The Rise of Ghost Kitchens: How the US is Adapting to the On-Demand Economy

Currently, in the United States, there are approximately 1,500 ghost kitchens, and they are still increasing. The COVID-19 crisis has caused restaurants to “catch up” with the demand for home delivery, but experts now see the possibility of making permanent changes to business models as dark kitchens gain traction. The pandemic is destroying the traditional restaurant business in restaurants, but the crisis has also provided an opportunity for digital revenue channels to accelerate growth, especially in the case of ghost kitchens. Consumers are busier and more connected than ever, according to Nielsen.

This connectivity has driven double-digit growth in digital shopping habits over the past five years, crystallizing an on-demand economy. Home delivery used to be a differentiating factor, largely only for Chinese and pizza restaurants, but the growing demand for speed and convenience from diners in recent years has forced the adoption of home delivery across the industry. For a long time, Domino's has been a company that prioritizes deliveries, with a small area designed to serve a busy off-site business. But that's not the case with most restaurant concepts, especially independent operators striving to meet the growing demand for home delivery. This is why ghost kitchens, once considered a niche channel, are now hailed by some as a potential lifesaver for restaurants. Madding adds that, until a year or two ago, few people outside coastal cities knew what a ghost kitchen was.

No one was thinking of taking advantage of their existing kitchens. This has become a real estate project and can reduce occupancy rates by 50%, he said. As the ghost kitchen segment grows, so does the number of names for these concepts. Ghost kitchens, virtual kitchens, cloud kitchens and dark kitchens are some of the most popular terms for restaurant concepts that only offer home delivery, and Frederick points out that operators, investors and consumers tend to exchange them. Rikhter agrees that these concepts tend to mix, but he makes a distinction between ghost kitchens and virtual restaurants.

Euromonitor describes virtual restaurants as brands of prepared food that only exist online, without physical locations. On the contrary, the Nextbite portfolio is full of its own virtual brands that don't have shop windows, such as Mother Clucker, Firebelly Wings, Grilled Cheese Society and Outlaw Burger. Nextbite develops these concepts based on data and only with home delivery so that restaurants operate within their existing spaces and in conjunction with their existing menus. All of this underlines the fluid nature of the way brands use ghost kitchen space in general. From Rikhter's perspective, existing brands that take advantage of their kitchen space to create exclusive delivery concepts have the most potential right now, especially in the fast and informal space. Chipotle, for example, has a second production line specifically for delivery orders, giving the company the ability to increase production as those orders increase, Rikhter said.

Wingstop may already be at that point, as the chain has started to stick its toes into the phantom space in the kitchen. In June, the restaurant opened its first ghost kitchen in the U. S. UU.

The Dallas branch is less than 400 square feet, less than a quarter the size of a typical Wingstop unit, and only makes it easy to deliver orders. Madding believes that virtual kitchens have the greatest potential, but adds that this depends on the problem the operator is trying to solve. Any prediction of potential in this area should materialize sooner rather than later, as the COVID-19 pandemic has driven the growth of ghost and virtual kitchens at a new pace. Several high-profile brands, from Wingstop to Brinker International and Cracker Barrel, are experimenting with the model, while the space in general has garnered significant interest from investors. The market has a long way to go to catch up with other markets.

This is not only because home and off-site delivery became a survival tactic, but also because restaurant operators can no longer afford to shy away from innovations or new access points. The Second Measure data was released in September. In August, sales of food delivery services grew 158% year-on-year. What does this acceleration mean for phantom and virtual space in a post-COVID world? Many analysts predict that delivery is difficult consumer behavior, meaning that the ghost kitchen space should have a long growth path.

Madding also anticipates expansion beyond densely populated urban areas and into suburban markets, especially as the delivery adoption rate expands to those regions. In fact, urban markets were severely affected by the pandemic, which has caused a small exodus to the suburbs. Rikhter believes that demand for delivery will force brands to adopt a bifurcated product offering depending on the type of channel they are in - inside or outside facilities - The restaurant industry is already seeing this as Chipotle and Sweetgreen experiment with exclusively digital offerings different from their traditional menus. The recovery of the restaurant labor market remains unstable and is characterized by growing demand for workers and a small talent pool putting pressure on companies to adapt their staffing strategies.

The union's proposals usually focus on specific changes in systems with which workers interact around clock every day including equipment and mobile orders. The concept of ghost kitchen is very simple: customers can buy their favorite dishes and menus through mobile applications and receive them at home without having to travel or spend too much time away from home. For their part restaurants and operators save costs and optimize their resources to supply different geographical areas with different gastronomic offerings. Ghost kitchens which are usually remote spaces rented by existing restaurants to manage home and takeaway orders aren't for everyone but they can open up new sources of income increase profits and gain more market share.

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