How to Open a Ghost Kitchen

With the increasing demand for takeout and delivery, many operators and investors wonder if they should open a ghost kitchen. Ghost kitchens (also referred to as dark kitchens, virtual kitchens, or shadow kitchens) are facilities set up to prepare takeout or delivery-only items. Many Ghost Kitchens have thrived over the past 18 months with help from Kingswood Leasing* as they procured, prepared, cooked, and delivered thousands of meals all over the US.

A study conducted by Upserve found delivery apps such as DoorDash and GrubHub have grown 300% faster than traditional dine-in restaurants in the last five years.

The ghost kitchen concept is nothing new. An NBC New York article coined the phrase in 2015 when they investigated restaurant owners listing their establishments under multiple different brands on delivery platforms. Those restaurants ended up being removed from GrubHub and Seamless’ platforms. Both delivery companies created new policies to check restaurant information and give customers more transparency into where they were ordering from.

Since then, ghost kitchens have morphed to become lucrative businesses. Some of the benefits of ghost kitchens include:

1. Ability to capitalize on increased delivery and takeout demand
2. Reduced overhead
3. Less food waste
4. Opportunities to open in locations that are not ideal for traditional restaurants due to lack of parking and dining space

Earlier this year, Kitchen United secured its second lease agreement in Chicago. The commercial space located in Chicago will be home to 10 kitchens arranged to resemble a food court. A centralized food ordering and pickup location will exist in the space. Not only is this model great for professionals that need to grab a quick bite, but it’s also a convenient option for families and other groups. This business model takes the argument out of “what’s for dinner,” allowing Chinese food, pizza, pasta, and burgers to be placed in one order that someone can pick up in one fell swoop.

If you want to open a ghost kitchen, it is important first to figure out your business model.

The Kitchen United model that allows a large space to be managed by one company while individual brands manage their kitchen operations has gained popularity. If this option appeals to you, check out this resource from The Kitchen Door. They’ve compiled a listing of commercial kitchens available to rent.

Other operators are choosing to open space only big enough to run their own kitchen. A variation of this model allows a single restauranteur to run multiple kitchens out of a centralized location. This is an excellent option for operators who want to offer new concepts without investing in opening a traditional dine-in restaurant.

Another interesting take on the ghost kitchen allows operators in a traditional dine-in restaurant to operate a takeout-only establishment from their existing space. In this option, the ghost kitchen menu would not be available for dine-in customers. This is another way an established restauranteur can test a new concept without a large amount of overhead.

It is not only new concepts that choose to open a ghost kitchen. Many established chains, such as Panera and Chick-Fil-A, are opting to open takeaway-only locations. This allows them to open in new markets with reduced overhead.

While it may be a great option for some, the decision to open a ghost kitchen does not come without drawbacks.

A few important things to consider with this business model are:

• Reduced relationship-building touchpoints with your customers
• Less control of the presentation, temperatures, consistency, and delivery of your food items
• High third-party delivery fees (fees can be between 20-40%)
• Delivery errors that are out of the operator’s control (that can often taint the customer’s view of the restaurant)
• Increased competition as reduced overhead costs make opening a ghost kitchen more financially accessible
• Increased need to rank highly online when customers search for takeout options could mean increased ad spending, particularly pay-per-click (PPC) ads.
• Limited access to customer information, as third-party apps will own the customer information and order history, making marketing to past customers impossible in some

There is no denying that this business model can offer big rewards to operators. Here are a few tips to running a thriving ghost kitchen:

Meticulously plan your menu. Many dishes don’t travel well. Choosing to offer items you know will arrive in an optimal state is critical. Aim for quality menu items vs. a large quantity. Focusing on knockout dishes you know will travel well will help you avoid unhappy customers.

Stay organized. From keeping on top of your inventory to ensuring your staff always have the items they need, where they need them, keeping your kitchen well organized will save you money and aggravation.

Automate as much as possible. Often, operators open a ghost kitchen to keep overhead costs to a minimum. The flip side of this is the spaces are often small and can feel crowded. Automation and streamlining your processes can help keep your costs down while maximizing your space.

Become a marketing mastermind. Eliminating touchpoints with your customers means less opportunity to dazzle them. Get creative with ways to show your appreciation and convert them into loyal, raving fans. Ensure you’re utilizing social media consistently, invest in advertising, and create a cohesive branding experience through your packaging. Of course, an impeccable customer experience during each touchpoint you do have is vital.

Regardless of the type of ghost kitchen you open, you will need equipment, signage, AV equipment, and more! Keep your working capital available for daily operational costs by working with Kingswood Leasing* to explore equipment lease financing options. It only takes a few minutes to apply, and you will be able to get the items you need for monthly payments you can afford.

Contact us to learn how we can help you open a ghost kitchen today!

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