What Is a Ghost Kitchen?
Ghost kitchens are an evolution of a well-established business model: take-out-only restaurants. By-the-slice pizza places and catering kitchens are ghost kitchens in their most basic form. The convergence of third-party delivery services, high demand for home delivery, and high rents for brick-and-mortar restaurants has transformed these mini food factories into a fast-growing, innovative sector.
Pizza Delivery: The Ghost Kitchen Pioneers
Pizza perfected home delivery, and Domino’s has been one of the primary delivery innovators since it entered the market in 1960. Their original model used a limited number of sit-down locations, centralized commissary kitchens for prep, and satellite kitchens—ghost kitchens in today’s terminology—in high-demand areas to do the final bake. Today, Domino’s is using big data to track demand and autonomous robots to make the final delivery to customers.
Ghost Kitchens vs. Traditional Restaurants
First, remove the seating, servers, ambience, and storefront from a traditional restaurant. Next, add demand-generating apps plus data-driven delivery, and you’ve got a ghost kitchen.
In some cases, ghost kitchens have the same business model as a traditional restaurant. They produce food for a single restaurant from a single menu—modified to taste and look great when it arrives at your location—all without the overhead of serving sit-down customers.
Other ghost kitchens produce food for multiple brands and multiple menus in the same kitchen. They may serve as satellite kitchens for brick-and-mortar restaurants or serve virtual restaurants that only exist in apps and online.
Regardless of the exact business model, ghost kitchens cut rent and labor costs by eliminating brick-and-mortar locations and dine-in service.
Ghost Kitchen Business Models
The ghost kitchen sector is constantly evolving. The low-overhead ghost kitchen business model makes experimentation and innovation less risky and less expensive. The current ghost kitchen universe includes major quick service restaurants (QSRs) and fast-casual brands, owner-operator kitchens, kitchens for hire, and virtual brands.
|Ghost Kitchens||“Ghost kitchen”—aka dark kitchen or cloud kitchen—is the umbrella term for commercial kitchens optimized for delivery and takeout only.|
|Dark Kitchens||Dark kitchens are owner-operator kitchens that focus on a single brand. The owner provides the equipment, staff, menu, and marketing. They may be delivery satellites of a traditional brick-and-mortar restaurant or stand-alone businesses for delivery and takeout only.|
|Kitchens as a Service (KaaS)||Kitchens as a service (KaaS) are ghost kitchens that prepare food for other restaurants and brands. They provide the kitchen equipment, cooking staff, and back-of-house technologies. Other businesses do the marketing, generate the orders, and manage deliveries.|
|Virtual Restaurants, Brands, and Menus||Virtual restaurants exist completely online and in apps. They create brands and menus based on data analytics and localized demand. They often repurpose the same menu item across multiple brands—crispy fries for brand “A,” potato twists for brand “B.” Virtual restaurants operate like any e-commerce business. They use real-time data, A/B testing, dynamic merchandising, and constant menu optimization. Virtual kitchens depend on KaaS providers to produce their food and on third-party delivery services to get it to customers.|
|Kitchen Aggregators||Kitchen aggregators purchase or partner with in-demand restaurants, dark kitchens, and virtual kitchens. Most kitchen aggregators are also delivery service providers who are in it for the data and the user base. Their access to food order and delivery data gives them a significant advantage they can use to identify hot trends, stage production, and streamline delivery.|
|Mobile Kitchens||Mobile kitchens are ghost kitchens in a food truck. They can serve as brand-owned dark kitchens or as KaaS providers. Mobile kitchens can go where the demand is and deliver food directly to the consumer. This direct connection means fresher, hotter food that’s plated accurately, which is critical for the restaurant’s brand.|
|Property Kitchens||Property kitchens are a relatively new trend that solves the real estate crunch in high-rent urban areas. The concept was pioneered by Reef, a real estate company that owns parking lots across North America. They stage mobile kitchen facilities on their parking lots for use by pop-ups, dark kitchens, and KaaS providers. Urban parking lots are strategically located, which makes them ideal for hyperlocalized ghost kitchens and last-mile deliveries.|
Ghost Kitchen Advantages and Challenges: Delivery Services
Delivery services, such as Just East Takeaway, Deliveroo, Grubhub, Meituan, and Ele.me—in combination with increasing demand for home delivery—have fueled exponential growth of ghost kitchens over the past five to 10 years. Initially, the delivery services’ ability to gather and analyze data on food orders, deliveries, and customers gave them insights that no brick-and-mortar restaurant had. Delivery services have used this data to launch their own virtual kitchens and brands, identify independent restaurant brands for acquisition, and promote highly targeted offers to their user base.
Ghost Kitchen Advantages for Delivery Services
- Wholesale source for menus and food prep
- Highly flexible food factories for delivery-service-owned brands
- Zero capital investment in kitchen equipment, staff, or inventory
- Scale up or down based on demand
- Close to customers for fresh, fast delivery
- Constant source of data for food trends, orders, deliveries, merchandising, and operations
Ghost Kitchen Challenges for Delivery Services
- Owner-operator restaurants and policy makers pushing back against commissions
- Delivery drivers and policy makers pushing back on working conditions
- Quality control depends on third-party kitchens
- Delivery timing and quality depend on gig workers
Ghost Kitchen Advantages and Challenges: Major Restaurant Brands
Pickup and delivery have always been part of quick service restaurants and fast-casual dining. The rise of third-party delivery services created new demand for food preparation, but at a steep price. Delivery services may take up to 30 percent of an order’s value in commissions, which means many restaurants lose money on every order made through a third-party service. Plus, delivery services don’t share their data with the restaurants they serve.
To take control of costs and get access to valuable customer data, many restaurant brands now have their own online ordering platforms, apps, and delivery services. They’ve also taken a page from Domino’s playbook and created satellite ghost kitchens—including mobile kitchens and third-party KaaS providers—that extend their delivery range beyond their brick-and-mortar presence.
Ghost Kitchen Advantages for Major Restaurant Brands
- Puts excess kitchen capacity at brick-and-mortar restaurants to work
- Extends service areas and brand presence beyond brick-and-mortar locations
- Brand-operated ghost kitchens and delivery services maintain control of order quality, freshness, and speed
- Brand-owned technology stacks and services produce valuable data about customers, menu performance, delivery areas, and demand
Ghost Kitchen Challenges for Major Restaurant Brands
- High commissions and zero data insight when working with third-party delivery services
- No control of third-party delivery or service quality—food can arrive late, cold, mixed up, or damaged
- Virtual kitchens and aggregators can siphon off business with look-alike menus and brands
Ghost Kitchen Advantages and Challenges: Owner-Operators, Start-Ups, and Chefs
The rise of food trucks is concrete proof that take-out-only operations are a viable, low-overhead option. Chefs, cooks, and bakers can start up with little capital and scale rapidly.
Established brick-and-mortar restaurants use ghost kitchens to move food production closer to their customers, test new markets, and experiment with new menu items. The ghost kitchen business model allows start-ups to get into business quickly without the overhead of a sit-down restaurant. They don’t have to hire and train waitstaff, serve diners, or bus tables.
The ghost kitchen economy can also create additional revenue streams for small restaurants. Owner-operator kitchens can prepare meals for other restaurants and virtual brands by doubling as KaaS providers.
Ghost Kitchen Advantages for Owner-Operators, Start-Ups, and Chefs
- Delivery/pickup-only models lower the cost of entry
- Commercial kitchen and staff, online ordering platform, menu, and digital branding are all that is required
- No physical locations, servers, or bussers to fund
- Rapid, low-cost innovation—one kitchen can serve multiple virtual brands and menus
- Opportunity to increase earnings as KaaS provider
- Constant feedback on brand and menu performance
Valuable customer and location data for direct marketing and market testing Ghost Kitchen Challenges for Owner-Operators, Start-Ups, and Chefs
- Dark kitchens have no physical brand presence, which requires effective online branding and marketing
- High-end cuisine and delicate plating don’t travel well
- Third-party delivery services charge high commissions and don’t share data
- Third-party delivery services can harm reputation, as food can arrive cold, mixed up, or damaged
- Look-alike menus and brands can take customers
Ghost Kitchen Technology—the Foundation for Success
In many ways, ghost kitchen start-ups have an advantage when it comes to technology because they can start with a clean slate and build their technology platform strategically. Existing restaurants—from mom and pops to major QSRs—often have a mix of legacy technologies that can be difficult to integrate with the newer technologies that drive ghost kitchens.
Whether a ghost kitchen is just getting started or has legacy technology in place, strategic planning and smart use of AI can anticipate challenges, solve problems, and provide new levels of efficiency.
Start Smart with an Integrated Ghost Kitchen Management System
Ghost kitchens depend on web- and mobile-based menus, ordering, and delivery. Orders can come from virtual restaurant sites, delivery services like Postmates or Grubhub, or an app on a customer’s phone.
Managing all these different platforms can turn into a logistical nightmare, especially if kitchens are managing orders manually and entering tickets into a point of sale (PoS) or on-premises kitchen management system. Manual order management isolates data from delivery services and customer apps, plus it adds time that can increase labor costs and bog down service.
A better scenario: an advanced ghost kitchen management system that integrates data from every platform and synthesizes it into a unified experience for customers, staff, and management.
Simplify Integration with a Web-Native Platform
Most ghost kitchens—and innovative brick-and-mortar restaurants—build on web-based technologies that integrate with third-party APIs. Orders can come from any device or application and flow straight to kitchen displays. Order progress flows back to the customer and delivery services so that pickups can be timed perfectly, and meals arrive hot and fresh.
Take Control of Your Data and See What’s Happening
Integrated systems also collect data from every step of the process, from web analytics through transaction data, prep times, inventory, and customer profiles. As you review ghost kitchen software and service providers, make sure that the solution gives you access to all the data and tools you need. If a kitchen software can’t help you analyze and understand how your menu, kitchen, and delivery services are performing in near-real time, look for a better platform.
Improve Ghost Kitchen Food Quality, Delivery, and Service with AI
A modern ghost kitchen management system can support far more than ordering, food prep, and delivery. Management systems can integrate telemetry from smart appliances, sensors, and cameras in the kitchen the same way they integrate order data from websites and delivery services. The result is a smart, connected kitchen that helps staff work more efficiently and shares data with the rest of the operation.
Support and Supplement Staff with Smart Kitchen Equipment
AI and basic robotics are automating rote cooking tasks and helping maintain quality and consistency. For example, smart ovens are using computer vision to recognize items, set temperatures, and bake to perfection. Automated robotic fryers time cooking and protect workers from burns. There are even smart grills with multiple temperature zones and sensors that help ensure different foods are cooked appropriately.
Improve Order Accuracy and Quality Control with Computer Vision
Smart cameras on cooking lines and prep stations can help staff reduce mistakes by cross-checking items with customer orders. Computer vision AI can even analyze portions and check plating to ensure that orders are filled with the right amount of food and with on-brand quality.
Tell Customers Exactly Where Their Orders Are
Every step the ghost kitchen management system captures can be shared with your customers, including video or still images, quality checks, and driver locations. Customers can check in on their food at any step.
Orchestrate Deliveries and Plan Smarter Routes
Third-party delivery services pioneered the use of AI for scheduling, managing fluid driver pools, and predicting demand. Increasingly sophisticated ghost kitchen management software is giving owner-operators similar capabilities.
Refine Ghost Kitchen Performance in Near-Real Time
Sophisticated ghost kitchen management systems integrate data from ordering and delivery applications, connected kitchens, and back-of-house operations in near-real time. Machine learning analytics can then extract insight from that data for in-the-moment decision-making, customer engagement, and more-efficient operations.
Optimize Menus and Pricing
AI can uncover what items are performing well, with whom, and why. While granular insight into menu performance is valuable to every restaurant, it’s critically important to virtual restaurants that A/B test menus and adjust their offerings in real time.
Upsell Automatically with AI Recommendation Engines
AI can mix and match menu items to create personalized menus for individuals based on their order history, location, or what’s trending. Upselling engines can keep an eye on the time of day and the weather. They might offer warm stew on a cold day or gazpacho when it’s hot. Smart, automated upselling can uncover hidden opportunities and increase average ticket sales.
Refine Ghost Kitchen Operations
Back-of-house data on staffing, inventory, and trends can be integrated with ghost kitchen systems and analyzed with AI. AI-powered operational insights can help ghost kitchens make better day-to-day decisions, forecast more accurately, and spot issues before they can interrupt production, minimizing downtime.
Market Smarter and Connect with Customers
AI can review customer data to create personalized offers for existing customers or target promotions based on location, food trends, and events. When a customer returns with a new order, AI can predict their likely order to get the kitchen started in advance and recommend add-ons like desserts and drinks.
Create Competitive Advantages with Next-Gen Technologies
Major brands and institutional kitchens with R&D budgets are pushing kitchen and delivery technologies into new terrain. These technologies may be out of reach for most ghost kitchens today, but winning solutions will be commonplace in the not-so-distant future.
Automate Prep with Self-Flipping Grills and Robot-Tossed Pizza
Kitchen automation is well beyond simple, self-dunking fryers and automatic drink dispensers. Multiaxis robotic arms are flipping burgers and putting sauce, pepperoni, and cheese on pizza dough. Robotic kitchen automation is maturing fast, and products from Miso and Kuka are in market and proving the concept.
Start Cooking before Orders Arrive
AI already analyzes PoS data to predict future demand. Many kitchen management systems can guess what a returning customer wants as they place their orders. Delivery pioneers like Domino’s are going a step further by using predictive AI to anticipate likely orders so they can begin preparing the food before the order is placed.
Deliver Fresher Food, Faster
Autonomous robot delivery services debuted on college and business campuses where well-defined routes and high-density populations made early systems practical. Today robots are delivering food in major cities around the world. In many ways, they are the ideal, last-mile delivery option for ghost kitchens staged near their customer base. Unlike third-party delivery services, robots deliver orders to one destination at a time, so food arrives fresh and hot.
Ghost Kitchens and the Future of Restaurants
Some experts predict that the ghost kitchen business model will dominate the industry. It’s not hard to see why. The lower overhead, rich customer data, and ability to test menus and brands rapidly make ghost kitchens an innovative incubator for the industry.
However, the social dimension of breaking bread in a sit-down restaurant is priceless. It seems more likely that brick-and-mortar restaurants and ghost kitchens will develop a symbiotic business model that helps them both succeed.