You May Not See Them, But Ghost Kitchens are Here to Stay Ghost kitchens were just beginning to grow in popularity prior to the COVID-19 pandemic. However, social distancing measures and increased demand for food delivery have accelerated the trend

By Shiv Sundar

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For years, the restaurant industry has been rapidly transitioning to an omnichannel business model. The popularity of delivery apps such as Caviar, UberEats and DoorDash have spurred a growing delivery channel. Last year, US-based consumers spent roughly $10.2 billion on delivery service, up 48 per cent from the previous year. As more restaurants embrace delivery models to meet changes in the market, restaurant operators are turning to ghost kitchens to keep pace with growing demand for delivery.

What is a ghost kitchen?

You may have walked past a ghost kitchen without even knowing it. Housed in nondescript buildings, ghost kitchens operate with no wait staff or guests. They forego the decor and aesthetics of traditional restaurant spaces. Instead, these brick-and-mortar concepts offer traditional restaurants a secondary location to fulfil delivery orders without overwhelming their kitchen staff.

Instead of couples and families coming and going, ghost kitchens more closely resemble pit stops for delivery drivers. To keep pace with delivery orders, ghost kitchens rely on mobile technology to maintain efficiency. Consumers place orders online, which are received via tablets in ghost kitchens, while kiosks and interactive digital signage are used to display order status to delivery drivers.

Ghost kitchens were just beginning to grow in popularity prior to the COVID-19 pandemic. However, social distancing measures and increased demand for food delivery have accelerated the trend. Even large corporations are invested in the new delivery model. Earlier this year, Chipotle announced that it would open delivery kitchens to prepare and package meals exclusively for digital-first customers.

Why ghost kitchens? And, why now?

The intersection of delivery apps and the gig economy has created an opportunity that goes beyond traditional delivery models. Competitive delivery platforms have recruited restaurants to grow their business by offering their menus online.

As more restaurants participate in online ordering services, growing demand has overwhelmed many kitchens. Restaurants of all sizes need to invest in mobile technologies to centrally display customer orders from multiple ordering apps, communicate with delivery personnel in the lobby, and seamlessly update daily menus across multiple platforms.

During the COVID-19 pandemic, ghost kitchens have helped meet surging demand while limiting risk for customers and restaurant staff. Even as restaurants in some cities across the US reopen to partial capacity, the demand for online ordering has remained steady. Fast Casual found that during the pandemic, 92 per cent of restaurant traffic is now off-premise. Online ordering and delivery have grown 7 per cent from its pre-COVID-19 volume, with 51 per cent of consumers having downloaded at least one new food delivery app since the start of the pandemic. In a survey of consumers, BlueDot found that 53 per cent of consumers are downloading and using more apps to reduce interaction and contact with on-site staff.

Ghost kitchens deliver convenience & flexibility to customers

In addition to public health benefits during the pandemic, ghost kitchens allow restaurants to meet rapidly evolving customer expectations. Even before COVID-19 guidelines went into effect, customers wanted greater control over how and when they could eat. Rather than waiting in long lines or ordering from limited menu items, ghost kitchens and delivery apps give more control to customers.

Some of the most successful companies that have adopted ghost kitchen models have taken a customer-obsessed approach. These restaurants make it simple for customers to order directly from their menu, while also giving the option to customize their order according to individual preference, health-conscious lifestyle or special diets. When combined with the comforts of in-home dining, customers are able to create the experience they prefer with little-to-no-friction.

Are ghost kitchens here to stay?

The short answer is yes. Delivery service was growing exponentially in the years prior to the pandemic. In 2019, many restaurants were exploring and investing in the space. Many restaurants and even fine dining establishments have transitioned to delivery channels. When businesses reopen there will be continued demand for delivery options. Ghost kitchens can help fill this demand gap while ensuring restaurants aren't overwhelmed.

And, while there are obvious benefits as we navigate dining in the interim, the benefits of ghost kitchens extend beyond the pandemic. The shift toward ghost kitchens also has several lessons for restaurant operators and food service industry vendors:

Delivery-first customer behavior is likely to stay here

If and when viral spread is controlled, customers may be slow to return to in-house dining. A Restaurant Business survey found that 20 per cent of customers would not return to normal activities until a vaccine is approved. Customizable in-home dining experience will continue to offer customers flexibility, even when public health concerns fade away.

It's time to explore operating efficiencies

Finally, a James Beard Foundation survey found that 41 per cent of restaurant owners are primarily concerned with a slow return of customers, while another 35 per cent are concerned with paying vendors. Ghost kitchens can create additional revenue to help these restaurants keep afloat until a return to business as usual.

Mobile investments matter
For restaurants of any size, investments into a mobile infrastructure to streamline customer orders and fulfilment is crucial. Ghost kitchens are an important part of the next-gen mobile restaurant and a model for what a mobile-centric workflow could look like. Restaurant operators can improve the customer and employee experience by using an ecosystem of apps, tablets, and interactive digital signage to improve communication at each stage of the customer order.

Shiv Sundar

Co-Founder and COO, Esper

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