Food
6 minute read - Nov 30, 2020

These ghosts are here to stay

Ghost kitchens -- also called virtual kitchens or cloud kitchens – are embracing technology and the new need for food delivery and enticing investors.
Marshall Pierce
Enterprise Partnerships

Picture this. You’re hungry and in the mood to try something new to eat. You’re tired of cooking, and COVID regulations have limited restaurants in your area to only takeout and delivery.

As you scroll through your phone looking for options, a new place catches your eye. In fact, the photos of the entrees look so delicious that you have a hard time making a decision. Finally, you add one to your cart and pay for the order. A short time later, your meal arrives at your door.

The meal tastes as good as it looked online, and you know you’ll be a repeat customer. However, it may take some time for you to realize that “new place” doesn’t really exist as a physical establishment. It’s a ghost kitchen.

What are ghost kitchens, and how are they changing the post-COVID restaurant landscape?

Even before COVID, food delivery apps were growing in popularity. Now, however, as the pandemic continues to reshape the restaurant industry and the demand for delivery swells, brick and mortar locations have become less important. Why spend money on a prime location when all you really need is a kitchen?

There’s no one template for a ghost kitchen. For example, some are entirely new brands, and others are spin-offs of existing restaurants that want to offer new concepts exclusive to delivery apps. Some partner with large delivery marketplaces like Uber Eats and DoorDash, and others manage deliveries themselves. Yet most industry experts agree that ghost kitchens – also called dark, virtual, and cloud kitchens or even headless restaurants – are here to stay. The market research firm Euromonitor estimates that they could be a $1 trillion business by 2030.

Within the next decade, food delivery could account for up to one-third of the $3 trillion people spend on food globally. That number includes about 50% of drive-thru business ($75 billion) and 50% of takeout ($250 billion), according to Euromonitor.

Those kinds of numbers are getting the attention of investors.

Investors are lured by the high return on investments of the virtual restaurant concept. Unlike traditional restaurants, ghost kitchens require no pricey prime real estate location and no big payroll. For example, you can set up a ghost kitchen in a warehouse on the edge of town, and you only need a kitchen, not a fancy dining room.

CloudKitchens, launched by Uber’s former CEO Travis Kalanick, has received funding in the hundreds of millions of dollars, and the company has spent in excess of $130 million over the past two years on real estate for its ghost kitchens, according to the Wall Street Journal.

Ghost kitchens are part restaurant and part tech startup. Yes, good food is critical, but technology is the gateway to customers. Investors have their eyes on software companies that help ghost kitchens manage their orders. For example, Ordermark, just such a software company, recently received a $120 million investment.

The U.K.-based delivery app Deliveroo has invested – to the tune of $1.5 billion by late October 2020 -- in its own cloud kitchen platform, Deliveroo Editions. Virtual Kitchen has raised over $35 million in funding, and Kitchen United reached $40 million in funding by late September 2020.

REEF Technology has more than 100 ghost kitchens, including Nathan’s Famous,  BurgerFi, and Saladworks. The company recently raised $700 million to transform and grow its real estate network of 4,500 garages and parking lots into “neighborhood hubs.”

REEF’s goal is to help restaurants deliver locally and at scale. As part of that plan, the company also launched an initiative to allocate $10,000 in financial support for up to 100 minority- and women-owned establishments.

Kitchen United recently raised $50 million in venture capital funding from GV (formerly called Google Ventures) and the real-estate firms Divco West and RXR.

Kitchen United operates in its home base of Pasadena, California, as well as Chicago, Scottsdale, and Austin, and soon in New York City.

Even the supermarket giant Kroger is getting into the act of ghost kitchens. In an effort to expand into meal delivery, Kroger has partnered with the meal delivery start-up ClusterTruck.

The Kroger ghost kitchens feature a menu of more than 80 meal choices and an average order-to-delivery time of 30 minutes.

The ghost kitchen concept also has captured the attention of national chains such as Papa John’s,Wendy’s, Chick-Fil-A, and Sweetgreen.

Despite this rosy picture, ghost kitchens do present some challenges. Here are four of the most critical ones.

• Since the business is all virtual-based, ghost kitchen operators must diligently manage their online reputation. The use of third-party marketplaces can blur branding.

• Food packaging must be of high-quality to ensure that meals arrive in the best condition.

• Third-party delivery marketplaces must offer excellent service. They can make or break your reputation, no matter how good your food is.

• Speaking of delivery – third-party apps take a portion of your delivery earnings for the convenience of their service. However, delivery is essential to success in today’s food market, and offering in-house delivery means you’ll need to account for wages, vehicle maintenance, gas, and insurance.

Cloud-based technology developed for restaurants is one multi-purpose solution to these challenges.

Ghost kitchens are only as effective as the technology they use, according to Chris Lybeer, chief strategy officer at Revel Systems. Lybeer tells QSR Magazine that Revel offers restaurants tools to manage their ordering platforms, allowing them to streamline operations and stop relying on third-party delivery companies.

“The more vendors there are involved in a transaction, the more points of failure are introduced to the system,” Lybeer says in the QSR interview.

High-quality photography is another essential component of a successful ghost kitchen. Think back to our hungry customer at the beginning of this article. Professional images of the menu items are what caught that person’s attention and ultimately drew them to place an order.

Without a brick and mortar location for diners to visit, ghost restaurants must rely upon a robust, strong marketing strategy in order to establish brand identity.

Beautiful, appetizing photos translate into clicks and orders. Unfortunately, phone cameras do not provide the needed detail and quality. To win over customers, ghost kitchen operators need professionally-taken images taken with state-of-the-art cameras.

And why stop at just photos of a mouth-watering meal? Why not also include pictures of your fresh ingredients, your cooking process, and your insulated packaging? These images will set your virtual kitchen apart from the competition. You’ll find professional photos to be an excellent investment since you can use them, again and again, to market your kitchen on all channels.

For example, if you want to convert these third-party customers to direct customers, you’ll want high-quality images on your website and app to make it easy and, more importantly, appetizing to order.

Example: Chili's focuses on showing high quality images on its online menu

How Snappr can help you get more orders and clicks.

At Snappr, we know you want to spend your time in the kitchen, not chasing down photographers. With our global network of professional photographers, Snappr makes it fast and easy to book a food photography expert. Shoots can be booked anywhere, on-demand, and with as little as two hours’ notice.

Are you ready to get the full benefits that professional photography can bring to your business? Contact Snappr’s Enterprise Team to learn how we can provide professional food photos that bring your ghost restaurant to life.

About the author

Marshall Pierce
Enterprise Partnerships

Marshall Pierce leads partnerships for enterprise Food clients at Snappr. He has helped dozens of major players in the industry with their content strategy. He is available for a no-obligation consultation about your Food photography needs.

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