How to start a ghost kitchen

Have you ever ordered food from a ghost kitchen? A lot of people have without even knowing it. 

And, as crazy as it may sound, that’s part of the appeal of opening one. Consumers don’t even need to know it exists before becoming regular customers. 

Plus, the potential market share is huge! According to CBRE Research and Hospitality Technology, the ghost kitchen market share of  U.S. restaurant sales is expected to reach 21% by 2025 and be worth $71.4B by 2027. So, the ghost kitchen concept is revolutionizing the food service industry, with delivery platforms playing a crucial role. The demand for delivery-only restaurants is skyrocketing, especially in urban areas with limited dining room space.

So, how do you get your slice of the ghost kitchen pie? And what do you need to know to give yourself the best shot at success? 

Those are the questions we’ll be helping you answer in this article as we explore the ghost kitchen concept, business license, menu items, and more.

• Examples of successful virtual kitchens 

• How to pick the right ghost kitchen model

• The pros and cons of opening one

• The 5 essential steps to start one in 2022

But let’s kick things off by looking at what makes them different from traditional restaurants.

What is a ghost kitchen? 

A ghost kitchen is a restaurant kitchen space used solely to make food for delivery and takeaway orders. Unlike traditional brick-and-mortar restaurants, the main staff on-site are chefs, cooks, and the people who package delivery orders. All customers’ orders come directly via third-party delivery service apps or a restaurant’s online ordering platform. 

A ghost kitchen, also known as a delivery-only concept or virtual brand, operates exclusively for takeout and pick-up orders, bypassing the traditional restaurant industry setup. Instead of a bustling front-of-house scene, it's all about efficient food preparation and packaging by kitchen staff. These kitchens run on delivery drivers and online ordering platforms, saving on real estate and operating costs associated with a traditional storefront setup.

Ghost kitchens are also sometimes referred to as cloud kitchens, virtual kitchens, dark kitchens, or ghost restaurants. All of those terms mean the same thing. But there are different ghost kitchen models that you’ll want to know about if you’re interested in setting up and running one yourself. 

We’ll look into those distinct models later. But, first, let’s look at some examples to give you an even better idea of how this new concept works.

Ghost kitchen examples

Guy Fieri’s Flavortown Kitchen is one of the most famous and fastest-growing ghost kitchens in the country. Flavortown Kitchen currently has 23 locations across the U.S., mostly operating out of the kitchens of restaurants like Buca di Beppo, Brio Italian Grille, Bravo Italian Kitchen, and Bertucci’s. This innovative business plan allows Flavortown Kitchen to leverage established restaurant food business infrastructure for rapid expansion.

Another popular ghost kitchen, Pasqually’s Pizza & Wings, operates out of the kitchens of Chuck E. Cheese restaurants. This ghost kitchen model has helped Chuck E. Cheese recover some of its financial losses (as a result of the pandemic) and reach new markets while still using the same ingredients and offering a somewhat similar menu. Furthermore, this ghost kitchen strategy has enabled Pasqually’s Pizza & Wings to enhance its in-person dining experience, bolster its restaurant brand, and attract more foot traffic to its physical location.

How do ghost kitchens work? 

We’re sure you’d agree: the basic concept of ghost kitchens is fairly easy to understand. It’s a virtual restaurant that exists only as a kitchen preparing delivery and takeaway orders. But, as we mentioned, there are different ghost kitchen models to suit different needs. Let’s take a look at those now. 

Commissary Kitchens

The most popular model is the commissary kitchen. Owned and rented out by an entrepreneur or third-party service, commissary kitchens are a shared kitchen space among several virtual restaurants that pay a membership fee or rent the space by the hour. 

The main benefits of using commissary kitchens are flexibility, convenience, and (most of all) price. Since you do not own the facility, the setup and maintenance costs are low.

Additionally, commissary kitchens often boast state-of-the-art Point of Sale (POS) systems tailored to the unique needs of virtual restaurant operations. These POS solutions streamline order management, inventory tracking, and sales reporting, empowering restaurateurs to make data-driven decisions and optimize their performance.

Commercial Kitchens

For more established restaurants with large quantity orders, commercial kitchens tend to be the best option. Commercial kitchens are usually larger, have all of the essential kitchen equipment, and are rented for private use. 

The main benefit of using commercial kitchens is that it’s a private kitchen space that is used only to prepare orders for one restaurant.  

Moreover, commercial kitchens provide ample space for staffing requirements, ensuring that restaurant operations run smoothly even during peak hours. This setup allows restaurateurs to focus on efficient workflows and maintain high-quality standards in food preparation and service. Also, commercial kitchens offer an ideal environment for implementing effective restaurant marketing strategies.

Incubator/Pop-up kitchens

Incubator/Pop-up kitchens operate out of extra kitchen space in brick-and-mortar restaurants and food trucks. Within that space, workers focus exclusively on preparing online and delivery orders. By creating this separate space and workflow, other restaurant workers are freed from the responsibility of preparing both dining and delivery orders. 

The main benefit of incubator/pop-up kitchens is that they allow existing restaurants to experiment with new revenue streams. Pasqually’s Pizza and Wings virtual restaurants, which we mentioned earlier, are an example of this model as they operate out of the kitchens of Chuck E. Cheese restaurants. 

Furthermore, these kitchens serve as incubators for small businesses and startups in the food industry. Entrepreneurs can test their concepts and menu items in a low-risk environment before committing to a full-scale operation. This setup fosters innovation and creativity within the food industry, allowing for the exploration of new culinary trends and flavors.

Kitchen Pods

Kitchen pods are small ghost kitchens with only essential supplies and equipment since they are usually built-in shipping containers. This setup makes kitchen pods easy to transport to different locations (e.g. parking lots) and directly serve customers for takeaway orders. 

The main benefits of kitchen pods are their mobility and cheap start-up costs. However, due to limited kitchen space, it can be difficult to provide safe, adequate working conditions and enough physical space to prepare orders. 

Entrepreneurs seeking to establish their own ghost kitchens can explore the option of kitchen pods. These compact setups offer a convenient solution, especially for those looking to enter the food industry with limited resources. With their modular design, kitchen pods can be easily square away in diverse locations, maximizing exposure and catering to varying customer demands.

Pros and cons of ghost kitchens

The ghost kitchen business model is promising, given the current preference many consumers have for delivery and takeaway orders as a result of the ongoing pandemic. Additionally, ghost kitchens provide an opportunity for culinary innovation and experimentation without the constraints of a traditional dining establishment.

But before you decide to give opening a ghost restaurant a try, there are also some drawbacks you might want to consider. One potential challenge is the lack of a physical storefront, which may limit visibility and foot traffic. So, let’s now take a look at some of the major pros and cons.

Pro #1: Low Cost 

Running a ghost restaurant is a lot cheaper than running a traditional restaurant. Since you only need kitchen space, you save a lot on operational and overhead costs. As, you can optimize staffing by focusing solely on kitchen staff, reducing labor expenses associated with hiring customer-facing roles like servers and hosts. This streamlined approach helps minimize expenditure, making it an attractive option for small businesses aiming to maximize profitability.

Pro #2: Flexibility and Experimentation

One significant advantage of ghost kitchens is their inherent flexibility, allowing operators to adapt and pivot swiftly as market demands change. This agility enables experimentation with menu items and offerings to gauge customer preferences accurately. For instance, should a particular item fail to garner traction or face supply issues, it can be promptly removed from the menu, ensuring optimal resource utilization and customer satisfaction.

Pro #3: Wider customer reach

In the past, restaurants only served people onsite with limited occupancy. Ghost kitchens revolutionize the traditional restaurant model by expanding your potential customer base beyond physical constraints. With no limitations on table turnover, you can accommodate more orders and serve a larger volume of customers each day. Through strategic restaurant marketing tactics, you can effectively promote your virtual eatery to a broader audience, reaching diners from various locations within your vicinity. 

Con #1: Third-Party App Fees and Algorithms

While using third-party food delivery apps such as Uber Eats, DoorDash, and GrubHub can enhance your restaurant's visibility and attract more customers, it comes at a cost. These platforms often charge steep commission fees, sometimes reaching up to 30% of each order. Moreover, your restaurant's visibility and exposure are subject to the algorithms of these delivery apps, over which you have little to no control.

Con #2: Limited Interaction with Customers 

One significant drawback of operating a ghost kitchen is the lack of direct interaction with customers. Unlike traditional brick-and-mortar restaurants, where you can engage with patrons face-to-face, transactions in ghost kitchens occur solely through third-party apps. Consequently, these platforms often retain all customer data and insights, depriving you of valuable information for personalized marketing strategies and customer retention efforts.

Con #3: Difficult to Build and Manage Your Brand 

Managing your brand in the virtual realm of ghost kitchens poses significant challenges. Your ghost kitchen’s online presence is all you have when it comes to branding. Given that these platforms often serve as the primary point of interaction with customers, maintaining a positive reputation is crucial.

And, most of that online presence exists entirely on third-party apps where reviews can make or break how customers perceive your restaurant. A few bad reviews can hurt your restaurant's visibility and orders, highlighting the vulnerable nature of brand management in the digital age.

How to start a ghost kitchen 

So, you’ve reviewed those pros and cons and still think starting a ghost kitchen is the right move for you? Fantastic! Here are the five essential steps to set one up in 2022.

Step 1 - Create Your Concept

Which ghost kitchen model makes the most sense for you? Will your kitchen host one or multiple virtual restaurants? Who are your target customers? 

Answering these questions from the start will help you develop your positioning strategy and stand out among competitors. It will also help you narrow down your menu offerings and determine how to best market your virtual restaurant(s) to customers. Additionally, conducting thorough market research can provide valuable insights into consumer preferences and behaviors.

Step 2 - Find a Kitchen

Next, you’ll have to find a kitchen space that suits your preferred ghost kitchen model. For instance, if you're focusing on delivery-only operations, renting a commissary kitchen could be the most practical choice.

To find available commercial and commissary kitchens for rent, check out platforms like The Kitchen Door. Alternatively, if you have access to the necessary resources and networks, consider setting up an incubator kitchen or kitchen pod to streamline your operations.

Step 3 - Choose Your Delivery Method

You can either deliver meals using your in-house delivery team or by partnering with third-party delivery apps. As we mentioned earlier, there are pros and cons to both options. 

While third-party apps simplify the process, the commission rate might not be worth it. If you opt to use an in-house delivery system, ensure you have enough labor to prevent compromising your food quality and customer service. Consider implementing a hybrid approach where you utilize both methods to maximize reach and efficiency.

Step 4 - Hire Staff

Luckily, ghost kitchens don’t need many staff members onsite. You just need to hire enough cooks to prepare the food and workers to package and manage online orders. 

That being said, hiring staff amid a pandemic and labor shortage isn’t exactly easy. So, you may want to use a restaurant hiring solution like Workstream that can help streamline your hiring process and get open roles filled quickly.

Step 5 - Establish your online presence 

Your online presence plays a vital role in determining the success of your virtual restaurant. Build a website and create social media accounts for your business so your customers can engage with you. 

These online marketing tactics are cheap and effective in reaching out to your potential customers. You can also run marketing promotions on third-party apps to entice new customers to try your menu. 

Consider using search engine optimization (SEO) techniques to improve your website's visibility and attract more organic traffic. Additionally, regularly update your social media profiles with engaging content, such as behind-the-scenes glimpses of your kitchen operations, chef's specials, and customer testimonials, to foster a sense of community and loyalty among your followers.

Final thoughts 

If you want to start a ghost kitchen, the best time to do it is as soon as possible. As we’ve shown in this article, there is a ton of demand for this restaurant business model now and in the future. Additionally, remember to stay proactive and adaptable in navigating the dynamic landscape of the food industry.

We hope the information we’ve shared helps you begin the journey of opening your own! 

And, for more tips like these, be sure to also check out our blog where we discuss topics like how to find and hire great employees!

FAQs

Are Ghost Kitchens Profitable?

Yes, definitely! Ghost kitchens have the potential to be very profitable. By focusing solely on delivery and takeout, they can streamline operations, reduce overhead costs, and cater to the growing demand for online food ordering. However, success depends on factors like location, menu offerings, and effective marketing strategies.

Is a Ghost Kitchen Worth It?

Sure thing! Whether a ghost kitchen is worth it depends on your specific situation and goals. They offer benefits like lower overhead costs and flexibility, but there are also challenges like limited customer interaction and reliance on third-party delivery apps. Consider your priorities and weigh the pros and cons before diving in!

What is the Process of Ghost Kitchen?

So, here's the deal with ghost kitchens! The process typically involves setting up a kitchen space solely for preparing delivery and takeout orders. You decide on your menu, find a suitable kitchen, choose your delivery method (in-house or third-party apps), hire staff, and establish your online presence for marketing. It's all about streamlining operations and maximizing efficiency to serve up delicious meals without the need for a traditional dining area!

Are Ghost Kitchens Healthy?

When it comes to ghost kitchens and healthiness, it depends on what and how you're cooking up! Just like any restaurant, it's up to the chefs and the ingredients they use. So, if you're whipping up fresh, nutritious meals, then sure, ghost kitchens can be healthy options. But if it's all about deep-fried goodness, well, maybe not so much. Always good to check out the menu and read those reviews!

What is a Ghost Kitchen?

Alright, so imagine this: a ghost kitchen is like a secret hideout where all the cooking magic happens, but there's no fancy dining area or servers buzzing around. It's a kitchen space solely dedicated to whipping up food for delivery or takeout orders. No dine-in option here, just good food straight to your doorstep or ready for pickup!

How do You turn Your Home Kitchen into a Commercial kitchen?

Turning your home kitchen into a commercial kitchen? That's like upgrading from a cozy studio apartment to a bustling office space! First off, you'll need to comply with health and safety regulations, get the right permits, and possibly make some renovations to meet commercial kitchen standards. It's a bit of a process, but with the right guidance and effort, you can make it happen!

How will Ghost Kitchens Affect the Restaurant Industry?

Ghost kitchens are stirring things up in the restaurant industry. With a rise in takeout and delivery orders, these virtual kitchens are making waves. They offer convenience and challenge traditional dining norms. Get ready for a flavorful shift in the food scene!

Are Cloud Kitchens and Ghost Kitchens the Same?

Well, not exactly! While they share similarities, they're not identical twins. Cloud kitchens are all about the virtual side of things, cooking up orders for delivery. Ghost kitchens, on the other hand, focus on whipping up delicious meals without the need for a physical storefront. Different strokes for different folks, right?

What are the Tax Advantages of Ghost Kitchens Over Traditional Restaurants?

Ghost kitchens can serve up some sweet advantages compared to traditional restaurants. One biggie is the ability to write off expenses related to running your kitchen, like equipment, ingredients, and even delivery fees. Plus, since ghost kitchens often have lower overhead costs, you might find yourself with a lighter tax bill at the end of the year. Who doesn't love a little extra dough in their pocket, right?

How Can a POS System Help a Ghost Kitchen?

Think of a POS system as the ultimate kitchen assistant for your ghost kitchen. It's your trusty sidekick, keeping tabs on orders, tracking inventory, and even managing payments. With a POS system in place, you can streamline operations, speed up service, and keep those orders flowing smoothly. It's like having a kitchen ninja by your side, making sure everything runs like a well-oiled machine!

What are the Key Steps for Starting a Successful Ghost Kitchen?

Here are the key steps for starting a successful ghost kitchen:

1. Concept Creation: Define your menu and target audience.

2. Kitchen Setup: Secure a suitable space with the necessary equipment.

3. Delivery Method: Decide on delivery apps or your team.

4. Staffing: Hire cooks, packagers, and managers.

5. Online Presence: Build a strong website and social media presence.

6. Marketing: Promote your ghost kitchen through ads and promotions.

With these steps, you're on your way to ghost kitchen success.