Aiming to maximize internet ordering, ghost kitchens
Restaurants’ off-premise capabilities are under additional pressure due to restrictions on in-store eating brought on by the coronavirus (COVID-19) outbreak, which is intensifying the already growing emphasis on takeaway and delivery.
In recent years, off-premise commerce has grown significantly in the restaurant industry. The National Restaurant Association reports that as many as 80% of foodservice companies stated that it was a key area of focus in 2019.
Certain corporations have expanded their product offerings to meet evolving consumer demands. Others are welcoming “ghost kitchens,” which are businesses that focus mostly on deliveries but don’t have physical locations.
Ghost Kitchen developers stated that their tech-enabled business strategy offers a low-cost, efficient way to scale up and optimize delivery. For firms wishing to enter new markets, storefront-free kitchens reduce entrance costs by requiring less space and manpower.
They might also increase the effectiveness of operations at conventional brick and mortar establishments.
Some restaurants are utilizing as many as eight or more order management systems, according to Alex Frederick, senior analyst for emerging technology at PitchBook, a data and research organization. “The proliferation of food delivery apps has created a chaotic environment,” Frederick stated. “Ghost kitchens can help separate delivery operations, allowing virtual restaurants housed within ghost kitchens to optimize the delivery side while brick-and-mortar restaurants can concentrate on the dining experience.”
Another benefit is shorter wait times.
“Chefs require cooking areas that are nearer to customer destinations,” stated Jim Collins, the CEO of Kitchen United, a company that develops ghost kitchens, in a cameo on Final Round. “The most crucial factor affecting consumers is how soon they can get their food.'” If a customer knows they would receive their food faster, they will choose a restaurant that is closer, even if they know the food is inferior.
Kitchen United has launched locations in busy commercial districts in an effort to reduce wait times. Others work in cheap real estate industrial zones. Trailers and shipping containers are used by Miami-based REEF Technology to construct mobile pods that can be shifted to locations with the greatest demand.
Ghost kitchens differ in terms of their design and the commercial services they provide to customers. For instance, Kitchen United centralizes front- and back-of-house operations so that eateries may concentrate on preparing cuisine.
As major chains and investors catch on
Since off-premise business accounts for a growing share of restaurant revenues, investment activity in the industry has increased. According to PitchBook, the total amount invested in ghost kitchen developers increased to $1.9 billion in 2019 from roughly $500 million in 2018.
Recent high-profile transactions include the $15 million Series A round of Virtual Kitchens, located in San Francisco, and the $40 million Series B round of Kitchen United, spearheaded by GV, the venture arm of Google parent Alphabet Inc. In March 2019, the biggest transaction for a ghost kitchen developer to date, for $900 million, was signed by REEF Technology.
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Although local eateries have been the primary focus of industry leaders in this area to expand their delivery reach, national chains have also begun to investigate the idea.
Last year, The Wendy’s Company started experimenting with kitchens focused on deliveries. The strategy will be used in high-delivery areas and locations without a physical store, according to Abigail Pringle, Wendy’s chief development officer and international president.
Using shared commercial kitchens, Kitchen United has worked with chains like Chick-fil-A, Sweetgreen, and The Halal Guys to offer delivery services. Late last year, McDonald’s opened its first delivery-only restaurant in London. Along with Bloomin’ Brands, the parent company of Outback Steakhouse, Inspire Brands, the business that owns Arby’s, Buffalo Wild Wings, Sonic, and Jimmy John’s, is experimenting with independent kitchens.
The wider image
Restaurants that have collaborated with ghost kitchen firms might be more equipped to handle COVID-19 disruptions.
Restrictions on dine-in services have resulted in an increase in orders at Chick-fil-A’s three test ghost kitchens located in Hollywood, Redwood City, California, and Chicago.
In order to execute more business through delivery, ghost kitchens have been “instrumental,” according to Luke Pipkin, principal program lead for innovation at Chick-fil-A. Additionally, the facilities are supplying the corporation with data that it will utilize to further streamline operations in the future.
According to PitchBook, the ghost kitchen industry is still in its infancy and will probably have little effect on restaurants’ capacity to meet demand during the pandemic.
After the outbreak has been contained, the effects can become more significant. According to The NPD Group, takeout and delivery made up almost half of all restaurant spending in the previous year. In the second half of 2020 and beyond, ghost kitchens are expected to become a key focus for restaurants, and the current crisis may serve as a stimulus for deeper penetration.
“If customers’ preferences for food delivery continue after the crisis is resolved, ghost kitchens may benefit greatly as eateries look for more resilient delivery systems,” Mr. Frederick stated.