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The Ghost Kitchen

What Are Ghost Kitchens and What They Mean for C-Stores

A ghost kitchen sits idle

n this day and age, delivery is king!  Take-out and delivery are aspects of food service that are only growing.  In fact, it is estimated that 60% of American consumers order delivery at least once a week.  Restaurants and big chains are well aware of this trend and looking to capitalize on it with a new method: ghost kitchens.

What are ghost kitchens?  If you’ve never heard this term, that means they are doing their job.  Ghost kitchens present a new future for food and delivery services, which is an area of concern for many c-stores.  The concept of ghost kitchens vs c-stores is something that must be reconciled, as it would appear they are here to stay!

What is a Ghost Kitchen?

We must answer this question first, as well as the question: how do ghost kitchens work?  Ghost kitchens are also known as dark kitchens or delivery-only kitchens.  In essence, they are kitchens for a restaurant that offers delivery service exclusively.  There are no wait staff, no dining area, and no reservations available.

Ghost kitchens are literal kitchens with a very slight physical presence, hence the nickname.  Cooks will prepare orders and drivers will deliver them directly, with little to no paying customers actually entering the premises.  There are different types of ghost kitchens, but they all share the same general layout and delivery centered model.

It’s been found that delivery-only restaurants go back to at least 2013, even if they did not enter the public notice until recently.  Ghost kitchens have seen an increase during the COVID-19 pandemic, which presented many restaurants with plummeting in-person sales but spiked delivery tenfold.

Ghost kitchens are here to stay, at least as long as delivery and takeout remain popular.  Once the question, “what are ghost kitchens?” has been answered, the next step is reviewing the different types of ghost kitchens and how they function.

Types of Ghost Kitchens

As previously mentioned, all ghost kitchens share the same general premise of functioning solely to prepare orders for delivery.  However, there are multiple types of ghost kitchens.  The differences between them may seem slight, but they are important distinctions.

1.  The Rented Commissary Kitchen, or “Multi-Kitchen”

In this type of ghost kitchen, multiple restaurants use the same rented space and operate in tandem.  This space could be a warehouse or industrial kitchen, occasionally rented out to the businesses.  The chefs will be specific to their restaurants, but the delivery drivers may work for the overall space.

The former CEO of Uber, Travis Kalanick, has opened a prime example of this: CloudKitchens.  This company buys up real estate and constructs kitchens for multiple restaurants to use in connection with their delivery service.

2.  Chain-Owned Virtual Kitchens

These ghost kitchens are owned by big restaurant chains, typically fast food.  Restaurants like Chipotle have opened delivery-only locations run by ghost kitchens in order to spread their brand to towns without a local branch of the chain already in place.

3.  Hidden Ghost Kitchens

The hidden ghost kitchen is a little tricky.  It is essentially a spin-off from an established dine-in restaurant, delivering new meals under the name brand and using the same kitchen.  This is different from simply ordering take-out from a primarily dine-in restaurant;  hidden ghost kitchens are delivery-only subsidiaries of the restaurant that operate in the same space.

4.  Courier Kitchens

Occasionally, restaurants may offer their commercial kitchens to be leased or rented by ghost kitchens.  A service such as Deliveroo can also offer food delivery businesses the chance to rent commercial kitchens in order to safely prepare the food that is being delivered.  This is similar to a hidden ghost kitchen, but it is not a spin-off from the restaurant but rather a different company renting the same space.

These are the primary types of ghost kitchens with their differences laid out clearly.  Despite their differences, they operate in similar ways.

The Ghost Kitchen Operation

If you’ve been asking yourself, “wait, but how do ghost kitchens work?” this whole time, that’s because we have yet to cover their actual operation.  From the process of ordering to delivery, ghost kitchens operate in ways that compare and contrast to dine-in restaurants and c-stores.

First, a ghost kitchen must be able to lease or own a commercial kitchen.  This is important to maintain proper cleanliness and health inspections.  Once the location has been set, orders are primarily placed through delivery apps such as CloudKitchens, DoorDash, or GrubHub.  Ghost kitchens can also allow call-in or online orders directly.

Much like a typical restaurant, it is essential that ghost kitchens build up a brand and gain attention if they want to stay open;  simply cutting down on dine-in costs and space will not ensure that orders flow in!  That’s why hidden, or chain-owned ghost kitchens are common.

Once an order has been placed through the delivery apps, employees will begin to prepare the food.  A delivery driver will then be dispatched to actually drop off the order.  This driver may be from a third party delivery service or hired by the ghost kitchen themselves.

Payments are all virtual, either by entering in credit card information for online orders or through the typical payment process of food delivery apps.  Using drivers from delivery services typically charges restaurants a marketplace fee of 30%.  This can fall to 15% if companies use their own drivers but allow orders to be placed through apps such as UberEats.

Because they typically rent their kitchens, the owners of ghost kitchens need to build up a good following to maintain operating fees.

Advantages of Ghost Kitchens

Even once people can succinctly answer the question of what are ghost kitchens, they struggle to see the advantages.  Why would restaurants choose to limit themselves to solely delivery? In actuality, there are many reasons!

  • No set-up or customer fees:  According to Sage, the average cost of restaurant start-ups is $425,000.  It is obvious that not everyone has access to these kinds of funds.  Ghost kitchens eliminate the need to pay for an entire building, as well as decor and seating for potential customers.  They allow owners to focus on what they truly care about: the food.
  • Reduction of labor costs:  Along these same lines, ghost kitchen operators do not need to pay the wages of typical restaurant workers like busboys, waiters, and a host.  The only employees will be the actual cooks and the delivery drivers if they choose not to use drivers from a delivery service.
  • Pandemic Safety:  The rise of ghost kitchens cannot be discussed without mentioning the COVID-19 pandemic and how it has impacted delivery.  The safety of customers and employees improves when face-to-face interaction is cut down.  The business of food delivery apps has doubled during the pandemic and has yet to revert, if it ever will.
  • Cuts down on food waste:  With only intentional deliveries coming in, ghost kitchens are able to cut down on food waste and the overall cost of ingredients.  Customers input their information intentionally through an app or online order, lowering the chance of error.

These are some of the advantages of ghost kitchens, which explains why they have seen a rise in recent years.  The new wave of delivery-focused restaurants heightens the convenience of ordering out.  This brings us to the ways ghost kitchens may impact a surprising industry: c-stores.

Ghost Kitchens vs C-Store Food Service

C-stores have long stood out as ways to grab some food quickly and, well, conveniently.  There is some concern about the ways in which ghost kitchens will impact the food service abilities of c-stores.  The ghost kitchens vs c-stores debate continues, although both sides make valid points.

Overall, the food service offered by c-stores will still be cheaper.  Customers do not pay the delivery or preparation fees associated with ghost kitchens;  even if they choose to have c-store food delivered, it will be less expensive than a fresh and just-cooked professional meal.

In fact, there is growing evidence to suggest that c-stores and ghost kitchens could actually work together.  C-stores with the space and ability to host a commercial kitchen can actually rent out their kitchens to ghost kitchens, and doing so would encourage the restaurant to purchase available ingredients and supplies from the c-store itself.

Even if c-stores and ghost kitchens are not able to work together, the current hope is that they operate in different markets.  Even though delivery-only ghost kitchens can present themselves as a more convenient option, historically restaurant takeout and c-store food services have not significantly impacted each other’s earnings as they occupy different elements of food service.

Whether this coexistence of ghost kitchens vs c-stores continues as ghost kitchens rise in popularity is another question, especially looking towards the future.

Are Ghost Kitchens the Wave of the Future?

Looking forward, ghost kitchens seem to be a way for businesses to cater to the rising demand for delivery without needing to secure an entire restaurant.  Of course, branding and customer loyalty remain extremely important.  Saving money on seating and decor will not mean anything if orders do not continue to flow in.

Eater published an article titled, “Ghost Kitchens Are the Wave of the Future. But Is That a Good Thing?” by Kristen Hawley.  Nikki Freihofer, the senior strategist for Culinary Edge, is interviewed.  Culinary Edge is a restaurant consulting firm that specializes in virtual creation.

“The virtual space is ripe for innovation and I doubt the overriding trend will be homogeneity.  The virtual space allows for a certain degree of flexibility and the ability to be nimble to adapt to consumer preferences, so operators shouldn’t shy away from innovation or creativity by any means.”  Nikki Freihofer, senior strategist for Culinary Edge

Innovation and branding will continue to make the difference in the staying popularity of ghost kitchens.  After all, it is unlikely that people or restaurants will completely steer away from dine-in experiences once safety and sanitation are more assured.

Ghost kitchens remain a good format for start-ups and established restaurants or chains looking to expand their services.  The cost of partnering with delivery drivers and apps will also impact how many ghost kitchens can remain open.  In addition, the overall competition of ghost kitchens vs c-stores and which presents a more convenient option is still playing out.

Looking Forward

When this trend first arose, many were asking: how do ghost kitchens work?  By now, it is clear that they work and have staying power in today’s climate.  The potential to focus solely on delivering food and building customer loyalty is exciting for start-ups and big chains alike.

For c-stores, the risk of ghost kitchens remains their ability to present a convenient option with restaurant quality food.  However, the recent rise in their popularity remains in question if ghost kitchens cannot keep income consistent.

November 18, 2022