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How to Start a Ghost Kitchen Style Delivery Restaurant

Ghost Kitchen

It's the golden age of restaurant delivery in America. Delivery services like GrubHub and DoorDash have grown 300% compared to dine-in restaurants in the last five years.

And now, with the coronavirus pandemic keeping us all apart, delivery is more than just a convenient service. It's a way for restaurants to stay in business. Or, in the case of new restaurants, a way to start a business even when people aren't dining in.

Ghost kitchens are one of the ways that restaurants are adapting during the pandemic. What is a ghost kitchen, and how do you start one? Keep reading to find out more.

What is a Ghost Kitchen?

While a ghost kitchen and a virtual restaurant are often used interchangeably, they're two very different concepts.

A virtual restaurant is a delivery-only brand, sold exclusively online through delivery apps. A ghost kitchen, on the other hand, is the facility that makes virtual restaurants possible. Rather than having any dine-in facilities, a ghost kitchen solely provides the facilities to produce food for virtual restaurant orders. Customers order in advance and have their food delivered through a delivery service.

Attractiveness of the Ghost Kitchen Concept

During the coronavirus pandemic, the ghost kitchen is a highly attractive concept for many business owners.

They were gaining popularity before the pandemic. Essentially, using ghost kitchens was a bet that the future of the food industry rests with delivery. Restaurants lose money on delivery apps, so ghost kitchens attempt to create a more sustainable model.

The business model is simple. In an outsourced facility model, you rent kitchen facilities from a landlord, typically sharing facilities with anywhere from two to a dozen restaurants. The landlord provides all the kitchen implements for restaurants to work. Imagine a warehouse full of stations that look like restaurant kitchens and you've got the right idea.

That said, not all restaurants want to rent a space, especially if they already have a restaurant kitchen. So, many restaurants are now running ghost kitchens out of their own kitchens, in that there are no sit-down customers and the staff only works to fulfill delivery orders. If the restaurant runs multiple brands, they can run them out of the same restaurant. Alternately, some restaurants may be willing to create a shared kitchen with another brand so both sides can save on operating expenses.

Setting Up Your Ghost Kitchen

As you can see, the model is highly attractive in a time when everyone relies on delivery. But it's not quite as simple as opening a brand.

On one hand, you don't need to worry about many typical restaurant concerns, like purchasing new restaurant chairs. On the other hand, you have to create a complete restaurant experience without the sit-down aspect. In other words, you need to recreate what makes a restaurant memorable and successful without ever seeing your customers directly.

There are a few key strategies that make this easier.

Develop the Right Menu Pricing Strategy

The first step is creating a successful menu pricing strategy.

Because customers only engage with your website, not your storefront, pricing shouldn't be a deterrent. At the same time, pricing has to account for the cost of third-party delivery commissions and similar operating costs. It will also account for things like packaging, which is a critical branding tool when the customer's most tangible interactions are with the packaging and the food.

You can keep packaging simple at first, but as your ghost kitchen gains traction, you may want to pay for better packaging to ensure food quality. Always keep an eye on your pricing, though--you don't want to price yourself out, but you don't want to price your customers out either.

Don't Forget Labor and Operating Costs

A customer doesn't experience the in-person elements of a ghost kitchen, but your labor and operating costs are critical to ensuring a profitable business model.

Whether you have a new business, a new concept at an old location, or a shared restaurant facility, you have to account for rent. It is cheaper to start a ghost kitchen than an outright brick-and-mortar, but keep in mind that your sales come entirely from delivery.

You'll also have to account for the labor that makes the restaurant possible. In a ghost kitchen, that's tied to managing hours. You'll likely see a breakfast, lunch, and dinner rush, but there's no reason to have staff sitting around between them. Instead, staff should work on other elements to support the restaurant, especially marketing.

Make a Marketing Plan

With that in mind, we come to the most important step of all: make a marketing plan. If you don't have a plan, you'll struggle to promote your online presence successfully.

Many restaurants mistakenly believe this will all be managed through a third-party delivery service, but you will need to continue your traditional digital marketing efforts. In fact, opening a ghost kitchen requires you to double down on marketing, since your customers won't wander in and decide to sit down.

Think of it this way: customers won't know about your restaurant or what you're doing until you tell them. Your job is to tell them.

This means a variety of digital marketing tactics, ranging from search engine optimization to social media marketing. Your website is your digital storefront--make use of it. You should aim to develop an established following you can then leverage and engage.

Adapting Your Restaurant to the Times

We know these are challenging times for everyone. But that doesn't mean it's a bad time to be in the food industry or start a new business. If anything, now is the time to get creative, find inventive ways to solve problems, and deliver a business (and a meal) that people enjoy. A ghost kitchen is one way to adapt to the times.

Need more tips to take your restaurant through thick and thin? Check out our posts for more great tips to help your ghost kitchen thrive, like these top 10 POS systems restaurants should use.

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