After the Covid-19 pandemic flipped the world upside down, the hospitality industry took one of the worst blows in the world. No dining in meant that there was no source of revenue for restaurant owners and they were handcuffed with little to no options.

However, through the despair did emerge a new idea within the hospitality industry that paved the way to a projected multi-million market size by 2028.

We are talking about Ghost Kitchens. You may have heard of this term floating around on the internet or you could be like most people who have never heard of this in your life.

Have no fear – we are going to break down everything you need to know about this booming market taking over the restaurant industry.

We will touch on what exactly a Ghost Kitchen is, the benefits of using one, a quick start guide on how to start a Ghost Kitchen from the ground up, and other popular questions and concerns that come up when starting.

What exactly are Ghost Kitchens

Ghost kitchens, also known as virtual kitchens, are restaurants that operate entirely online and do not have a physical storefront. They typically rent kitchen space from existing restaurants or foodservice companies and use third-party delivery services to get their food to customers.

Ghost kitchens became popular during the COVID-19 pandemic, when many restaurants were forced to close their dining rooms and pivot to delivery and takeout.

They offer a number of advantages for restaurants, including lower overhead costs, the ability to reach a wider audience, and the flexibility to experiment with new concepts.

Here is how ghost kitchens work:
  • Chefs rent kitchen space from a restaurant or foodservice company.
  • They create a menu and list their restaurant on third-party delivery services.
  • Customers order food online and it is delivered to their home.

Since these people are only using the kitchen and are in another restaurant’s location, they would only use delivery as the way to give it to their customers. This essentially gave companies the ability to use professional-grade equipment without having the professional-grade price tag associated.

The process of orders being placed may seem complicated as chefs are in a different company’s brick-and-mortar location, however, it is extremely simple.

Orders are placed entirely online and they would use third-party websites like UberEats or have their own website to sell to their customers. This is why they are also referred to as virtual kitchens – everything online and no physical location.

Ghost kitchen - Young woman preparing takeaway food for fast delivery inside ghost kitchen - Focus on hands holding bag

Photo via iStock

There are a few ways to set up your Ghost Kitchen. For example, let’s say an Italian restaurant wants to set up a Ghost Kitchen at its location. They decide they want to sell Mexican cuisine through their Ghost Kitchen.

What they can do is use their existing staff in the restaurant along with equipment and ingredients to run both businesses. This is a model that has become increasingly popular with chefs wanting to have multiple sources of income.

A more traditional model used in the Ghost Kitchen world is one where a small business or even a home cook wants to scale up their production but does not have the financial capabilities to do so.

This is a great model for those who love to cook and want to start making money or scale their business up before making a huge purchase.

Which business model to choose from? 

With the whole concept of Ghost Kitchen still in an infancy stage, there are a couple of models to choose from and it is important to pick the right one for you.

Ghost Kitchens:

This is your standard concept of using a shared space to take advantage of professional equipment at a third-party site. It is a usually shared space and focuses only on delivery and pickup.

No on-site dining is available so delivery methods are efficient to create the best quality product in the quickest way possible to pump out orders.

Host Kitchens:

A host kitchen is used by an existing business that already has a brick-and-mortar location. Owners can use their equipment, staff, and ingredients to create food for another brand they run or even for another company to pay them for their services.

This is a great way to increase revenue and make the most of your resources especially since on-premise dining is not as popular as it once was before the pandemic.

Virtual Restaurants:

This model of a Ghost Kitchen is for those who strictly want to operate online. There is no physical location being used so only delivery is an option. To save even more money, you can get viable permits to run a delivery restaurant out of the comfort of your own house!

Ghost kitchen - Ghost kitchen and ghost kitchens

Photo via iStock


Benefits of opening a Ghost Kitchen

1. It’s the new wave

You may be thinking to yourself “why would you want to rent out somebody else’s kitchen when you can just start your restaurant with an actual location?” There are a few reasons. The first is the overall landscape of the hospitality industry. There has been a massive shift in the past two years because of the pandemic.

In wake of unprecedented times, restaurant owners needed to adapt to the challenge of not having customers in the physical location. This brought to life the Ghost Kitchen business model.

Today, the Ghost Kitchen market is expected to reach $71.4 billion US by 2027. Knowing this, it is a no-brainer that restaurant owners must explore this sector before it is too late.

2. Less overhead costs

Ghost kitchens are becoming increasingly popular in the hospitality industry because they offer a number of advantages, including lower overhead costs.

In a traditional restaurant setting, there are many overhead costs associated with operating a storefront, such as rent, utilities, and staffing. These costs can be significant, and they can make it difficult to be profitable.

Ghost kitchens, on the other hand, do not have a storefront. This eliminates a significant amount of overhead costs, which can help restaurants to save money and be more profitable.

In addition to eliminating the storefront expense, ghost kitchens also streamline their operations to make the delivery process as efficient as possible. This can further reduce overhead costs and improve profitability.

In addition to eliminating the storefront expense, ghost kitchens also streamline their operations to make the delivery process as efficient as possible. This can further reduce overhead costs and improve profitability.

Here are some specific ways that ghost kitchens can reduce overhead costs:
  • Eliminate rent: Ghost kitchens do not need to rent a storefront, which can save them a significant amount of money.
  • Reduce utilities: Ghost kitchens typically use less utilities than traditional restaurants, since they do not have a large kitchen or dining area.
  • Streamline operations: Ghost kitchens can streamline their operations by using online ordering and delivery services. This can help them to reduce staffing costs and improve efficiency.

3. Low start-up costs

It’s a known idea that opening up a restaurant is pricey. The average cost of starting a restaurant is $275,000 or $3,046. With a Ghost Kitchen, the price of starting up is substantially less.

At an average of $5,000-$10,000 lump sum cost to start up, Ghost Kitchens are a much lower investment risk to the owner especially if they have never done it before.

Now, there are a few ways to spend your money depending on your budget and what you are looking for. In most scenarios, renting out a pre-existing kitchen that already has equipment for you to use is ideal since rent is the major expense.

If you do have a larger budget, buying your equipment is an option.

Ghost kitchen - Calculating costs

Photo via iStock


How to get your Ghost Kitchen started 

There are a few crucial factors that need to be thought of when beginning your journey in the Ghost Kitchen world. The first is choosing a good location. You may not have a physical location, but being in a populated area where food delivery options are available is important.

Try looking for a location where services like DoorDash, UberEats, and GrubHub are available to order from as they are the industry leaders in the food delivery market.

The next important piece of information to obtain is licenses and permits. This can be a lengthy process but it has to be done to become a legal seller.

You will need a food service license, business license, employee health permit, and seller’s permit. Make sure all of this legal work is up to standard with local authorities before any operation has commenced.

You then want to curate a quality menu. It is important to create a simple but attractive menu that encourages customers to order more from the restaurant. Check out our blog to learn valuable menu tips on how to captivate your guests and increase sales!

Another matter sometimes overlooked is finding the right supplier. Make sure to do your research well before launching a Ghost Kitchen to source the best possible supplier for your situation so that it is not left for the last minute.

If there is some kitchen equipment needed that is not already supplied in the kitchen you are renting, ensure you purchase or rent them much before operations begin.

If you want to take your store to the next level, packaging can be a great resource to use to differentiate yourself from the competition.

Using packaging that is eco-friendly and practical with a good design can even boost sales!

Packing up delivery food

Photo via iStock

Here are some additional tips to help you get started:
  • Do your research. Before you do anything else, it’s important to do your research and understand the ghost kitchen industry. This includes understanding the costs involved, the different types of ghost kitchens, and the legal requirements.
  • Create a business plan. Once you have a good understanding of the industry, you need to create a business plan. This will help you outline your goals, strategies, and financial projections.
  • Get the necessary permits and licenses. Depending on your location, you may need to obtain certain permits and licenses before you can open your ghost kitchen.
  • Find a suitable location. The location of your ghost kitchen is important, so you need to find a place that is convenient for customers and delivery drivers.
  • Set up your kitchen. Once you have found a location, you need to set up your kitchen. This includes getting the necessary equipment and supplies.
  • Create a menu. Your menu is your most important marketing tool, so you need to create a menu that is appealing to customers.
  • Market your ghost kitchen. Once you have your menu ready, you need to start marketing your ghost kitchen. This can be done through social media, online advertising, and word-of-mouth.
  • Provide excellent customer service. Customer service is essential for any business, but it’s especially important for ghost kitchens. Make sure you are responsive to customer inquiries and that you provide excellent food quality.

Final word

Whether you have been in the restaurant industry for decades, or you only cook in your kitchen at home, taking advantage of the Ghost Kitchen industry is a smart choice for everyone.

With different models to choose from like renting out a professional kitchen or even being in the comfort of your home and creating food, there is no excuse to wait any longer if you want to break into the restaurant industry.

Understand that it will not be easy, but with time and hard work, your business can be THE spot to order from. What’s stopping you? Start your very own Ghost Kitchen today!

TechRyde Inc.