Ghost kitchens need to go omnichannel if they want to survive, experts say
Segment players may need brand awareness and expanded access points to thrive after a year of dashed expansion plans, closures, and high-profile regulatory infractions.
Ghost kitchens, delivery-only restaurants, gained popularity in 2020 and 2021 with significant company funding. However, issues such as low unit volumes, operational difficulties, and permitting problems have arisen, causing some experts to question the model’s efficacy.
Major restaurant chains and platform providers have slowed their investment in ghost kitchens. After two months of operation, Chili’s closed its delivery-only unit, and Reef Technology saw Wendy’s cut its projected unit openings by more than 500. Meanwhile, Butler, a company that combined hotel food service with ghost kitchens, shut down suddenly, leaving hotels and vendors without food service or payment. Cloud Kitchens faced a mass exit of restaurant partners, leading to corporate layoffs; while C3 closed its Miami food hall, Wondered abandoned its initial van-based ghost kitchen model.
Despite these setbacks, the future of ghost kitchens may still be successful as long as companies are equipped to face the ongoing challenges. One of the main problems is driving sales, as executives at restaurants that once tried ghost kitchens, such as Fat Brands, are now hesitant due to the low sales generated. CEO of Fat Brands, Andrew Wiederhorn, said delivery volume is insufficient to make ghost kitchens viable in the Quick Service Restaurant (QSR) segment.
However, Atul Sood, the chief business officer at Kitchen United, believes that ghost kitchens that focus on various channels, such as catering and takeout, and delivery, tend to perform better. He also emphasized the importance of pickup in the ghost kitchen model and believes that adding catering and takeout options will be crucial for ghost kitchens to succeed.
In contrast, the CEO of Franklin Junction, Rishi Nigam, believes that the delivery-only ghost kitchen model is not well adapted to the American market, where consumers prefer drive-thru and takeout and where delivery is less competitive compared to countries such as South Korea and the United Arab Emirates.
In conclusion, the future of ghost kitchens is uncertain, with some experts questioning their efficacy due to low sales and operational difficulties. However, companies that adopt an omnichannel approach, offering pickup, catering, and takeout alongside delivery, may have a better chance of success.
The article is “Ghost kitchens need to go omnichannel if they want to survive, experts say.”