Technology

For many small restaurants, ghost kitchens fail to deliver

Independent operators have struggled to make the model work, citing marketing challenges and the high cost of delivery.
Kitchen interior
Photograph: Shutterstock

Ghost kitchens are supposed to be an easy, more affordable way for restaurants to grow their business. 

The scaled-down kitchens have no front-of-house and rely mainly on delivery to generate sales. That means less staff, lower overhead, and, ostensibly, more profit. The model has taken off during the pandemic, thanks in large part to the growth of delivery.

But many independent restaurants have found that running a ghost kitchen is not as simple, or lucrative, as it appears. 

Operators told Restaurant Business they struggled with the high cost of delivery, finding and affording labor, and marketing a location that is virtually invisible to the public.

Berg Hospitality, a Houston-based multiconcept operator, shut down its location at a CloudKitchens facility after just six months, despite being the best-selling tenant in the building.

“The economics just didn’t work,” said CEO and founder Ben Berg.

This is an abridged version of Restaurant Business’ in-depth look at ghost kitchens. To get the full story, subscribe to RB+.

It’s unclear how many ghost kitchens have failed. But interviews with restaurants and a look at some of the biggest providers suggest that turnover is common.

“I think the challenge remains that succeeding in off-premise, whether it’s a ghost kitchen or otherwise, is difficult,” said Carl Orsbourn, author of the book “Delivering the Digital Restaurant” and an investor in ghost kitchen company Kitchen United.

The challenges have led some ghost kitchen providers to shift their strategies. They’re narrowing their focus on chains rather than restaurants of all sizes, for instance, and they’re developing locations that are more visible and that promote pickup and even dine-in.

Experts on the space agree that the model is challenging, especially for smaller operators. But they insist that the right restaurant can make it work.

“If you’re an ambitious independent operator with really high-quality food that travels well, the ghost kitchen market could still be a ripe opportunity for you,” said Atul Sood, chief business officer for Kitchen United.

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