During the COVID-19 pandemic, dining establishments had to switch gears to avoid certain death. As a consequence, companies began running “ghost kitchens” out of existing restaurants. Yet, this business model is dying as diners return to going to physical locations to eat.
This article examines the rise and possible fall of the trend…
What are Ghost Kitchens?
To understand what is going on with ghost kitchens, we must know what they are.
Simply put, they are delivery-only branches of restaurants — usually with a different name and limited menu.
However, these virtual brands sometimes are entirely new and operated out of local eateries. For example, the Mr Beast Burger brand partnership with Youtuber, Jimmy Donaldson, AKA MrBeast.
Initially, investors and restaurateurs saw fantastic results from ghost kitchens.
BASED ON THE NUMBERS, WENDY’S ANNOUNCED PLANS IN 2021 TO OPEN 700 DELIVERY-ONLY LOCATIONS!
Further, CBRE forecasted that 21% of total restaurant sales would come from ghost kitchens by 2025.
Unfortunately, this business model that helped so many establishments survive the pandemic faces issues as it comes to an end…
Why the Model is Dying
As you can see, separate virtual brands are a great way to…
Maximize kitchen resources…
Maintain order volume…
Reach a wider audience…
AS LONG AS NOTHING ELSE IS HAPPENING IN THE RESTAURANT.
As eateries come alive with customers, ghost kitchens negatively affect traditional dining operations.
Kevin Hochman, chief executive for restaurant conglomerate, Brinker International, commented on its experience.
“EVERYONE THOUGHT IF YOU HAVE THE LABOR AND THE EQUIPMENT, IT WOULD BE EASY TO RUN VIRTUAL BRANDS, BUT THE REALITY IS, MOST OF THE DELIVERY TIMES FOR VIRTUAL BRANDS TRANSACT DURING BUSY TIMES FOR THE REGULAR RESTAURANT… IT WAS TOO MUCH TO HAVE A BUSY DINNER RUSH WITH AN INFLUX OF VIRTUAL ORDERS COMING IN, TOO.”
Via The New York Times
And all of that comes before we get to the issue of food quality. Something that majorly impacted the aforementioned MrBeast Burger.
After an influx of customer complaints, Donaldson publicly distanced himself from the brand.
That being said, there are few chains that not only keep their virtual brands alive but thrive…
How Ghost Kitchens Can STILL Be Successful
Despite the new issues ghost kitchens bring to active brick-and-mortars, there are still examples of its success.
And these two examples may surprise you…
Chuck E. Cheese and Denny’s.
The Chuck E, Cheese delivery-only service, Pasqually’s Pizza & Wings says sticking to core menu items keeps them viable.
By providing pizza — which it makes already — on its virtual menu, it doesn’t tax its kitchen as heavily. Therefore, quality and speed are not compromised.
On the other hand, Denny’s is leaning into its ghost kitchens to reach a younger crowd…
The Burger Den and The Meltdown — which focus on burgers and grilled sandwiches respectively — are open 24/7. As such, their focused offerings appeal to youth who enjoy staying up late — which has yielded a profit for the brand’s bottom line.
So, as far as the impending demise of ghost kitchens, it is not so black and white.
Nonetheless, restaurants will need to use great market data and stats to make them work.
Be Great,
GCTV Staff
Disclaimer: This content is intended to be used for educational and informational purposes only. Individual results may vary. You should perform your own due diligence and seek the advice from a professional to verify any information on our website or materials that you are relying upon if you choose to make an investment or business decision. Investment, real estate, and business involve great risk and there is no guarantee of performance or results.We are not attorneys, investment advisers, accountants, tax professionals or financial advisers and any of the content presented should not be taken as professional advice. We recommend seeking the advice of a financial professional before you invest, and we accept no liability whatsoever for any loss or damage you may incur.
