In the past few years, we’ve seen the concept of ghost kitchens take off — and some have pretty big names attached, such as MrBeast Burger. This new trend in the food industry can be attributed to the significant shift in dining habits and consumer preferences driven by the pandemic and technological advances. In fact, the food delivery service industry has grown over 52% since the pandemic's start and is expected to increase by 10.3% year-over-year between 2023 and 2030. With the recent demand for food delivery, ghost kitchens have gained tremendous popularity and revolutionized how we order and prepare food.
In this guide, we’ll cover everything you need to know about ghost kitchens — from the basics to how to operate one. Let’s dive in!
A ghost kitchen, also known as a virtual kitchen, cloud kitchen, or dark kitchen, is a food establishment designed exclusively for delivery operations. Unlike traditional restaurants, ghost kitchens focus solely on preparing and packaging meals for delivery, without any dine-in space or customer-facing areas. They leverage online delivery platforms to receive and manage orders, which allows for a streamlined operation. Some ghost kitchens are now allowing pick-up orders, but generally only through food delivery apps that offer a pick-up option.
There are multiple operating models for ghost kitchens. Some popular examples include:
Since ghost kitchens only have to focus on preparing food and marketing, it minimizes overhead costs and maximizes efficiency in the delivery process.
Although it’s difficult to pinpoint the exact origin of ghost kitchens, they first emerged in 2013 driven by the rise of delivery platforms, such as UberEats and GrubHub. Ghost kitchens began gaining more traction as the demand for food delivery services skyrocketed, particularly in urban areas. Despite being around since 2013, the pandemic accelerated the adoption of the virtual kitchen business model due to the heavy reliance on delivery services. In 2020, Uber Eats’ revenue increased by 100% year over year and overall delivery orders increased by 70%. As restaurants looked for ways to keep their businesses afloat during lockdowns, many turned to ghost kitchen models to continue reaching customers in a safe and efficient manner.
Operating a ghost kitchen allows a business to reach a wider audience by expanding the delivery range. Although the target market may vary depending on the area and cuisine offered, ghost kitchens typically target customers who are looking for quick and convenient food options. In general, your ghost kitchen business should target:
It’s important to understand who you are targeting before you launch your ghost kitchen and design your menu. You may aim to target all five groups above, or you may choose to narrow in on one or two and create a highly targeted menu. Either way, it is recommended to conduct market research to best understand the consumers in your area, their preferences, and how to stand out among the competition.
Although the revenue potential for ghost kitchens can vary, overall, they can have higher profit margins and less risk than a traditional restaurant.
Profit margins in a traditional restaurant are typically quite low at an average of 2-5%. However, operating a ghost kitchen has the advantage of having lower overhead costs by eliminating expenses associated with dine-in space, front-of-house staff, and decor. As a result, this allows business owners to unlock an additional 5% or more in profit.
If you already own or operate an existing restaurant, you can also use a ghost kitchen to add an additional revenue stream for your business. Since you’re already paying for fixed costs, such as rent, labor, and equipment, there’s essentially no additional start-up costs required. On average, food delivery platforms charge anywhere between 15-40% of gross sales as a commission fee, but the rest is yours to keep.
Despite the extra revenue potential of a ghost kitchen, it’s important to keep in mind that there are sometimes additional external factors that can impact a ghost kitchen’s revenue potential. These external factors include:
These external factors may sound daunting, but you can be prepared by conducting proper market research and adapting to consumer preferences to maximize potential profits. On top of that, since ghost kitchens primarily function online, they can leverage data analytics to enhance revenue potential. Data can be used to optimize operations, increase order volume, and improve efficiency.
Even though ghost kitchens are quicker to set up than traditional restaurants, there are still several key components required to get started. Here are the essentials:
Starting a ghost kitchen requires careful planning, adapting to changing consumer demands, and leveraging technology and operational efficiencies to maximize profitability. By considering these essential elements, a restaurant can lay a solid foundation for a successful ghost kitchen venture.
First and foremost, ghost kitchens need to prioritize food items that are delivery-friendly and can hold up well during transit. Offering dishes that are specifically designed for delivery can help preserve its quality by the time it reaches the consumer. While curating your delivery-only menu, it’s recommended to opt for menu items that can maintain their flavor, texture, and presentation even after travel. Dishes that are easily packaged, reheat well, or are designed for quick assembly at the customer's location tend to work better in a ghost kitchen model.
Along with being delivery-friendly, if your ghost kitchen has a large and diverse menu, consider making multiple niche menus under different restaurant names or brands instead. Large menus can be overwhelming for potential customers to navigate online and sticking to a smaller number of staple dishes can help reduce decision fatigue. Adults have to make on average 35,000 decisions per day. Make ordering from your ghost kitchen an easy one for people.
Lastly, the menu items should cater to the local market preferences. Here are some additional considerations to keep in mind while creating your ghost kitchen’s menu:
To get a better idea of local market preferences, you can conduct thorough market research and analysis prior to creating a menu. Actioning customer feedback can also be a helpful tool to help you adapt to new food trends, allowing you to continue maximizing customer satisfaction and revenue potential.
Considering that there are over 1,500 ghost kitchens operating in the United States as of April 2022, there are plenty of them around! However, one ghost kitchen that stands out amongst the rest is MrBeast Burger.
MrBeast Burger was launched by YouTuber Jimmy Donaldson, famously known as MrBeast, in 2020 during the height of the pandemic. Despite the restaurant now exclusively operating as a virtual brand, MrBeast Burger first started off as an in-person pop-up restaurant in North Carolina where MrBeast himself gave away food items free of charge. This resulted in thousands of visitors and a video that racked up millions of views. With the help of his substantial online following and influencer marketing, MrBeast was able to create significant buzz.
Fast forward to today, MrBeast Burger has successfully expanded across the globe in a relatively short period of time. Since its launch in 2020, there are now over 1,000 MrBeast Burger locations worldwide with approximately 600 in 45 US states. Instead of opening each individual location on his own, MrBeast leverages existing restaurants, which reduces start-up costs and allows for his brand to expand quickly. MrBeast was one of the first to establish this business model, now coined as “ghost franchising”, and also accepts applications from existing restaurants to become a MrBeast burger franchise. By utilizing the ghost kitchen model, along with existing restaurants, the brand was able to quickly enter new markets, test demand, and scale operations.
Now that we’ve covered the ins and outs of operating a ghost kitchen, let’s summarize the main advantages of having a virtual kitchen.
Tapping into the ghost kitchen model can give business owners the opportunity to capitalize on the benefits that make this concept stand out in comparison to a traditional restaurant.
While operating a ghost kitchen offers numerous benefits, there are also some drawbacks that should be considered. Here are a few potential challenges that you might face as an owner or operator of a ghost kitchen business:
It’s important to keep in mind that the risk of these drawbacks can be reduced with strategic planning and unique menu offerings. By implementing effective strategies, ghost kitchens can overcome these potential drawbacks.
Operating a ghost kitchen in 2024 presents an intriguing opportunity for restaurant owners and entrepreneurs. With the increasing demand for convenient dining options, the ghost kitchen model offers great benefits such as lower overhead costs, expanded market reach, and scalability. By leveraging technology and data insights, ghost kitchens can capitalize on the evolving food delivery landscape and meet the changing preferences of modern consumers. With careful planning and execution, a well-operated ghost kitchen can thrive and tap into the lucrative market of food delivery.
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-Tara Hardie, ZZA Hospitality Group, 16 locations
