In an industry with notoriously tight profit margins, ghost kitchens are proving to be a lucrative source of revenue for some restaurateurs. This relatively new business model is focused completely on online orders. There's no need to host, wait, or bus; there's no dine-in or pickup. Just a back-of-house operation and a delivery service.
Ghost kitchens offer interesting advantages and opportunities in today's digital-first world, though there are also challenges. So it's worth investigating in detail what ghost kitchens involve, the types of restaurant businesses they can complement, and the necessary considerations to successfully launch one. Here's what you need to know.
Benefits of a ghost kitchen model
Serving guests has been the beating heart of the restaurant business for decades — in fact, for centuries. So it might seem somewhat strange and counterintuitive to have a restaurant where no customer walks through the door.
But ghost kitchens are still committed to serving guests; the only thing that's changed is where those guests are located. More people are ordering food from the comfort of their homes, and this creates a novel opportunity for restaurateurs to build a beloved brand that only operates online and caters to customers who prefer delivery.
There are a variety of reasons why this can be a lucrative business model, but here are five standouts:
1. Launch with limited startup capital
You might have a great restaurant business concept, but the upfront costs are too prohibitive. After all, an attractive storefront with ample floor space and plenty of foot traffic doesn't come cheap. Neither do furniture, dishware, and cutlery. And front-of-house staff recruitment is also a significant investment of time and resources.
A ghost kitchen demolishes these barriers; all you need to start is an appetizing menu, a capable prep team and commissary facility, and a memorable brand.
2. Enjoy the ease of minimal overhead
It's not just the lack of upfront costs that provides a unique advantage. You'll quickly notice that the absence of recurring costs can be a huge selling point for ghost kitchens. You're no longer having to deduct the high monthly rent costs of a dine-in restaurant, or the wages of a full roster of serving staff. This can make it much simpler to manage, and to balance, your books.
3. Maximize your operational efficiency
With a team consisting only of your core kitchen functions — such as chefs, line cooks, and dishwashers — you can be hyper-focused on your product, creating dishes of exceptional quality at an accelerated pace. With no obligation other than to fulfill orders, ghost kitchens are a great way to meet the demands of modern diners.
4. Expand where, and when, you want
Is your restaurant concept a hit in your local market? With a ghost kitchen model, it's not difficult to scale up and take your business to new neighborhoods. You just need to find a suitable food prep space in the area, hire staff (or move existing staff to the new location), and partner with a third-party delivery service to get started.
5. Make the most of creative freedom
On-premises dining can lead to a stagnation of innovation for you and your team. Your regulars are responsible for a substantial chunk of your revenue, and they have certain expectations of your menu, your ambiance, and your general customer experience — which makes every change a calculated risk.
In this regard, ghost kitchens — and their exclusively online "ghost menus"— can be liberating. You can tweak, test, add, and remove menu items on your own terms, prioritizing your high performers while granting your chefs greater permission to iterate and experiment.
Ghost kitchen vs. virtual kitchen
Importantly, not all ghost kitchens operate as standalone brands. Sometimes, a successful dine-in restaurant will open a ghost kitchen to support an increased volume of online orders. This can be particularly useful during lunch or dinner rushes, when a single kitchen staff is too busy to handle both on- and off-premise orders. Ghost kitchens can also allow existing restaurants to connect with new customers and serve geographies far from their flagship store.
This is where the distinctions between ghost kitchens and virtual kitchens can become confusing for some business owners. Sometimes these terms are used synonymously, but there are differences; here’s a brief breakdown.
Ghost kitchens: Also known "commissary kitchens," ghost kitchens are privately owned or rentable shared commercial kitchen space where restaurant teams can prepare food for a delivery-only clientele.
Cloud kitchens: Remember how normal brick-and-mortar restaurant businesses can use ghost kitchens to service distant and distributed markets? Cloud kitchens are similar, except there is no brick-and-mortar business. The brand only exists online but grows through a franchise model and partners with established restaurants, commercial kitchens, and commissary spaces that want to make and sell its signature offerings.
Virtual kitchens: Unlike ghost kitchens and cloud kitchens, which can utilize commissary and commercial facilities, virtual kitchens operate out of an existing brick-and-mortar restaurant. In these cases, the business launches a separate online-only brand using their existing team, space, and supply of ingredients and resources. This allows existing restaurants to maximize the value and variety it provides to customers by offering a secondary brand and menu.
Pros and cons of opening a ghost kitchen
How do you know if a ghost kitchen is the right path to go down for your restaurant business? Think about those benefits and opportunities mentioned before, and weigh them against the challenges and obstacles.
On the "pros" side, you have the low startup and operating costs, as well as the potential for greater creativity and scalability, with a complete focus on food rather than service. That scalability works both ways — you can grow rapidly if needed, but if your concept doesn't work out, you can also rein it in or shut it down without incurring too great a loss. That makes it a less risky investment.
If you choose to pursue a virtual restaurant, you can bring in incremental sales with the resources and talent you already have.
But then there's the "cons" side. Service, ambiance, and presentation can be some of the most meaningful and memorable aspects of the restaurant experience, and ghost kitchens have to build their brand, establish their reputation, and cultivate relationships without any of those. Also, unlike dishes that can be washed and reused, disposable takeout wares are single-use, which entails special considerations both for your budget and your environmental footprint.
When you factor this in, along with the costs of operating a delivery service, your profit margins might not be as high as you expected. And because ghost kitchens are a fairly new concept, their long-term viability remains unknown and unproven.
Key questions to determine if a ghost kitchen is right for your business
Looking at the pros and cons should give you a lot to think about when assessing the potential of a ghost kitchen for your restaurant business or concept. But there are considerations you should pay attention to at a more fundamental level before you make a final decision.
What is your vision for your restaurant? Does it involve an inviting atmosphere — whether that's a welcoming storefront or a comfortable dining room — and face-to-face customer interactions? Or can it thrive in an online-only format?
How determined are you to launch or scale quickly? If you're in a hurry to get your business off the ground or make forays into new markets, then the relative simplicity of starting a ghost kitchen may be an appealing prospect for your goals.
Are you equipped to manage delivery? Remember, a ghost kitchen exclusively takes online orders, and overseeing a fleet of drivers can be logistically complex. Consider partnering with a third-party delivery service to provide this capability.
Your guide to setting up a ghost kitchen
Building a ghost kitchen business plan is similar to planning a traditional restaurant in some ways, but in other ways, it's wholly different and unique. Perhaps the biggest distinction is the understanding that your guests will only encounter your brand and your menu digitally — through your website, social media channels, online reviews, and delivery platform.
Because of this, restaurateurs must place special emphasis on marketing to spread the word about their online restaurant. It's also crucial to create enticing dishes that will maintain their flavor, temperature, and appearance even after being boxed up and delivered to their destination.
Beyond this, the usual factors need to be accounted for: you'll need to find facilities that meet your needs and budget, and you need suppliers that are available and accessible. You'll also need the appropriate permits and licenses, which you can secure with the help of your local health department and business development offices.
And of course, partnering with the right third-party delivery service is a good move when setting up a ghost kitchen. Otherwise, you'll be tasked which the costly task of acquiring, insuring, and maintaining a fleet of delivery drivers and vehicles.
A delivery platform like DoorDash will handle all the logistics of delivery, while also providing you with marketing and promotion tools to put your brand in front of prospective new customers and convert them into devoted fans. Better yet, DoorDash partners get dashboards that give you real-time insights to track, measure, and optimize your campaigns for ongoing business growth.
Ready to make your concept for an online-only restaurant — whether a virtual kitchen or a ghost kitchen — a reality? If so, then DoorDash is ready to support you.
