Should Restaurants Still Believe in Ghost Kitchens?
Headed into 2023, the future of virtual kitchens is becoming more of a fact than an apparition.
Sam Nazarian, founder and CEO of C3, started virtual kitchens in 2019 because “We saw an opportunity to bring added revenue to underutilized restaurant kitchens and real estate space.” He describes his goal as “reimagining the food service industry.”
The pandemic has accelerated the rise of ghost and virtual kitchens in the restaurant industry. These central facilities fulfill takeout and delivery orders and allow entrepreneurs to open a restaurant at a fraction of the cost of building a stand-alone location. Companies like Kitchen United and REEF Kitchens have flourished and expanded rapidly. However, not all virtual kitchen companies have succeeded, with some shutting down due to financial difficulties.
Experts say that the growth of virtual and ghost kitchens has stabilized since the pandemic has settled chiefly, and customers are venturing back inside restaurants. However, many ghost kitchen organizations have garnered considerable financial investors and continue to grow despite the dine-in boom.
Lee Schulman, president of Panacea Management Group Consulting, a restaurant advisory firm, states that the pandemic fostered the growth of virtual and ghost kitchens by allowing independent operators to reach customers who couldn’t or wouldn’t dine out. He called it a “feeding frenzy” because growth was so rapid.
Since the pandemic ebbed, Schulman says there has been a “reset” with people wanting to dine in with their friends and family. He adds that many startup restaurateurs “aren’t ready to go brick-and-mortar; they don’t have the reputation or financial backing. But you can get your feet into the water [with ghost kitchens] at minimal cost and discover ways to see if the consumer demand or desire is there. It offers exposure.”
However, only a minority of ghost kitchens evolve into full-steam retail storefronts, with Schulman estimating only about 20-30% move into stand-alone eateries. Some turn into brick-and-mortar locations, such as Citizens at Hudson Yards in New York City and Burger Dandy in Franklin, Tennessee.
Many ghost kitchens specialize in a limited number of menu items due to their tight kitchen layouts and cross-utilization of ingredients. Established brands have also opened ghost kitchens to cheaply extend their reach in a neighborhood.
Schulman believes that “hospitality is still a touchy/feely business, and restaurants are here to stay. There’s a social aspect to dining out; many people want to go somewhere else and not have everything delivered to their door.”
However, Michael Montagano, the CEO of Kitchen United, sees a bifurcation that could exist in tandem. “I don’t think going out to dinner and ordering in are mutually exclusive,” he says. He believes that ghost kitchens will continue to play a role in the industry, but it’s unclear to what extent.
The original article is “Should Restaurants Still Believe in Ghost Kitchens?“