While dine-in restaurants continue to suffer from the ongoing pandemic, ghost kitchens are booming. These kitchens, often known as dark, delivery, or shadow kitchens, are delivery-only restaurants that serve third-party delivery app services such as DoorDash, GrubHub, and Uber Eats.
Ghost kitchens and delivery services were already on a steep growth trajectory before COVID-19, and the virus has accelerated the growth of, according to report published in Cushman & Wakefield’s Edge magazine.
“The pandemic has had a significantly positive impact for ghost kitchens,” Cushman & Wakefield said. “The logic is simple; delivery demand equals potential ghost kitchen demand. And prior to the pandemic, delivery demand was already soaring.”
Prior to COVID, ghost kitchens appealed to restauranteurs because it gave them the opportunity to produce food without all the real estate and labor costs associated with restaurants. For restauranteurs that primarily serve clients via delivery and takeout, they have no need for servers nor do they need dining space, which improves margins in a skinny margin business.
Delivery services offer convenience to consumers who don’t want to leave their homes to enjoy their favorite foods. The growth has been significant enough that the investment community has noticed: CB Insights reported that ghost kitchen funding in 2019 had grown at 12.5 times the rate of the previous year to more than $520 million.
Over the past 18 months, a number of independent ghost kitchens have rolled out, joining CloudKitchens, DoorDash Kitchens, Epic Kitchens, Ghost Kitchens USA, GrubHub, Kitchen United, REEF Kitchens, Salted, Uber Eats, and Virtual Kitchen Co.
Kitchen United has plans to open as many as 400 locations over the next few years. Meanwhile, CloudKitchens, which is led by Uber founder Travis Kalanick, raised more than $400 million in funding and has plans to open more than 100 virtual kitchens across the nation by 2021.
Almost overnight, the competitive landscape for ghost kitchens has moved from being “wide open to incredibly crowded,” according to Cushman & Wakefield. As the U.S. went into pandemic lockdown, most restaurants transformed into ghost kitchens, offering delivery and takeout exclusively.
This has allowed restaurants to continue to operate and serve customers even if their dining rooms are closed. In short, it has prevented many restaurants from closing their doors permanently.
In the long-term, however, traditional restaurants won’t be able to exist solely as ghost kitchens. Even if they wanted to transition to a delivery-only model, they already occupy more space than a ghost kitchen needs, and they’re locked into a lease for that space.
Cushman & Wakefield predicts that ghost kitchens will end up being a major rebuilding method for the restaurant industry. These concepts have a low barrier to entry because in most cases they can be opened for about a tenth of the cost of opening a standalone restaurant.
“We have always believed that the ghost kitchen model should have a seat at the table, but that it would not become the entire table,” the firm said.
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