Demand for contactless delivery options has skyrocketed as consumers shift away from the traditional restaurant experience—allowing ghost kitchens to take center stage.

The COVID-19 pandemic has eliminated bustling dining rooms and packed bars. Physical restaurant experiences are taking a back seat to more convenient, cost-effective options such as ghost kitchens and other delivery-centric business models.

In previous years, online delivery was estimated to reach $41 billion by 2021. This year alone, online delivery spend has already reached a total of $45 billion—pulling forward nearly three years of consumer spending, accelerated by the growth of contactless technology and the need to keep employees and customers safe.

Operators who recognize and act on this trend early will create more resilient, robust operations. While also giving customers the flexibility they need to order and eat however they prefer.

So, what is a ghost kitchen? A ghost kitchen is a professional food preparation and cooking facility set up to prepare delivery-only meals, usually for quick service or fast casual restaurants. These stripped-down commercial cooking spaces offer no dine-in option and are made for producing white-label meals. Let’s walk through the different ghost kitchen models, their pros and cons and the importance of technology these facilities use to drive customer experience and revenue.

The Ghost Kitchen Model

Delivery apps ushered in a golden age for food delivery, one that was critical to this year’s coronavirus response. But operators are always innovating, and this year has seen a significant increase in the number of ghost kitchens—with some attracting sizeable investments and interest from fellow operators, customers and the media.

Restaurants are exploring how to use ghost kitchens to create new revenue streams for their business, but this model is not limited to big name quick-serves. Restaurants, startups and third-party delivery platforms are increasingly turning to ghost kitchens to keep up with delivery orders and cut unnecessary expenses such as décor, tables and wait staff. 

However, for many restaurants struggling with contactless options, creating their own ghost kitchen is out of reach. The capital investments required to establish a ghost kitchen are significant, which is why some restaurants are turning to startups with ghost kitchens housing multiple restaurants under one roof. These facilities are equipped with common kitchen necessities and make it simpler to rapidly launch new delivery options. For example, celebrity chef Eric Greenspan recently launched Alt/Grub/Faction, a ghost kitchen with several delivery brands from a single commissary located in downtown Los Angeles.

Weighing the Options

Before jumping on the bandwagon, it is important for a restaurant to weigh all the options.

The Upside:

• Delivery is quicker and cheaper to launch since customer interaction is primarily virtual. Kitchen machinery like dishwashers and stove tops can be shared across various restaurants in one space.
• The burden on restaurants’ four walls is reduced as locations are not limited by on-site space. And since ‘prime real estate’ is no longer needed, more space can be used to accommodate delivery vehicles and food prep.
• Technology-based systems that accommodate order intake, tracking and delivery are sophisticated and streamline processes between third-party delivery platforms and kitchen software.

 

The Downside:

• Onsite and walk-in traffic provided by a storefront are missed opportunities for new customers and revenue.
• Operating a ghost kitchen requires substantial initiative and research, and merchants will spend a considerable amount of time contemplating factors specific to their restaurant. Plus, juggling the costs of brick-and-mortar, labor, food and beverage, technology and loyalty programs can be difficult.
• The in-store customer experience no longer exists. Interaction with customers over social media is more difficult and experience will rest in the hands of the delivery drivers (whether third-party or not).

 

Heating Up Around the Country

Ghost kitchens have been thriving around the world, but they are relatively new to the United States. Since launching in Pico-Union, a neighborhood in central Los Angeles, a shared kitchen concept called CloudKitchens has opened ghost kitchens throughout California in Anaheim, Koreatown, Long Beach, Oakland and San Diego. It has also expanded to locations across the country including Atlanta, Chicago, Houston, Orlando, Philadelphia and Columbus, Ohio.

Other facilities like Kitchen United, located in Pasadena, California, host 20 kitchen spaces. Colony, another shared kitchen, houses more than 30 different brands. As the demand for delivery has increased due to the closure of indoor dining, these shared facilities are facing major competition from, well, everyone else.

Technology Takes Mainstage

While there are upsides and downsides to the implementation of a virtual ghost kitchen, one thing is clear—technological developments in the restaurant industry, specifically delivery, are the future of food service. Technology is the backbone of ghost kitchens, operating behind the scenes and providing real-time information needed to:cook meals in the correct order, include requested condiments and coordinate with delivery drivers so promised delivery times are met.

Technology is responsible for an order as soon as it is placed online or through an app. Restaurants will need an integrated technology system to smoothly transition customer orders and provide the ability to track them. This is crucial because technology is responsible for the customer experience and enables them to provide feedback to improve the entire delivery process.

What customer orders originate from the ghost kitchen? Where geographically are the orders coming from? Where are they going to? Advanced kitchen technology has the power to track and trend data to answer questions such as these. 

How consumers interact with brands is changing every day, and the lines between physical and digital reality have started to blur. Modern customers crave personalization and convenience. For some restaurants, ghost kitchens are a valuable tool to help deliver the experience customers crave, while also providing a path to weather challenging times such as these.

Rakesh Patel serves as executive director of NCR Hospitality and is a leader in the product management group. Specializing in consumer engagement technology, Rakesh builds exceptional guest experiences and disruptive innovation. In his current role, he is responsible for developing engaging consumer experiences outside of the traditional four walls of the restaurant. NCR is the technology provider of choice for restaurants around the world and Rakesh is focused on delivering the next-generation software, hardware and services that deliver on what customers want, when they want it.