December 05, 2021

The Ultimate Guide to Ghost Kitchens: A Recipe for Success

The F&B industry is a highly consumer-driven field that has witnessed unprecedented growth due to the changing behavior of customers as well as technological advancements. The restaurant sector has moved increasingly to innovation and automation. One such F&B business model is the ghost kitchen, or otherwise known as cloud kitchens or virtual kitchens. 

ghost kitchen, cloud kitchen, tablet, chef

Ghost kitchens are expected to majorly influence the future of the restaurant industry, with reports projecting them to be a $1 trillion business by the end of 2030.

Ghost kitchens have the potential to be a game-changer in terms of lowering operating expenses, streamlining operations while providing a more enhanced customer experience compared to traditional brick-and-mortar restaurants. 

What is a Ghost Kitchen?

In its essence, a ghost kitchen, or otherwise known as a virtual kitchen, cloud kitchen, or a dark kitchen, is a food prep operation with no physical space for in-house dining for customers. Instead, these cooking facilities prepare delivery-only meals with no visible presence in the community. 

These establishments typically receive orders from an online platform, such as any brick-and-mortar restaurant does. The primary purpose of ghost kitchens is to prepare meals for consumption off-premises. They sell and fulfill orders online through online food delivery apps such as Uber Eats, Zomato, Deliveroo or through their own online store and social media channels. Some ghost kitchens have delivery personnel or partner with last-mile delivery and logistics platforms to fulfill customer orders. Ghost kitchens have also opened their doors to include drive-in and curbside pickup. 

ghost kitchen, chef, cooking, food

Running a ghost kitchen allows you to go beyond just being creative with your food. Ghost kitchens are increasingly popular in the F&B business, and their benefits are multifold. 

The primary advantage of operating a ghost kitchen is that restaurants can save on heavy financial costs incurred from rent, workforce, operating costs, capital investments, and restaurant footfall. 

The Rise to Popularity of Ghost Kitchens

For restaurateurs, ghost kitchens proved an extremely viable option to lower their business’ operational costs. By decreasing the amount of investment needed, restaurants can focus solely on good food and customer satisfaction. There is no requirement to maintain a physical storefront nor hire waitstaff. Besides cutting costs and labor, ghost kitchens can fully embrace technology and innovation to accelerate their operational speed and efficiency using a highly sophisticated POS system, a kitchen display system, and a centralized platform to integrate and manage orders and deliveries across various online food delivery apps.  

Ghost kitchens are increasingly popular as many restaurant patrons opt for contactless delivery for safety reasons. The rise and popularity of ghost kitchens were accelerated by the COVID-19 pandemic, which forced restaurants to shut their doors and shift their sales strategy online to survive a challenging business environment caused by lockdowns, capacity restrictions, and social distancing. 

The ghost kitchen business model responded well to consumer behavior changes and customer demand for delivery meals. In addition, the lower costs incurred by using kitchen facilities outside of heavily rented, bustling metropolitan areas with higher foot traffic enabled ghost kitchens to emerge as the ideal métier for many budding and medium-scale business owners. 

takeaway, delivery, food

Ghost kitchens allowed F&B owners to operate at lower costs and keep up with growing consumer demand. For instance, while opening a traditional, physical restaurant with a dine-in service would have been impossible, some small food business owners employed the ghost kitchen model to get a footing in the market. 

Ghost kitchens allow new ventures in the foodservice industry as business owners consider it a viable model. With the restaurant not having to serve tables and organize labor-intensive operations with various employees, ghost kitchens can streamline only the most essential processes, such as preparing food and sending them out for delivery. This allows the restaurants to focus on innovation, quality, and customer service. 

The initial investment to set up a ghost kitchen is less than a dine-in restaurant. It reduces the risk of a significant investment in a notoriously competitive industry, opening doors for healthy competition and new players in the foodservice industry.

The Boom of Ghost Kitchens in the Past Decade

In the ever-evolving F&B landscape, takeaway and delivery have become a popular choice for consumers and a critical revenue channel for many business owners. In addition, when public dining is restricted, ghost kitchens help businesses continue their everyday operations without losing out on revenue and sales. 

Starting a new restaurant is an alluring ambition for many, but heavy investments and cut-throat competition makes the restaurant market hard to crack. As an alternative, ghost kitchens are much easier to establish and set up due to low entry costs and capital investment.

An increasing number of businesses are operating out of ghost kitchens, making the market a more democratic space. Any promising start-up can compete with other established, corporate players who have been in the business for decades. 

Ghost kitchens cater to people who enjoy restaurant-quality meals delivered to their doorstep. These ghost kitchens are part of the ever-growing food industry where geographical location is no obstacle as long as delivery executives reach them. Instead, owners can focus on procuring high-quality raw materials, expert chefs, and provide gourmet cuisine at low and competitive prices. 

takeout food, takeaway, ghost kitchen, gourmet food

Ghost kitchens enable many restaurants to operate out of one commissary kitchen, where everyone can share commercial equipment, raw material supplies, and resources on hand. There is also an additional stream of revenue created from restaurants that rent out their kitchen to other small businesses to use them as their ghost kitchen. 

Besides saving costs, ghost kitchens allow restaurateurs to test out menus, brands, and new concepts on food aggregator platforms. This helps them perform data-driven decisions because it is easier to identify consumer trends and tastes and know what is selling well and what is not functioning. In addition, even if some items on the menu or a concept are not performing as well as expected, it is relatively easier to rebrand and relaunch on the same online platform using a different strategy.  

Another primary reason why ghost kitchens prove to be highly beneficial is the rise of the gig economy. Gig economy is where short-term stints are the most common form of employment compared to permanent positions. Ghost kitchens can easily employ freelancers and part-timers, and these employers make delivery more accessible and cost-efficient by performing them at 1/3rd the price of food aggregators.

The Different Types of Ghost Kitchens 

 Delivery-Only Model

An establishment without a dine-in service is the most basic setup of a ghost kitchen, and this model is also preferred by food entrepreneurs offering a delivery-only service to their consumers. 

With investment at an all-time low, many traditional restaurants have shifted to a delivery-only model to cut operational costs, investment, and maintenance. This business model allows them to operate effectively as they can still fulfill orders by being efficient and getting the best possible returns for their new ghost kitchen. 

Pop Up Kitchens 

A pop-up kitchen or an incubator kitchen is similar to a traditional restaurant but focuses primarily on fulfilling online orders and deliveries. Although usually, the restaurant owns the space and resources, a separate workflow and delivery model is created to allow its staff to work isolated in a ghost kitchen. 

takeaway, ghost kitchen, delivery

The segregation between online and in-store orders reduces the pressure on the working staff and enables both to function efficiently as the workload is shared equally. Restaurants who want to introduce a new revenue stream and test how the local market reacts to contemporary cuisine could opt for incubator kitchens. If a specific concept fails, only time is lost rather than a significant amount of money, and it is simple to rebrand and launch another fresh idea. 

Commissary Kitchens 

A commissary kitchen is one where there is a single shared space for multiple restaurants to operate in. They share everything from kitchen equipment to resources. A commissary kitchen is considered one of the most successful ghost kitchen models as sharing resources incurs lesser expenses.

Commissary kitchens are usually owned by third-party companies who rent out specific kitchen space for ghost concepts to operate out of. They rent their space alongside other food entrepreneurs and businesses and house multiple brands with various concepts under one roof. As a result, a commissary kitchen is less expensive than establishing a ghost kitchen with its own physical space and costly industrial-grade food appliances. 

Kitchen Pods

Kitchen pods are pre-made, permanent modular kitchen building components that are sold, complete with all the catering equipment needed to run a food business. For any food business owner, kitchen pods are the easiest and quickest way to set up their ghost kitchen.

Kitchen pods are incredibly convenient as operators can customize their pods to their liking, following the concept of their food business. A portable pod also reduces the expense of a rented space in a high-foot trafficked area. 

Getting Started With Your Ghost Kitchen

  1. Know Your Customer to Shape Your Brand

Knowing and understanding your customer base helps in performing informed business decisions. The most successful businesses around the globe know exactly who their target audience is. Once your target customer is defined, it is easier to shape a menu and concept around fulfilling that need. 

It is essential for a restaurant to understand what its clientele wishes to be served. This can be achieved by understanding the critical demographic data within the radius of service and delivery, analyzing competitors, spending capacity, and income. Upon identifying these fundamental qualities, curating a concept and brand-related assets around it strengthens the foundation of your ghost kitchen. 

An in-built Customer Relationship Manager (CRM) with your restaurant POS is pivotal in helping you improve your customer’s overall experience. A restaurant CRM system is a guest database that aids in the management of important customer information. Managing customers effortlessly with a personalized touch makes guests feel special and leads to enhanced client loyalty. 

By using restaurant CRM software, ghost kitchens can get valuable insights about their customers, such as contact information, addresses, order history, and preferences. It also facilitates comprehensive reports on inactive customers, which you can use to re-engage your customers with targeted campaigns that pique their interests such as specialized deals and discounts, freebies, and loyalty points, thus boosting customer engagement and, ultimately, customer retention. 

  1. Create a Winning Menu Optimized for Delivery 

To establish a thriving ghost kitchen, perhaps nothing is as important as the taste and quality of the served food. Therefore, the most significant factors to consider while developing a delivery-only menu are time, temperature, and texture. 

Think about how the commute from the kitchen to your customer’s home affects the food delivered. Typical deliveries take anywhere between 30 to 40 minutes, so it is vital to analyze the food’s characteristics thoroughly. In addition, ensuring the food is in good shape and good quality warrants a repeat customer base which is crucial for the success of a food business. Once these critical components are identified, an optimized-for-delivery, ideal menu can be curated that has the customer in mind at all stages. 

Leveraging the help of third-party delivery apps to deliver your food would account for 20-30% of your revenue going towards these food aggregators. Hence, it is essential to serve food items that have a high-profit margin. 

  1. Licensing and Location

In most countries, food sold to consumers should be produced in a licensed, commercial kitchen. Ghost kitchens offer the versatility of using shared-use kitchens, multi-brand kitchens or rent commercial kitchens by the hour, week, or month. 

To be eligible to rent a commercial kitchen, a business must be registered with valid food handling licenses and insurance. A ghost kitchen must also be primed for Food Safety and Health Department checks before it becomes operational. 

The location of a ghost kitchen must be accessible by delivery personnel to optimize the delivery time for your customers. 

  1. Partnering with the Right POS Technology

Ghost kitchens should automate as many back-of-house processes to streamline operations and reduce costs as much as possible. A restaurant POS or a Point Of Sale is imperative to manage the entire running of a ghost kitchen on one platform. From purchasing, sales, online orders, invoicing, inventory, daily reporting, payments, accounting, and food and recipe cost calculation, the whole F&B process from ordering to fulfillment, procurement to stock check can be automated. 

tablet, POS, sapaad, ghost kitchen

Highly sophisticated food technology such as cloud-based POS and restaurant management systems go one step further by integrating a ghost kitchen’s online orders from major food ordering apps across a single platform for seamless management.

Ghost kitchens do not need to invest in or use multiple devices to manage orders from various food delivery apps when using an integrated system. All orders – partner stores and their own online stores – are directly sent to the restaurant’s POS and the Kitchen Display System (KDS), eliminating errors and reducing labor. 

With a KDS, your staff can stay on top of the kitchen’s workflow by ensuring a seamless journey from order placement to fulfillment. A KDS simplifies kitchen communications and processes to improve efficiency, food quality, and speed of service. The kitchen system routes orders to predefined kitchen stations automatically, where the item completion is tracked from being prepared to being ready for collection.

It offers an overview of order tickets to guarantee quick order fulfillment of prepared items. The KDS is fully integrated with POS which supports all order types, such as online and delivery, and helps in managing your operations effectively. All orders are intelligently split and automatically routed to your kitchen prep screens. 

Knowing and understanding your customer base makes business decisions easier. The most successful businesses around the globe know exactly who their target audience is. Once your target customer is identified, it is easier to shape a menu around fulfilling that need.

  1. Choosing a Delivery Provider

In exchange for facilitating one of the most essential aspects of your business’ success, food aggregators and last-mile delivery companies demand a substantial commission. When a customer finds your menu and places an order, the store confirms and prepares the food. Then, a delivery partner delivers the food to your customer as the last step of the process. 

One of the first steps in choosing a delivery provider is to find out who services your region and compare typical delivery times, reliability, and customer service. It is possible for businesses to partner with multiple delivery partners as well who cater to different locations. Ghost kitchens can receive and manage all their online orders from various food ordering platforms across one integrated platform using a delivery manager.

A delivery manager gives you complete visibility into every stage of your delivery process, from the time a customer places an order to when it is delivered at their doorstep. Delivery managers offer real-time visibility to track everything from customer waiting times, analyzing every step of your home delivery process with real-time SMS alerts. It offers you total control and supervision with ease and eliminates the need for multiple hardware for every partner. 

Be it a restaurant’s own fleet of drivers or that of a last-mile delivery company, both delivery processes can be efficiently managed by using a leading POS system with a fully-integrated delivery manager. All delivery processes can be monitored and analyzed while identifying bottlenecks, and incentivizing top-performing staff. 

Cost to Set Up a Ghost Kitchen

The beauty of setting up a ghost kitchen is that you can launch one in a matter of a few weeks. With minimal capital investment and upfront costs associated with establishing a traditional restaurant, it is relatively cost-effective to set up a ghost kitchen. There is little need for ghost kitchens to focus on their interior layout, design, and maintenance. According to sources, the estimated costs of opening a ghost kitchen versus a traditional restaurant or a food truck are comparably lower.

While an average food truck may cost the entrepreneur anywhere from $40,000 to $250,000, and a brick and mortar restaurant going up nearly $2 million, a ghost kitchen stands at a humble $5,000 to $30,000. 

When the need for a dine-in space is eliminated, real estate becomes cheaper. A ghost kitchen only has to be accessible by delivery personnel and not by their guests. In a brick-and-mortar restaurant, businesses spend more than 30% of their revenue on labor alone. This proves to be extremely expensive in the longer run, and this could be where automation and technology comes into play. 

delivery, ghost kitchen, sapaad

A ghost kitchen requires a branding strategy that is both easy to see in search results and eye-catching. A brand kit is tailored for use on different social media platforms, printed media, and websites. Brand kits can be expensive, although they typically range from $350 to $800, depending on the designer’s skill level. Hiring a professional photographer to take pictures of your menu items is also an essential part of branding and marketing, and the costs involved for a food photoshoot ranges anywhere between $500 to $5000. 

To sum up, it might be difficult to start any business, including ghost kitchens, but opening and running them become easier due to technology and automation. F&B technology such as cloud-based POS and restaurant management systems offer a one-stop solution where you can effortlessly streamline the operational workflow with a reduction in labor and human error, while your customers experience exceptional service.

In addition, establishing an online channel and partnering with third-party online food delivery apps provide ghost kitchens complete control over their online presence. POS systems offer unique solutions that enable your ghost kitchen operations to be up and running in a few days while integrating your online food ordering platforms, automating multiple delivery channels, keeping track of inventory, and hosting a rich database of customer information via restaurant CRM.

A POS system’s LIVE dashboard gives you the ability to analyze trends and forecasts which you can tap into to build a thriving business that is sure to keep your customers coming back for more.

At its core, automating your ghost kitchen improves efficiency and productivity while lowering costs. Cloud POS systems offer an easier and more effective way of managing your kitchen, making critical data and valuable insights available anytime.

Partnering with the right technology, such as a fully integrated, cloud-based POS is critical in the success of any restaurant, and especially ghost kitchens. While some of this technology is sophisticated, new technical developments and enhancements of existing systems are making these essential POS systems more accessible and affordable.