Maker Kitchens must have missed the memo that ghost kitchens are dead.
The Los Angeles-based kitchen provider has been around for 10 years and today has 14 locations, mainly on the West Coast. It is in many ways a “true” ghost kitchen, with large facilities carved up into small kitchens that restaurants can use to produce and sell food for delivery only.
While a number of other larger ghost kitchen companies have come and gone during Maker’s lifetime—Kitchen United and Reef Kitchens among them—Maker has chugged quietly along, opening about one new facility a year and building a solid base of tenants, some of whom have been with Maker since the beginning.
And the company is still growing, with a process underway to acquire ChefSuite, a two-unit ghost kitchen outfit based in Maryland. That deal will bring Maker to two new markets, Austin, Texas, and Richmond, Virginia.
Ironically, Maker did not start out as a ghost kitchen company, and that seems to have had a lot to do with its longevity.
When co-founder Yossi Reinstein and his business partner opened the first Maker location, in a dusty, industrial section of East Los Angeles in 2015, they were focused on leasing secure kitchen space to caterers. But they soon realized there were many other uses for rentable kitchens. They began getting inquiries from makers of granola, peanut butter and other small-batch goods (hence the name Maker Kitchens). So they expanded their horizons and, after some back and forth with local regulators on permitting for this unusual new business model, they started opening more locations, alternating between Los Angeles and San Diego.
At that time, before the advent of Uber Eats and Postmates, they weren’t really thinking about restaurant delivery. That changed in mid-2019, when they started getting questions from restaurants wondering if Maker was a ghost kitchen.
“We didn’t know what we were or what we should be answering to those questions,” Reinstein said, but they decided to look into it. They visited some locations of CloudKitchens, the large ghost kitchen provider that started in LA shortly after Maker, and learned that Maker had pretty much all of the elements needed to support restaurant delivery.
It was good timing. A year later, the pandemic drove a surge of demand for restaurant delivery and gave rise to a number of ghost kitchen competitors.
Today, about 35% of Maker’s tenants are restaurants. The rest run the gamut. More than a dozen pet food companies rent kitchens with Maker; Lenny & Larry’s, the vegan cookie company, uses a space in Maker’s Columbus, Ohio, facility as an R&D lab.
“We came at this from an approach of, we’re building clean, bulletproof kitchens for anyone,” Reinstein said.
The mix of clients has helped shield Maker from some of the challenges associated with food delivery. As many ghost kitchen operators have learned, driving sales without a storefront, dining room or front counter can be difficult, even though such an operation is less costly than a brick-and-mortar.
Some ghost kitchen providers have responded to those challenges by adding dining rooms and counter service and rebranding as “digital food halls” to bring in foot traffic. But Maker has remained largely no-frills.
“This is like an apartment building with no doorman,” Reinstein said. In most locations, the most Maker will do is put some picnic tables out front.
That has helped Maker keep costs down. It provides only the most basic services for tenants, which allows it to keep its prices reasonable. At Maker, there are no food runners or front-of-house staff: Restaurants are responsible for handing off meals to delivery drivers, who scan a QR code to let the restaurant know they’ve arrived. Nor does Maker have an in-house software system, but it will help connect tenants to providers such as Toast and Otter, sometimes at a special group rate.
It’s like the Southwest Airlines to CloudKitchens’ Emirates, Reinstein said. And it has allowed Maker to charge rent that is 50% to 60% of CloudKitchens’ typical rate. The average, 300-square-foot Maker kitchen costs $2,500 a month, with no hidden or additional fees or revenue sharing, he said.
As a result, Maker’s customer churn rate has remained low. At its first location, where there are 18 units, seven or eight are still occupied by the same businesses, Reinstein said. “If you set rates at an affordable price point, then people will do OK and they’ll stay,” he said.
That said, the company has made at least one change to adapt to the realities of restaurant delivery. While early locations tended to be off the beaten path, Maker now looks for denser areas with foot traffic and higher-income residents, such as its outlet on a prime corner in Midtown Sacramento.
The biggest obstacle to Maker’s growth lately has been developing new locations. Sky-high interest rates, construction costs and material prices have made building kitchens difficult. It hasn’t built anything in 18 months, but it wants to keep growing. “So what do we do next, if it's not buying a bunch of steel and wood and hoods?” Reinstein said.
Then the opportunity to acquire ChefSuite came along. The company, riding high after a successful seed funding round, initially approached Maker last year about taking over its operations and rebranding its locations as ChefSuites. It was aiming to raise more money and felt a larger footprint would help attract investors.
Negotiations dragged on, and then about six months ago, ChefSuite came back with a new proposal. “They said, ‘Our burn is so high and we’re having trouble raising more money and we need to think of a contingency plan,’” Reinstein said. “And one idea is that you acquire us.”
To Maker, it made a lot of sense. ChefSuite had locations already built and permitted, allowing Maker to expand without taking on development costs. It expects the deal to be done this week.
“It's these great buildings that were built beautifully,” Reinstein said of the ChefSuite locations. “We're going to try to fill them up and make them thrive again.”