The food delivery business is booming, fueled by companies like Uber Eats, DoorDash, and Grubhub. Restaurants are clamoring to get on board. According to research firm Technomic, digital orders grew 23% in 2018 to over $38 billion. The trend is spiking demand for “ghost kitchens”: commercial spaces purpose-built to fill delivery orders.
Operators are snapping up inexpensive industrial spaces and outfitting them with high-tech kitchen equipment. Each kitchen can handle multiple restaurant brands, each optimized for delivery. The model allows operators to quickly test new concepts at a low cost. If one brand flops, just launch another.
Some ghost kitchens produce meals for major chains like Chili’s and Cheesecake Factory. Others create their own virtual brands to sell through the delivery apps. Brands like Pasqually’s Pizza & Wings and Wild Burger appeared overnight but have no physical stores.
The model is attracting interest from venture capital firms and big food companies. Travis Kalanick, Uber’s ousted CEO, recently acquired a controlling stake in the startup CloudKitchens, which rents out ghost kitchen spaces. Nestle owns a minority stake in Freshly, which operates a ghost kitchen in New York.
For investors, ghost kitchens promise a way to profit from the food delivery boom without the hassle of running full-service restaurants. Rent and labor costs are low, so margins can be higher. With consumers increasingly favoring delivery over dining out, the model seems poised for major growth.
Still, ghost kitchens face challenges. Delivery apps charge commissions of up to 30% per order, eating into profits. And while delivery is surging overall, individual brands can quickly fall out of favor. Ghost kitchens live or die by their ability to constantly generate popular new concepts.
Proponents argue ghost kitchens make the restaurant industry more efficient by consolidating underused resources. They also create more opportunities for food entrepreneurs to launch new concepts at lower risk. However, some see them as a threat to dining out and community gathering spaces. They may also reduce job opportunities for waitstaff.
Whether you see them as an exciting innovation or a sign of an industry overly focused on convenience, ghost kitchens reflect the disruptive power of technology. Along with delivery apps, they’re transforming how we produce and consume food outside the home. For now at least, that transformation seems likely to accelerate.