What Is a Ghost Kitchen and is it the Future for Food Franchises

The COVID-19 pandemic has impacted almost every industry in some way. One of the hardest-hit, however, has been the food industry. Over 100,000 restaurants have closed in the U.S. over the last six months, and there is no telling how many more will follow as this pandemic is far from over. 

Small, locally-owned restaurants have had the most difficulty surviving throughout this situation, mostly because they rely on in-house dining to pay their bills. 

But, many restaurants have tried to find ways to be resilient in these uncertain times. That has required a bit of creativity and some major changes in their daily operations. 

As a result, ghost kitchens have become more popular than ever. Also referred to as ‘cloud kitchens’, these are kitchens that are used simply to prepare food that will be delivered or picked up. Ghost kitchens in restaurants generally don’t offer any dine-in options

What Are the Benefits of Ghost Kitchens?

Operating a ghost kitchen/restaurant has pros and cons like any other endeavor a food business might take on. Some of the biggest benefits include: 

  • Keeping your original staff while having the ability to hire more
  • Saving money on occupancy and labor costs
  • A probable increase in net revenue
  • The ability to expand and make more product/try new dishes in a more efficient manner 

If you decide to open a ghost restaurant from scratch, you could end up saving a lot of upfront costs as opposed to opening a traditional dine-in location. You’ll require a lot less space, dining furniture, and may even have to deal with fewer regulations and certifications. 

What Are the Drawbacks?

Running a ghost kitchen isn’t always easy, though. For starters, the fact that more restaurants are going this route is leading to a lot of unused and underutilized retail space. If your restaurant decides to expand production, that’s one thing. But, if that space remains unused, it could affect other businesses in the area. Additionally, some of the problems you could face include: 

  • Having to re-train your staff on new operations
  • Working with third-party delivery and technology companies that may not always be reliable or convenient to work with
  • Less customer interaction

Again, if you want to open a ghost restaurant from the ground up, it may be harder to build a brand from scratch when no one can come into your restaurant and get a vibe for what you’re doing. Your marketing will be based on your food and local perception alone. If someone has a bad delivery experience, even if it’s a third party’s fault, that could look poorly on your business and make it harder to find success. 

Are Ghost Kitchens Really the Future of Food Franchises? 

It’s not easy to say how ghost kitchens will look going forward. There is nothing that can replace eating a meal in your favorite restaurant. But, for places like fast food businesses that see much of their business from drive-thru and carry-out orders anyway (especially more recently with the convenience of food delivery services like UberEats and DoorDash, among others), ghost kitchens can and do make economical sense. 

Drive-thru sales alone represent 70% of what fast food franchises make. If they can shift to only drive-thru or delivery options, they could utilize their interior space to maximize production operations. Chains like Wendy’s and Chick-Fil-a had already started to utilize ghost kitchens last year to expand their business in certain areas. It seems to make sense for a fast-food setting. 

However, 45% of people go out to eat at least once a week. Many people choose to eat out rather than cooking at home to enjoy a full experience. Not everyone wants to eat in their car or take food home. On the other hand, many people who do eat out use the drive-thru to save time so they can eat in the comfort of their home (or car).

If ghost kitchens really do become the future of the dine-in industry, major changes will need to be made for existing franchise restaurants. That includes advancements in technology. As stated above, most businesses will have to work with third-party delivery services or develop their own digital ordering system that can be accessed via a computer or app. Because food delivery companies often tell consumers where their food is at any given time, your restaurant will need that kind of GPS technology as well. While a ghost kitchen can end up saving you money in many ways and make you even more money in the long run, there could be a hefty investment up front to get things moving. 

It’s important to consider all customers and target audiences if you’re thinking about a cloud kitchen. It may work better for some models (ie; fast food) than restaurants that are traditionally marketed for people to sit down and enjoy a meal.