Published June 19, 2022

What is a Ghost Kitchen or Virtual Restaurant?

A whole lot changed in the food industry during the COVID-19 global pandemic. Businesses were forced to continually pivot operating procedures to comply with ever-changing government guidelines to help protect the general public and employees. This led to a rise in takeout options and food delivery companies benefiting from an unprecedented uptick in orders.

In 2021, DoorDash reported revenue growth of $4.89 billion, an increase of 69% from 2020, and went public on the New York Stock Exchange at a $72 billion valuation. Part of its success came from a turning point in how the public engages with and uses food delivery services.

Unsurprisingly, innovation in the food industry has followed with the growth of ghost kitchens.

What is a ghost kitchen?

A ghost kitchen, also known as a dark kitchen, virtual kitchen, cloud kitchen, or shadow kitchen, is a professional kitchen that allows chefs and restaurateurs to operate a digital-only food business, usually out of a local commissary or shared kitchen. A ghost kitchen has no indoor dining or space for patrons to visit. Instead, they operate solely via food delivery apps or their own delivery systems.

You might be reading this and thinking, “that’s a fad!” but ghost kitchens are predicted to become a $1 trillion industry by 2030. In addition, by 2025, the European market for online food delivery is expected to exceed $60 billion. If you’re in the anti-food delivery app camp, be warned: 59 million people are predicted to use food delivery apps in 2023.

With so much buzz and excitement about ghost kitchens, they’re hard to ignore—even for the most traditional chef and restaurateurs.

Source: Unsplash, Francisco Suarez

What are the benefits of a ghost kitchen?

Lower start-up costs

We’ll make no bones about it: starting a restaurant is hard work and expensive, with start-up costs coming in at $275,000 on average. In contrast, according to Seattle’s Kitchen Sisters, renting a space in a commissary to launch a ghost kitchen can cost as low as $1550 per month.

Commissaries typically come fully stocked with commercial kitchen equipment, and you’re welcome to bring any specialist items you need. Depending on your location, you may need to obtain the following:

  • Operating permit
  • Food handling certification
  • Work safety certification
  • Food safety plan

The next step is to make sure you have a product or concept that is easily mass-producible and travels well, and after partnering with a delivery company whose margins work for you, you’re off to the races.

Lower overheads

Once you start working through a ghost kitchen, you may never look back to the more traditional method of running a food business. This is because your overheads are generally lower than running a full-scale, indoor dining operation, therefore putting more money in your back pocket.

We mentioned the cost of rent above, but you also avoid paying for front-of-house and back-of-house staff, seating, and tables, and there’s no extensive menu to iterate and update constantly.

Less food waste

Restaurants across the US lose $162 billion annually in unused or spoiled food, and for every $1,000 of revenue, a restaurant wastes approximately 33 lbs of food.

Food waste in restaurants is a huge problem that impacts a business’s bottom line and harms the environment and the future of our planet.

Ghost kitchens easily minimize food waste as they’re in a collaborative environment with multiple brands from the same restaurateur operating in the same space. For example, in Vancouver, BC, food brand Frankie started selling Indian street wraps and now operates four different brands under one roof, allowing them to strategically craft menus to minimize food waste.

Source: Unsplash, Max Saeling

Test customer demand

Opening a restaurant is a big deal, so why not test consumer demand first by launching and operating as a ghost kitchen? Then, you’ll be in the driving seat to assess how your concept, produce and dishes land with the public before committing to a long-term lease on a restaurant space.

Additionally, ghost kitchens allow you to test new markets. For example, let’s say you have a buzzing pizza restaurant in Brooklyn with a delivery radius of 10km. Opening a ghost kitchen in Queens will give you a solid opportunity to test the market in a different district before committing to open a full-scale restaurant.

Create flexibility

Maybe you’re a professional 9-5 worker who long dreams of owning their own restaurant one day? Or a stay-at-home mom with grand ambitions on how you’ll return to the workforce? Either way, launching a ghost kitchen gives you flexibility on how and when you work—which is hugely beneficial for people with other commitments or who are just starting out.

For example, you could launch a kebab ghost kitchen that only operates on Friday and Saturday nights for the post-pub crowd or a bento box concept that only operates on Monday to Friday lunch hours to capitalize on hungry workers. Having this level of flexible working doesn’t come easily and certainly doesn’t come with opening a full-scale restaurant.

Ghost kitchen tech stack

Inventory and planning

Operating procedures either make or break a restaurant. Without understanding how much stock you have, when you need to fulfill an order with your supplier or having a strategic way to manage your ghost kitchen menu, you’ll quickly feel out of control. Invest in software such as xtraChef or hardware such as the Picnic Pizza Station  to help streamline your operations and drive more revenue.

First-party ordering

If your budget allows, create a mobile app that allows you to manage and distribute all your orders. Not only does this mean that third-party companies (DoorDash, UberEats, GrubHub, and Postmates) don’t take a large percentage of your margins, but you’ll also give your customers an opportunity to form a habit by ordering from your app directly.

Third-party ordering

You know them off by heart, and the likelihood is that you’ve used them to call in delivery orders for yourself. The common go-to’s for third-party delivery include UberEats, DoorDash, Grubhub, and Postmates. However, these companies take a hefty percentage for every order, as much as 20%, leaving you with smaller profit margins to contend with.

Source: Unsplash, Erik Mclean

Fleet management

You’ll need support on getting your food from point A to point B. Enlisting the help of fleet management systems such as Vromo go a long way in ensuring a smooth operation.

Owning and operating a ghost kitchen is a fantastic way to launch a new food business and provides a gateway for growth due to consumer demand for tasty food delivered within minutes from a local kitchen that contributes to the local economy.