Article

Hospitality Companies Can Tap New Revenues With Ghost Kitchens

April 21, 2021
Chef cooking at walk up windows
Hospitality companies were hit hard by the COVID-19 pandemic. The search for new revenue sources has many of them adopting the ghost kitchen concept. These commissary kitchens have no customer-facing areas and are used for food delivery only. 

The ghost kitchen business model lets operators meet the demand for meal delivery without requiring the space and overhead of a restaurant. Ghost kitchens can be part of a brand or part of a kitchen in an independent location. Ghost franchises are available too, with entire brands created using the delivery-only model. 

Like traditional kitchens, ghost kitchens rely on professional chefs and cooks who prepare delicious food. The primary difference is that the ghost model does not serve food on-premises, which challenges operators to prepare and pack food optimized for delivery. Organizations that implement these kitchens can recover faster from business lost during the pandemic.

OPPORTUNITIES TO SEIZE THE DINE-AT-HOME TREND

Hospitality businesses like hotels have kitchens that can be used as delivery hubs. Some companies are 100% acting as ghost kitchens, and that’s likely to continue even after the pandemic ends. That means ghost kitchens will be one of the “new normal” trends to emerge from the coronavirus restrictions. The trend is poised to continue because people like the convenience of having food delivered to them.

In fact, the global market for ghost kitchens is expected to reach $1 trillion by 2030, according to a Euromonitor virtual webinar. And about 75% of restaurant operators consider off-premises dining to be their best growth opportunity, according to the National Restaurant Association.

Regional chains or brands that are struggling financially can partner with ghost kitchen businesses. These businesses share their recipes and business models with the operators to help them be successful. Hospitality companies that open a ghost kitchen can take advantage of a fresh revenue stream while reaching a new customer base.

ADAPTING TO DINING PREFERENCES DURING AND AFTER THE COVID-19 ERA

Food delivery services such as DoorDash gained popularity during the pandemic as they worked to meet the growing demand for food to be delivered to at-home customers. Delivery and digital ordering through apps like Grubhub, Postmates and Uber Eats have grown 300% faster than dine-in traffic since 2014, according to QSR Magazine. Other research shows that restaurants working with a third-party delivery system like DoorDash can increase sales up to 20% on average. Hospitality companies can benefit from this trend. 
 
Operators can run ghost kitchens more cost efficiently than those serving customers in-person. “The beauty of a ghost kitchen is that it allows your operation to run leaner and meaner than ever before,” according to a blog on QSR Automations. “With a ghost kitchen, you can keep your staffing minimal to the cook staff only. There is great value to that both in the immediate future and what’s to come.”

The benefits of a ghost kitchen include:

  • A lower investment cost and lower expenses than brick-and-mortar dining
  • The ability for operators to repurpose their existing kitchens
  • An opportunity for hospitality companies to expand their customer reach 
  • Improved profitability by capitalizing on a growing market

Hospitality companies looking to open a ghost kitchen don’t have to do it alone. Group purchasing organizations (GPOs) can help by offering competitive contracts for everything from food to supplies to expertise.

“The ghost kitchen business model lets operators meet the demand for meal delivery with less space and overhead.”

GHOST KITCHENS CAN BE LOCATED ALMOST ANYWHERE
One benefit for hospitality companies that want to launch a ghost kitchen is that the kitchens be opened pretty much anywhere, from repurposed buildings to former restaurant kitchens to areas reconfigured in businesses like a hotel or casino. 

Ghost kitchens can operate in as little as 200 square feet, according to Provista member REEF, which provides turnkey delivery solutions for the preparation, distribution and expansion of food concepts and offers the Neighborhood Kitchens, or NBRHD Kitchens, brand.

“Today, ghost kitchens are used by food brands of all sizes and cuisines to serve their customers,” according to REEF. “The ghost kitchen trend has also given rise to more sophisticated, restaurant-friendly delivery kitchen models—like REEF’s NBRHD Kitchens.” 

REEF can help Provista members that want to open this type of business. It offers a delivery kitchen model at zero cost or overhead to businesses, and acts as a full-service partner. 

“Unlike ghost kitchens, NBRHD Kitchens are financially and operationally self-sufficient,” according to REEF. “That’s because we manage all of the staffing, site selection and stock management on the restaurant owner’s behalf while maintaining the high quality and consistency standards of our partners.” 

The REEF-exclusive model is built on an international network of proprietary kitchens. REEF has an ecosystem of 4,500 locations with a team of 15,000.
  
LEVERAGE GPO CONTRACTS TO OPEN A GHOST KITCHEN

Hospitality companies interested in opening a virtual kitchen should start by talking to their GPO. They can learn about contracts with suppliers that help accelerate the opening of the kitchen and save money in the process.

For example, Provista supplier US Foods offers an “easy-to-activate” ghost kitchen program. Members benefit by:

  • Needing less than $5,000 in startup costs, on average
  • Being able to open within three weeks, average lead time
  • Achieving an average profit margin of over 35%

The US Foods’ all-in-one solution includes a ghost kitchen playbook, exclusive tools, proprietary technology and expert one-on-one support from food service industry leaders. The program helps companies identify the right concept based on research and current operations, build the brand with digital solutions and support, optimize the menu with food costing tools and chef-driven recipes, and manage the operation.
 
Another Provista supplier, Sysco, offers food, services and support to members. One of the services is Business Solutions, which provides everything from an understanding of profit and loss statements to developing new menus. Another Sysco program, Supplies on the Fly, provides a 24/7 online source for more than 170,000 food service products, including heavy equipment, kitchen supplies and specialty food.
 
By working with a GPO, food service operators have access to everything they need to start and run a successful ghost kitchen business. GPOs can also help members optimize their menus for delivery to ensure food still looks and tastes great when it’s eaten at home.

David Richard Headshot

About the Author

David Richard is the Senior Director of Program and Portfolio Development for Provista Hospitality & Senior Living
 

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