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
The conception of the Ghost Kitchen came in the wake of the pandemic. Restaurant owners could not keep the lights on any longer because customers were not allowed in. Instead of forfeiting the restaurant, the owners decided to rent out their kitchen space to other chefs for a certain period so they could keep the restaurant going.
This was a remarkable idea since the industrial equipment would be available for chefs who may not have the budget to buy them and in turn, they would generate revenue by people renting out their space. 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.
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!
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
Along with Ghost Kitchens being the next hot thing in the hospitality industry, another benefit to look at is the less overhead costs associated. In a regular restaurant setting, many moving parts make it difficult to balance both dine-in orders and delivery. Quality can slip and it is already extremely expensive to operate a storefront. Ghost kitchens eliminate the storefront expense and instead focus on delivery only by streamlining their operations to make the delivery process as efficient as possible.
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.
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!
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!
Written by Tyler Albuquerque