Ghost Kitchens: A New Business Model In Delivery-Only Restaurants, Explained

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Written by Ann Brown
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Due to the demand for delivery, there is a new business trend popping up right now — cloud kitchens also called ghost kitchens. A conveyor belt takes bags of food from ghost restaurants to a room where delivery drivers pick up orders at Kitchen United’s Chicago location on Aug. 29, 2019. Kitchen United, a start-up that builds kitchen commissaries for restaurants looking to enter new markets through delivery or take-out only, has plans to open 40 more kitchens in cities across the U.S. through 2020. (AP Photo/Teresa Crawford)

Food delivery has gotten easier and easier in the wake of apps like Uber Eats, GrubHub, DoorDash. In fact, a July 2018 Gallup poll showed that 84 percent of U.S. adults order food for either delivery or takeout at least a few times per month, eMarketer reported.

And home food delivery is big business. “The food delivery market is worth over $35 billion per year in the US, and that figure keeps growing,” CloudKitchens reported.

Due to the demand for delivery, there is a new business trend popping up — cloud kitchens also called ghost kitchens. There are brick and mortar businesses that are only open to make food for delivery. Many restaurant brands have opened them up and there are also spaces with groups of cloud kitchen operate. It turns out this as a boom in the franchise market, Saudi Arabia has even invested $400 million in cloud kitchens.

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And according to Business Insider during Wendy’s 2019 Investor Day, Chief Development Officer Abigail Pringle announced its own cloud kitchens.

So what exactly are cloud kitchens? “Virtual — also called cloud or ghost — kitchens are stripped-down commercial cooking spaces with no dine-in option,” QSR explained. The advantages of cloud kitchens are that they give restaurants all the resources they need to dish out more food (commercial equipment, dishwashers, cold storage, etc.) all at a lower cost.

“This month, DoorDash opened its first shared kitchen in Northern California; initial tenants include The Halal Guys and Nation’s Giant Hamburgers. Red Lobster is developing a ghost kitchen in the Midwest, CNBC reports, while Starbucks, Chick-fil-A, and sweetgreen are also figuring out ways to incorporate the concept into their business model. Starbucks already opened several such kitchens in China, with a walk-up, mobile-order-only location opening soon in New York,” Delish reported.

There are already various companies that specialize in ghost kitchens, one is CloudKitchens, which offers shared kitchen spaces are made for delivery only restaurants. Launched by ex-Uber CEO Travis Kalanick, it offers lower operational costs as well as lower upfront costs for those looking to get into the restaurant business — the delivery-only restaurant business.

“Rather than the +$1 million upfront to build out a brick and mortar restaurant, get started in a CloudKitchen® with a small deposit plus the cost of your specialized equipment,” according to the CloudKitchens website.