Point of sale

Ghost Kitchen: Definition, Benefits, Example, and How To Start One

Sahana Ananth
February 13, 2024
1 mins

Table of Content

Introduction

Now more than ever, running a brick-and-mortar restaurant has become unprecedentedly expensive. Today, when the demand is leaning toward delivery, 60% of US consumers order delivery or pickup at least once a week; Ghost or virtual kitchens are predominantly looked at to fill this demand. 

While ghost kitchens have existed for a long time, it was the COVID-19 pandemic that accelerated their growth. Since then, the concept has become a hit and is still growing progressively. This blog will explore why ghost kitchens are in demand and the basics of how to run one.

What is a Ghost Kitchen?

Also known as dark or commercial kitchens, they are physical spaces that run food preparation and other operations without a storefront. The food prepared is only available for delivery. Ghost kitchens don't have a store display but have space to cook and sell food online via third-party delivery apps. The experience created here is with the food itself. 

The operations workflow of a ghost kitchen focuses on preparing the food and cooking, essentially by dividing up the tasks among different stations. The staff is trained to leverage the point-of-sale software to cater to various orders and act quickly. Depending on the order forecast, the ghost kitchen team coordinates with the delivery partners. They also ensure the orders are packed and labeled correctly before being handed off for delivery. 

Ghost kitchen owners generally prefer to locate their business on the outskirts of cities or industrial parks. It is because there’s no need to pay downtown rent when there’s no front-of-house operation. Instead of a physical location, the presence is digital. However, we recommend you choose your location strategically. You should be located where you will capture the most online orders from customers nearby. 

Benefits of Opening a Ghost Kitchen

Ghost kitchens are one of the biggest 2024 trends in the restaurant industry. Businesses have been successful in operating the ghost kitchen. Here are some of the benefits to consider. 

1. Capitalize on Online Ordering Demand

The online meal delivery segment contributes to about 40% of restaurant sales. The growing demand for online food delivery is evident.  It’s the opportunity that first-time ghost kitchen operators can leverage to cater to the increased demand. Moreover, already-established restaurants can expand their business and capitalize on the increased demand for food delivery services.

2. Low Overhead Costs

The cost of starting the ghost kitchen business is low. You don't require a server, counter service, staffing for the bar, huge space, and a no-cost ambiance setup that includes tables, interiors, and cutlery. That means the ghost kitchen costs significantly less than a full-service or fast-casual restaurant with all these factors to consider. 

3. Simpler Startup Efforts

Starting up a ghost kitchen model takes simpler efforts. All it requires is a brand, a rental space for a kitchen to prepare food, marketing spending to create brand awareness, and integration with a third-party delivery app. All this, accompanied by a solid and sound menu, is a crucial aspect of the model compared to the traditional, which also has to focus on the interiors, exteriors, location, and much more.

4. Lower Risk

If starting a restaurant business is where your interest lies, then there is nothing less risky than the ghost kitchen. Its minimal cost requirement to start a business is lower than any other restaurant business model. Also, the ghost kitchen model allows you to try something new without making a significant investment. 

5. Increased Delivery Range:

When there is no fixed storefront to serve the customers, there is no restriction on who your customers are. That way, your delivery range can increase with third-party delivery apps or by increasing the number of kitchens. Initially, integrating a third-party delivery app is beneficial as it is more known in the market and can increase sales volume. Once your brand is established, you can select delivery partners to cater to various locations. As you grow, you can increase the kitchens in multiple locations to expand the delivery locations. 

Ghost Kitchen vs. Cloud Kitchens

Though the ghost kitchen and cloud kitchen are often interchangeably used, their differences make them different. 

Aspect Ghost Kitchen Cloud Kitchen
Operational Structure A single brand or restaurant that operates in a hidden location and delivers food to customers online. A shared kitchen space where multiple brands or restaurants can work and prepare food for delivery.
Market Reach It reaches a broader market and avoids the expenses of a traditional restaurant. Offers more variety and flexibility for customers and lower costs for operators.
Business Concept Delivery-only, virtual brand. Extensions for existing restaurants may have physical stores.
Cost considerations Lower overhead, streamlined operations.

Leverages shared infrastructure for cost savings.

Marketing Challenges Challenges in trust-building without a storefront. Benefits from an established brand include an easier customer transition.
Flexibility / Experimentation Independent, agile to market trends Balances innovation with maintaining brand consistency
Reliance Heavily depends on third-party platforms Less dependent, utilizes direct marketing channels.

Popular Ghost Kitchen Examples

The ghost kitchen concept of the model is simple. Many businesses have implemented it and have expanded themselves. Here are some popular brands that work on ghost kitchen models.

1. Krispy Rice

Krispy Rice is the only delivery restaurant, otherwise called Ghost Kitchen, launched by Creating Culinary Communities. It is a Japanese concept kitchen established in 2020. The concept is built around a signature dish, spicy tuna crispy rice. Hence, the menu has a variation of crispy rice made available in three combinations, or à la carte, which is attractive to all sushi lovers. C3 is a subsidiary of SBE Entertainment Group, a hospitality lifestyle company leveraging its vast restaurant network and ghost kitchens to deliver Krispy Rice’s recipes to doorsteps through DoorDash, Uber Eats, and Postmates.  

2. MrBeast Burger

MrBeast Burger is a virtual restaurant operating from ghost kitchens across the United States. It is owned by a famous personality on YouTube, Mr. Beast. Found in 2020, this ghost kitchen was a sensation. People order food via delivery apps. It is situated in 300 locations. They run from the virtual dining concept by Robert Earl, who has successful franchise ownership. VDC is the one that rolls out MrBeast Burger, which uses ghost kitchens to run a brand, and each of the concepts gets endorsed by a celebrity’s branding. With a strategic location spread,  they take over the delivery app algorithm to reach every city with delivery.  

3. Kitchen United

Another ghost kitchen company based in Pasadena provides delivery-only restaurants with fully equipped kitchen spaces. It was founded in 2017. Kitchens located in strategic areas where food delivery is in high demand allow existing restaurants or new ones to partner so that they can run multiple such virtual brands in the same space. The restaurants can share the infrastructure, utilities, and equipment to use resources efficiently. Their software for ordering can be integrated into significant delivery service apps to receive the orders.  

How do Ghost Kitchen Work?

The working of ghost kitchens is quite simple. Besides how you receive the order, here’s who is potentially involved. There’s a chef, kitchen assistant, packer, dispatcher, and manager to oversee the entire operation. 

  1. Order placement: Customers place orders via any food delivery platform. 
  2. Order details receipt: Your ghost kitchen receives the order. It is accompanied by all the required details and special requests, if any.
  3. Preparation: Your chef/team starts cooking the fresh meal. Since you need to fulfill the order in the designated timeline provided to the consumers, you need to balance quality and speed. 
  4. Packing: Once you’ve prepared the meal, it’s time to pack the same. Packing the meals in safe, hygienic, and convenient packaging pleases the eye and follows all the food safety regulations. 
  5. Delivery: Lastly, mark the order as complete in the food delivery app/website. The delivery person would then visit your premises, pick up the order, and deliver it to the customer. 
Pro tip: Like every other commercial kitchen, Ghost Kitchen must ensure compliance with relevant agencies and institutions set in place. Ensure food safety regulations with the U.S. Food and Drug Administration or state and local health authorities. Whether it's the FDA or state and local authorities, your ghost kitchen must meet food safety standards. 

Ghost Kitchen Costs

Now that we know it works like any other commercial kitchen, what does the cost look like? The essential cost varies depending on these factors:

  1. The type of food niche and menu you prepare will define the equipment and facilities that are explicitly required for your business needs.
  2. The expenses whether you build or rent your kitchen. 
  3. The operating expenses include utilities, equipment, insurance money, packaging costs, salaries of the employees, and every other essential of operating, such as licenses, permits, and set-up costs. 
  4. Your brand's digital presence, whether it has an app, website, or marketing spends. 
  5. The cost of the supply chain depends on the food, whether fresh or frozen, the storage time, and the scaling considerations in the later stage. 

Ghost Kitchen for Rent vs. Buy

If you are setting up a ghost kitchen, the question of whether to build or rent is common. Let’s quickly understand whether it is good to build or rent.  

Option 1: Build Ghost Kitchen 

Building a ghost kitchen has benefits, but it is one’s decision whether to take the initial setup's expenses on themselves. 

Pros: 
  1. It gives space to build per your needs, whether you want to optimize the layout, pick up specific equipment, or design as per the menu.  
  2. Consider this a long-term investment if you plan to expand your ghost kitchen. 
  3. Hygiene, operations, and maintenance can be entirely under your control. 
Cons:  
  1. Constructing, purchasing utilities, and getting permits is an upfront expenses. 
  2. The launch can be delayed due to setting things up from scratch.  
  3. The maintenance, management, repairs, and compliance hassle will be on you.  
  4. If the investment does not succeed, it can remain an asset that can't be repurposed easily.  

Option 2: Rent Ghost Kitchen

There are rental spaces equipped with shared spaces that you need not set up from scratch. 

Pros:  
  1. It is cost-effective compared to expenses incurred in construction.  
  2. The ready infrastructure comes with equipped utilities that are commercial grade and with licenses.  
  3. You can adapt quickly to test out different menus. 
  4. It can be an efficient solution, as other tenants can share the cost with you.  
Cons:  
  1. You’ll have limited control over the layout of the kitchen and equipment. 
  2. You must rely on the owner for the repairs and maintenance. 
  3. A lease arrangement cannot offer flexibility or might even cost more.

Wrapping Up

Ghost kitchen are the new trend circling the restaurant industry. They reduce overhead costs, increase operational efficiency, and expand market reach. Coupled with automation and technology, ghost kitchen make up to 200 times more money. 

Now that you know the ins and outs of ghost kitchens, what are you waiting for? It's time to capitalize on this increasing demand and start a ghost kitchen. And on the way, if you need help with a point-of-sale solution to make your operations manageable, check out OneHubPOS. This easy-to-use software is designed for restaurants, making kitchen operations a breeze. Book a demo with us to learn how!

How do I figure out how much to charge for food?

Pricing is a balancing act! You need to cover your costs (including the food cost per portion) while offering a price point that feels valuable to your customers. Consider factors like competition, target audience, and the overall dining experience you create.

What tools are available for tracking food costs?

Food cost calculators are great for initial estimates, but consider restaurant management software for ongoing success. This software tracks inventory, automates cost calculations, and generates reports to identify cost-saving opportunities.

Can I use a food cost calculator for different types of cuisine?

Absolutely! Many online food cost calculators can handle various cuisines. Look for tools that consider ingredient types, portion sizes, and even regional pricing variations.

How often should I calculate food cost percentage?

Consider your food cost percentage your restaurant's financial fitness tracker. It's the total cost of recipe ingredients divided by your total menu sales. Ideally, calculate this regularly, like weekly or bi-weekly, to monitor profitability and adjust pricing or portions as needed.

What is the standard costing model?

The standard costing model is like a recipe for consistent pricing. It uses historical data and market trends to predict ingredient costs, allowing you to budget, purchase, and maintain profit margins even when prices fluctuate.

What is food cost per portion?

Food cost per portion is the actual cost of creating a single serving of a dish. It considers all ingredients, including spices, garnishes, and even waste!  This number helps you understand your profitability and set menu prices effectively.

AUTHOR
Sahana Ananth
Director, GTM - OneHubPOS

Sahana is a seasoned GTM leader with a passion for building startups. She excels in crafting GTM strategies for tech products, driving revenue growth.

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