep and cooking practices. It is also important to think about the space that you need to cook and prepare your food. Although you do not need lots of space, you need to be able to move around comfortably. Insufficient space for your workers is likely to lead to frustrations and inefficiencies. Another factor to take into consideration is whether you plan on renting an independent kitchen or renting one that you will share with other restaurants. Furthermore, it is important to ensure that the structure of the building you choose complies with safety regulations.After finding somewhere to set up your business, you will need to dedicate your efforts towards marketing your business as this is going to increase awareness amongst prospective customers. 

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Are Ghost Kitchens a Profitable Business?

Ghost kitchens are a profitable business. There are many financial benefits associated with running this type of business. Because you do not provide an in-house service, the costs for labor are not going to be as high. You will also be able to maximize your income by developing a digital presence. By utilizing different social media platforms you will be able to spread the word about your business so that more people are aware of your presence. As we have mentioned, you can run several brands from the same kitchen and this is going to make your business even more profitable. There are online resources such as ghost kitchen calculators which you can use to determine how profitable your business is going to be. 

What Methods do Ghost Kitchens Use to Accept Payment?

The method that the customers use to pay will differ depending on whether they order through the apps of food couriers or directly from the restaurant. If they are going to be ordering via a courier app your systems will be linked so you receive the money. In some cases, you may need to pay a fee to the courier in return for using their platform. If customers are going to be ordering directly from your website, there are a few different order and pay platforms that you can utilize. Once the customers have placed their orders, you are going to receive their payment. 

person using credit card on their phone to order food from a ghost kitchen

Do Ghost Kitchens Work for Every Restaurant?

Although ghost kitchens can be successful, it is not a compatible option for all businesses. Whilst you will not have as many costs to cover you will still need to pay for rent, stock, and staff wages. New business owners may also be confronted with the initial costs involved with starting up a ghost kitchen as they will need to invest in tools and equipment. People that are looking to establish a business with really low running costs, may benefit from looking for alternatives. 

Are There Any Drawbacks Associated With Opening a Ghost Kitchen?

Now that we have covered all the good aspects of these types of kitchens, you may be wondering whether there are any drawbacks associated with this style of business. We have listed a few below. In ghost kitchens, you do not interact with your customers face to face as all of the ordering is done online. Because of this, building and maintaining customer relationships becomes virtually impossible. Instead, you will need to make sure that you provide them with food that is of the very best quality as this will encourage them to keep ordering from your restaurant in the future. The majority of ghost kitchens depend on third-party courier services to deliver their foods and this tends to be more expensive. It also takes away some of the control that you have over the business because once the food leaves the premises you are no longer in charge of it. To reduce these costs and your dependency on third parties, it may be worth launching your own delivery service. 

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Written by Brian Nagele

Brian attended West Virginia University, then started his career in the IT industry before following his passion for marketing and hospitality. He has over 20 years experience in the restaurant and bar industry.

As a former restaurant owner, he knows about running a food business and loves to eat and enjoy cocktails on a regular basis. He constantly travels to new cities tasting and reviewing the most popular spots.

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