There is a new concept in the food-service industry and it’s called the “ghost restaurant.” Because there has been a recent surge in consumer preference for off-premise eating – eating at home or at the office and not in a restaurant – restaurants have started to accommodate this trend by redesigning the traditional sit-down concept to create “ghost” restaurants that focus exclusively on takeout and/or delivery. If you want to learn more about what ghost restaurants are and how they work, keep reading.
Virtual vs. Physical
If you’re attuned to restaurant trends, you may have heard of ghost restaurants. These new types of food-service establishments are increasing in popularity as more and more restaurateurs decide to depart from traditional brick-and-mortar establishments and focus on delivery instead.
The food-service industry is booming in the United States and with growth comes innovation. “Ghost” restaurants are an invention that is on the rise not only in the United States, but also north of the border in Canada, as well as in Australia and Europe. With ghost restaurants there is no direct interaction between the customer and the restaurateur – food is ordered via a third-party food-delivery company, usually via an app or through a website. In this day and age of smartphones, and their widespread use, it makes sense that virtual eateries, which skip the storefront and bring food straight to consumers by delivery, will have a big impact on the way we dine out (or dine in, as the case may be).
What Ghost Restaurants Can Do
In “Growth of ‘Ghost’ Restaurant Concepts Proves Delivery-Only Trend Has Legs,” Forbes talks about the future of virtual restaurants and why it’s looking bright. With the minimum wage rising and rents skyrocketing, restaurants have no choice but to look for ways to reduce operating costs and keep labor expenses under control. By eliminating the dining room and bringing meals straight to the consumer, ghost restaurants can often sell more meals per hour and use less real estate than a traditional restaurant.
The ghost restaurant has many benefits for business owners – the prime advantage being lower overheads. Ghost restaurants don’t require expensive rents, wait staff, or tables for customers – all that’s required is a space with industrial kitchen equipment, along with chefs preparing food. Fixed costs are considerably lower in a ghost restaurant, and the model allows brands to adapt more easily to new dining trends and shifting consumer preferences. The front-of-the- house is an expensive use of space, especially as wages and rents increase. For larger chains, with existing restaurant locations, having a ghost restaurant in addition, can ensure that the quality of their in-house dining experience is not impacted or disrupted by the delivery process.
In cities across the United States, many diners opt to open a delivery app on their phone rather than rummage through drawers for standard paper delivery menus. The delivery-only model takes this concept one step further, and it is proving to be successful with companies such as Seamless/GrubHub leading the way. Food delivery companies are an important component of the ghost restaurant model, and other companies, such as UberEats, Foodora, and Doordash are building market share and allowing restaurants to expand their reach and profits without significant marketing expenses (aside from the charge the restaurant pays to these third-party food delivery companies).
Advantages of Being a Ghost
Think about all the expensive elements that won’t apply if you open a virtual restaurant: furniture, lighting, signage, dinnerware, air-conditioning, ware-washing equipment, and more, as well as wait staff to serve as servers or hosts. If you choose to open a virtual restaurant, you can forgo all those costs and even be more creative than you could be with a traditional establishment. Ghost restaurants are the perfect opportunity to experiment with new food menus and concepts, because you can easily scrap ideas that aren’t working and come up with new ones.
Since your investment in a ghost restaurant would need to be much smaller than that which is required in opening a brick-and-mortar eatery, the kitchen would be where most of your investment goes. Because you don’t have to allow square footage for a dining area, you have more room to customize your kitchen space. You can even own multiple ghost restaurants and operate them all out of the same kitchen. Especially if your menus have ingredients that overlap, you can prepare food for two separate concepts in one efficient space.
Partner with Food Delivery Apps
Many ghost restaurateurs opt to partner with take-out apps to attract customers. If you become a featured restaurant on one of these apps, you can gain exposure to customers who have the immediate intention of ordering. These apps arrange to pick up customers’ food when it is ready, and deliver it to them, so all you need to worry about is preparing orders for delivery. If you choose not to partner with an app, aim to have a strong online presence, as otherwise, you could suffer from being out of sight and out of mind.
What is a Commissary Kitchen?
For restaurateurs who don’t have the money to own or lease a customized kitchen space, working with a commissary kitchen is a great alternative. As explained on the Quora website, a commissary kitchen is a complete kitchen space that is available for rent. Commissary kitchens are usually shared, though some ghost restaurateurs prefer to rent private commissaries. In either case, a commissary kitchen will usually provide ample cooking space, including counter space, industrial-size ovens, freezers and cooktops, and storage, as well as trash removal and recycling services.
The Green Summit Group: A Thriving Ghost Restaurant Concept
The Green Summit Group, which operates out of central commissaries in midtown Manhattan, Brooklyn, and Chicago, is a thriving operation that provides food preparation services for a number of ghost restaurants. The Green Summit commissary consists of a bustling kitchen and a steady stream of drivers picking up “branded” meals – food that is associated with well-known restaurants – for a clientele who may or may not know that their favorite restaurants share the same address, chefs, and owner. “I don’t really think anybody cares,” says Green Summit co-founder and CEO Peter Schatzberg. “They just want really high-quality food.”
Schatzberg says that fast food chains have to dedicate 75% of their space to seating, although 90% of their customers just grab and go. By comparison, a company like Green Summit can open inside a kitchen with a few hundred square feet of space and operate a food-service business with a minimal footprint. At the same time, the restaurants that are represented by Green Summit do not have to devote square footage to customer seating and waiting areas. The Green Summit business model works thanks to the company’s reliance on external food-ordering platforms. In New York, for instance, a person ordering from Green Summit’s restaurants has to order through Seamless/GrubHub.
In the Green Summit kitchen, says Schatzberg, “There’s an area with a grill, people working and portioning, and a room adjacent to the kitchen where orders are assembled. They’re all made to order, and stations are set up by category.” He goes on to explain that because Green Summit prepares food for different restaurants and brands, all the ingredients across the various brands are in the same areas; however, Green Summit offers specialization, as staff prepares food according to the recipes and menus of specific restaurants. Similar or identical menu items inevitably do show up across many of Green Summit’s virtual storefronts, and this serves to boost efficiency. “There’s a lot of cross-utilization because at some point the universe of ingredients becomes finite,” Schatzberg says.
Good Uncle: Another Ghost Restaurant Doing Good Business
Good Uncle is a startup that test-marketed in upstate New York with deliveries to students at Syracuse University dorms. Founded by Wiley Cerilli and Matt Doumar, the company, similar to Green Summit, has one central kitchen that dispenses food for a number of brands and restaurants. “I think the bulk of restaurants will not have storefronts ten years from now,” Cerilli says. “Because, why would you? The technology exists where you don’t need the hassle.”
Because getting great food delivered to you is challenging outside of major cities like New York, Good Uncle’s goal is to cook and sell items from great restaurants and bring it to smaller cities that lack easy access to top-level food. To order food from Good Uncle, users use an app, which may, for instance, show a video of a chef in a trendy Brooklyn neighborhood making the burgers that are on the menu, or present stories about the history of the area where the restaurant is based. However, the food doesn’t get delivered by that restaurant; instead, it is prepared in Good Uncle’s kitchens, after the chefs have spent a lot of time with each restaurant learning the recipe.
Good Uncle doesn’t work with huge, national chains; rather their goal, says Cerilli is to “bring the insider story of niche restaurants to new markets.” Cerilli says Good Uncle’s cooks use the exact same ingredients as the restaurants they license menu items from and train with those outlets’ cooks so dishes can be replicated as precisely as possible.
Even Ghosts Have Problems
A recent study estimates that roughly 17% of all restaurants fail in their first year of operations, and ghost restaurants will face some of the same challenges that brick-and-mortar eateries do. While delivery-only establishments might have lower overheads than conventional restaurants, they miss out on the cash infusion that alcoholic beverage purchases and walk-in traffic provides.
No restaurant will be in business long if it fails to deliver the single most important ingredient of all: the food itself. Good Uncle has the constant challenge of recreating the exact flavor of existing dishes far away from the restaurants they originated in. Similarly, Green Summit’s approach of always trying new concepts has had its share of flops, as well. These false starts require renewed efforts, as well as the time needed to learn new recipes and techniques.
As promising as they seem to be, ghost restaurants probably won’t damage the traditional restaurant industry, although they could make a serious dent. Delicious food, combined with a beautiful setting and good service, will always draw friends and families together, looking for a wonderful night out. However, for a restaurateur who is looking to dive into the industry but who is unsure about investing in a storefront, opening a ghost restaurant could be a great option. These virtual restaurants, which cater to busy, young customers who like customization and instant gratification, provide both owners and customers with the flexibility that isn’t generally found in traditional establishments.