It’s Friday night and your restaurant is full of patrons. The door stands ajar with a line of eager customers. Toward the back of this line you can hear frustrated sighs.
Parties begin to leave. You see groups of four to eight people heading over to the pizzeria across the street. Another night of lost revenue as potential clients opt for an easy slice of pie rather than a long wait.
If your restaurant offered delivery-only service you would be able to serve all customers in your restaurant and inline in a timely manner. Dine-in experiences are limited by the number of seats in your physical space. Delivery, on the other hand, offers a lower dependency on table turnover.
More than ever, restaurant clients are favoring convenient delivery rather than sit-in dining. This unprecedented demand has been aided by COVID-19’s shelter-in-place orders, dine-in restrictions and general hesitations to go out to eat.
Demand for fast, quality delivery food has led to the advent of ghost kitchens. Ghost kitchens operate between food trucks and traditional sitdown restaurants. There is no physical space for customers to frequent your restaurant and all transactions are for delivery, completed online.
Ghost kitchens are a promising investment as revenues are predicted to increase by 25% each year for the next 5 years.
In general, they also offer a number of benefits to restaurant owners, one of the most notable being higher margins. A brick-and-mortar restaurant will on average cost $100 - $800 per square foot plus the cost of equipment (dining chairs, tables, or menus). With ghost kitchens, you can by-pass these overhead charges.
This article will go over everything you need to know to run a ghost kitchen—whether you’re starting one from scratch or transitioning your dine-in facility to a delivery-only service.
Similar to delivery at a food establishment, customers view your menu through your own mobile app or through a third-party delivery app like Uber Eats.
Customers can place an order and pay for their food electronically.
Your kitchen staff are then automatically notified of the order through computers. Meal preparation begins.
When the food is ready, a delivery driver transports the food to the customer.
After the customer receives the order, revenues are released to your business.
The most important key to success for your ghost kitchen is understanding your target consumer base.
Where are they located?
What is their income level?
What is their gender?
It’s important to explore delivery options in your selected area and understand which types of clients utilize these establishments. To carve out your own space, try to pick a unique demographic, one that differentiates you from other delivery services but also is popular enough to support a strong customer base in your area.
Once you’ve identified your target demographic, it’s important you understand their feelings and thoughts when it comes to current delivery options.
Email a survey to locals fitting your target demographic. Consider polling passers by on the street as well. Information you gather from these efforts will be essential when selecting your menu, pricing, brand and delivery options.
Your ghost kitchen will likely be located in one of three types of spaces: a commissary/shared-use kitchen, a low-rent commercial space or a pop-up kitchen.
A commissary (or shared-use) kitchen is a licensed food service kitchen available for rent.
This kitchen style mirrors a brick-and-mortar restaurant kitchen and includes all of the necessary equipment.
Commissary kitchens are priced more cheaply than commercial spaces and can also be shared with other virtual restaurants to further lower rent costs.
Low-rent commercial spaces can be practical for your business because delivery does not rely on foot traffic.
Pop-up kitchens are for operators who already own a restaurant. These kitchens are attached to your pre-existing business.
Wherever you are operating, you must ensure your kitchen meets health and safety requirements, meaning the local health department likely will need to visit your kitchen before you launch operations.
Pro Tip: Empty retail stores in malls are now being taken over by ghost kitchens. Malls are ideal locations to set up a ghost kitchen because they are situated in high-traffic areas, making them a convenient place for pick up and delivery.
Base your menu around the type of food you like to make and the type of food your target customers like to eat.
Don’t worry about getting your menu perfect prior to launch; if one concept doesn’t work, you can easily switch over to another at a small cost.
You can also make menu changes quickly, as your online menu will be available to edit live.
Here are some additional factors to consider as you create your ghost kitchen menu:
The most important factors in customer satisfaction in relation to your menu are:
If you don’t have thermal equipment for delivery, you’ll want to avoid foods that must remain hot or cold.
As well, you’ll want to make sure your packaging accounts for separation of goods that could cause food to be soggy or messy.
Lastly, ensure your menu is simple to lower the cost of goods.
Managing your restaurant inventory:
When first opening your ghost kitchen, you should focus on lower-stock inventory.
Just as with in-person restaurants, you should look at inventory costs and food waste to maximize profit margin per meal.
Add a daily special that uses surplus ingredients in ways that minimize your food waste and incorporate ingredients into existing dishes before they go bad. Making the most out of what is already in your kitchens helps lower your food cost.
Forecasting your demand based on recent sales data can be a powerful tool to help you manage inventory.
An accurate forecast can help you make optimal ordering decisions, covering your baseline demand while minimizing the food left on your shelf that may be wasted.
This forecasting and planning of inventory can be difficult so we recommend using a robust point of sale (POS) platform—like Revel—to help with forecasting inventory needs.
Choose to use a third-party food delivery app, set up your own delivery system, or create a hybrid.
Third-party delivery apps (such as DoorDash, Grubhub, Postmates, or Uber Eats): While food delivery companies offer the reliability of proven technology, all third-party apps charge a commission rate that might end up hurting your business.
Native delivery through your website: The alternative to third-party delivery is to keep that service in house. Look for a POS provider that allows you the functionality you need for a native delivery solution. There are many benefits to this approach, including owning the customer journey from end-to-end, keeping your customer data, and maintaining full profits on every order. The challenge with this approach is direct management of delivery logistics and maintaining a fleet of drivers.
To further ensure your ghost kitchen makes a profit, factor a portion of the delivery costs into your food prices.
When you’re running a ghost kitchen, you’ll be tasked with some unconventional challenges compared to more traditional restaurant logistics.
For one, without a physical location for customers to visit, there will be no physical storefront for people to associate with your products.
Instead, you’ll need to get creative. To reinforce your brand with area diners, consider putting up fliers, building referral programs for word-of-mouth referrals or sponsoring community events.
If you offer native delivery, your website is another great space—if a digital one—to give customers a look and feel to associate with your food.
Since food selection and transactions occur solely online you’ll want to make sure you have a well-branded online presence.
A great way to compensate for the in-store face time you forfeit as a ghost kitchen is by telling your story of entrepreneurship through your website or on social media. Facebook, Snapchat and Instagram are the most effective communication platforms for ghost kitchens.
Another key customer touchpoint for ghost kitchens is packaging. Here are some helpful tips to consider with your packaging:
Always put your logo and brand name on all packaging
Use tamper-proof packaging
Choose the appropriate packaging materials to keep foods cold or hot and free from mess. This is especially important with sauces and soups.
To make your business approachable, make sure you post reliable hours. This manages customer expectations for when they can order the food they’ve grown to love.
Additional Branding Must-Dos:
Promote specials and eye-catching food photos on social media and your website
Maintain up-to-date Google My Business and Yelp pages
Encourage Yelp reviews
Run campaigns for “user generated” content
Develop an email list to let potential customers know about your business
It's vital you track costs and revenues from one dashboard or account. If you’re adding a ghost kitchen to your existing brick-and-mortar restaurant you’ll want to clearly understand how both revenue streams are performing.
Ghost kitchens present a green opportunity for any current or aspiring restaurateur.
The setup process for these delivery-only establishments involves detailed market research, location decisions, menu creation, operational planning, go-to-market plan and financial accounting. Having accurate data to back up these critical decisions is of the utmost importance.
Whether you're still on the fence about starting a ghost kitchen or plan to forge ahead, we hope the six factors outlined in this blog post help guide you.
And if you're looking for a cloud-native POS platform for your current or future business plans, check out all the features Revel's platform offers to help you run the business you desire.