Despite the mysterious moniker, the idea behind ghost kitchens is pretty simple.
With scaled-down kitchens, minimal staff and no front-of-house, the model strips the job of opening and operating a restaurant to its most basic elements.
But in some places where ghost kitchens have put down roots, the fast-growing format is raising complicated questions. Local governments are working through how to handle this new take on restaurants, weighing issues like traffic and parking as well as deeper concerns about the business’ impact on local restaurants.
“This is a relatively new, relatively novel business model,” said Chicago Alderman Matt Martin in an interview with Restaurant Business. “There are lots of questions that folks have, be they in the restaurant industry or outside of that.”
Martin’s North Side ward has been home to one of the more intense clashes between a ghost kitchen and the community. Neighbors have been complaining for months about traffic and other problems created by CloudKitchens, a ghost kitchen provider that opened there last summer.
The kitchen houses Chick-fil-A along with a mix of local independents and virtual brands and offers delivery and pickup. It has been operating legally under its license as a shared kitchen operator, according to a spokesperson from Chicago’s department of Business Affairs and Consumer Protection.
But residents of the mostly industrial corridor where it’s located have griped about delivery drivers clogging traffic and driving recklessly, as well as garbage and food smells emanating from the facility. And Martin has heard from some restaurants that they are worried the ghost kitchen could hurt their business.
“It’s definitely something that is on a lot of folks’ radar. Restaurants in the ward have reached out,” he said, though he kept the names of those restaurants confidential.
“If the ghost kitchens are saddled with the same conditions as … a brick and mortar, then I’m all for the competition.” —Kyle Bagley, The Rambler Kitchen + Tap
CloudKitchens, founded by Uber founder Travis Kalanick, has four other locations in Chicago and dozens more across the U.S. None seem to have generated the public outcry this one has.
The company, neighbors and the alderman have been trying to work out the neighbors’ complaints through a series of meetings with the goal of developing what’s called a plan of operations—a set of binding rules that would apply only to that particular location.
The ghost kitchen has agreed to some of the demands that have come out of those meetings, hiring a security team to direct traffic and adding extra garbage cans. But it has not gone along with a suggestion that it prohibit customers from picking up food.
“We've continued to meet our neighbors where they are and accommodate requests when they are reasonable,” said Deidra Suber, an operations executive with CloudKitchens, in a statement. “Restaurants, especially as we've learned during the pandemic, need to be able to offer takeout as an important service. They do all over Chicago, and restaurants based at our CloudKitchens facilities are no different."
Dave Miller, who owns bakery-cafe Baker Miller about one mile from the ghost kitchen, said he is worried about the impact it could have on his business. But he doesn’t agree with the approach the city has taken.
“It’s competition, and no one likes competition,” he said. “But it’s a free market, and I’ve chosen to own a business in a competitive environment. ... I wouldn’t want the government changing the rules on me, and I don’t think they should change the rules for my competitors either.”
“CloudKitchens has actually done a lot of the things that have been asked of them, but [neighbors] keep doing it over and over again to the point I think it’s harassment,” he added.
Others feel that the model itself gives CloudKitchens an unfair advantage over traditional restaurants.
“Our concern lies with the ability of ghost kitchens to pivot from one menu to the next without capital investment and to work under a single license, address and insurance,” said Kyle Bagley, owner of The Rambler Kitchen + Tap. “If the ghost kitchens are saddled with the same conditions as … a brick and mortar, then I’m all for the competition.”
But at least one nearby restaurateur did not even know the CloudKitchens was there. Mark Bires, owner of Jerry’s Sandwiches, said he had no concerns about ghost kitchens and was even thinking of starting one himself, “but time got away from us and now we’re too freaking busy.”
There is one more meeting scheduled, and if an agreement isn’t reached, the issue could be elevated to the mayor’s office or City Council, Martin, the alderman, said.
“I do suspect that, given the amount of attention that’s been given to this issue by folks in the media and elsewhere, that it will continue to be a big topic of conversation, and the content of those conversations may shift into other areas,” he said.
“I’m sure there is an advantage that they are gaining by doing it their way … but it’s not quite the chasm between the two that some might think.” —Miami City Commissioner Ken Russell
In Miami, City Commissioner Ken Russell foresaw similar issues with a company called Reef Technology. Reef, which runs small, delivery-only kitchen units in parking lots, had been operating in its home base of Miami under a food truck license. That meant its outlets had to move to a new parking lot every three days, which was not in keeping with the spirit of the law, Russell said in an interview.
“So I said, let’s amend the code, come into compliance and work together.”
He developed an ordinance governing so-called app-based meal production businesses like Reef. It lays out rules distinct from food trucks and establishes a one-year pilot program that will allow Reef to expand and restaurants to give it a try.
But before unanimously approving the program in April, commissioners wrestled with some of the same issues Chicago is dealing with, particularly Reef’s potential impact on local businesses.
“There’s an argument of how it can hurt the businesses it moves into, and there’s an argument for how it could maybe help the businesses in a neighborhood,” Russell said. “I didn’t have the votes for this for a very long time.”
Most of the pushback, he said, came from the board of directors for the central business district, an area dense with restaurants and retail. Ultimately, the commission decided to prohibit Reef from operating there. The rules also don’t allow walk-up customers.
“It’s not meant to be a food court or a food truck court,” the commissioner said.
Reef’s lower-cost model could give it a leg up on brick-and-mortar restaurants, Russell said. But there is still a variety of permitting and infrastructure it has to pay for to operate legally in Miami’s parking lots.
“I’m sure there is an advantage that they are gaining by doing it their way … but it’s not quite the chasm between the two that some might think,” he said.
Reef welcomed the regulation because it lent some certainty to what had been a somewhat uncertain situation, said Mason Harrison, the company’s head of communications.
“What we always want is to work with cities to kind of understand the current framework … and to proactively collaborate with them to find the best path forward,” he said.
Miami’s proactive approach was “exceptional,” Harrison said, acknowledging that Reef has faced resistance elsewhere. In the most extreme example, the mayor of Marietta, Ga., in January vetoed Reef’s request to open a unit in a Chevron parking lot.
Mayor Steve Tumlin said he was concerned that customers would be unaware that their food was “made in a gas station” and not an actual restaurant, according to the Atlanta Journal-Constitution. (The food would have been prepared in Reef’s unit in the parking lot, not in the gas station itself.)
“Elected officials haven’t had enough familiarity with the industry, and, look, to their credit, it’s really new,” Harrison said. “[Marietta] is an extreme anomaly. I honestly think that is probably the only jurisdiction that has just outright denied our ability to operate in all of North America.”
Tumlin did not respond to requests for comment.
“Largely, cities are really excited when they find out that we’re operating because we do provide this platform for local brands.” —Mason Harrison, Reef
As for the company’s impact on local restaurants, Russell said that if the pilot is managed correctly, Reef could help level the playing field for them by offering a low-cost way to grow in Miami and beyond. The ordinance doesn’t mandate the type of restaurants Reef can work with, but Russell said a benchmark for local vs. national brands “may be something we lean toward.”
About half of Reef’s partners in Miami are local, Harrison said.
“We’re trying to make it more possible for [mom and pops] to grow, something that the big players, the big enterprise brands have always been able to do because of their balance sheet,” he said.
About 20% of Reef’s 200 kitchens nationwide operate its own in-house brands, and the rest are a mix of chains and independents. Harrison could not provide a breakdown of the number of indies vs. chains, saying it differs from city to city.
“Largely, cities are really excited when they find out that we’re operating because we do provide this platform for local brands,” he said.
So what will success look like for Miami’s Reef pilot? Russell said if it is not a traffic and trash nightmare and that local businesses benefit from the system, it will be a winner. The bottom line, he said, is that Reef has to be a good neighbor.
“That’s the big thing,” he said. “That they are a good neighbor to residents and businesses alike.”