In the recent podcast “Ghost Kitchens and the Changing Nature Of Restaurants" sponsored by Mesirow Financial, Kitchen United chief executive officer Jim Collins and Technomic strategy consultant Melissa Wilson explained the implications of how ghost kitchens are reshaping the future of retail foodservice.
“There is no question there is a massive spike in popularity for ghost kitchens to meet off-premise demand,” Wilson says. “There is no question that ghost kitchens are becoming more popular solutions.”
Establishing food preparation and cooking facilities for delivery-only meals is gaining widespread popularity; 51% of foodservice operators reported to Technomic they used a ghost kitchen in some format during the COVID-19 lockdown. There are new players and new venues, Wilson explains. Prior to COVID-19, only 15% of operators used a ghost kitchen.
“We were already seeing a significant growth in consumers seeking out a different way to eat,” Collins explains. “COVID-19 forced us all to graduate school.”
Entering 2020, almost half of total restaurant food and beverage sales were off-premise. Off-premise outpaced overall restaurant food and beverage growth, and third-party delivery sustained double-digit increases.
Wilson explains that third-party delivery has become a consumer expectation, and these types of societal shifts are reshaping location strategy. Research reveals 30% of operators report experiencing challenges in handling demand for off-premise orders. Three strategies are involved: balancing dine-in and takeout; staging orders during peak times; and managing waiting patrons.
To set up ghost kitchens, Collins explains that some restaurants pay a lease, while others pay a percentage of revenue. They are locating in high-demand urban neighborhoods.
“These kitchen centers are culinary communities,” he says. “We look for locations that are 7,000 to 10,000 square feet of retail space and are pretty close to where people are living and working. There are 8 to 12 kitchens inside with multiple restaurants using the space.”
Pickup centers are where delivery drivers or consumers come to pick up food. Third-party restaurants source their own ingredients, and partners use local distributions. Rental cost is similar to what it costs to rent a very small restaurant.
“I think we are all looking to see what the restaurant industry looks like in five years,” Wilson says. “A year from now, I think we’re going to see significant growth in ghost kitchens.”
Ghost kitchen popularity
- I do not use or operate a ghost kitchen 49%
- I have partnered with a ghost kitchen operator for some of my delivery orders 15%
- I operate my own ghost kitchen for all of my delivery orders 15%
- I operate my own ghost kitchen for some of my delivery orders 12%
- I have partnered with a ghost kitchen operator for all of my delivery orders 9%
Source: Technomic Foodservice Impact Monitor 8th Edition—Week Ending May 8, 2020