There are currently over 1500 ghost kitchens in the USA alone. In China and India, this number is at 7,500 and 3,500 respectively.
Most restaurant entrepreneurs are shifting to the ghost kitchens model due to the many benefits it has over the more traditional dine-in restaurants.
In this article, we will discuss a few basics about ghost kitchens and the main reasons why they have been on a rise in the last couple of years. Let’s jump right in.
What is a Ghost Kitchen?
A ghost chicken refers to a food preparation facility created to handle delivery-only meals. Sometimes ghost kitchens are referred to as virtual kitchens because people who order food from them never see what the facility looks like. Some of the most popular ghost kitchen brands right now include Reef Global, CloudKitchens, Kitchen United, and Colony Cooks.
The ghost kitchen trend became more popular during the covid-19 pandemic when movement restrictions were very intense in almost every country.
The best alternative for eating out back then was ordering food online. This trend has continued to the post-pandemic era as a significant number of people still prefer ordering food online instead of physically going to restaurants.
Why Are ghost kitchens becoming so popular?
1.Hard Times for Restaurants after the pandemic
Almost every industry, including the hospitality industry, was affected by the pandemic. The only way to survive during these post-pandemic times is by looking for all the possible ways of doing business without incurring lots of costs.
Restauranteurs now prefer ghost kitchens because they don’t require renting large physical structures or investing in the expensive furniture that traditional restaurants need.
It should also be noted that real estate prices have increased by over 20% between 2020 and 2022. This has led to a significant increase in rent. In such circumstances, food delivery strategies are the most feasible alternative.
2.Online Ordering and Delivery are increasing
We are living in an era where a lot of people prefer to order food online and not to dinning from restaurants locations. According to a study by Gloria Food, over 86% of people in the US had ordered food at least once a month. This clearly shows more and more people are embracing the ghost kitchen trend.
3.Ghost Kitchens Align with Modern Consumer Preferences
In the last 2 decades, consumers have been gradually shifting to buying almost everything online, thanks to brands like Amazon and eBay.
The number of people going to physical stores to buy goods is ever-shrinking. People now prefer ordering online because of the convenience that comes with browsing thousands of products and ordering what you want with just a few clicks.
The only caveat to ordering food online was the lack of delivery services that could have food delivered to customers in the shortest time possible. But with services like Uber Eats, Delivery Hero, DoorDash, and Grubhub, this problem has been solved. People can now order food and have it delivered to them within 15 to 30 minutes.
4.Business Model is Profitable and Flexible
In business, fewer costs usually lead to more profit margins. The ghost kitchen model is more profitable than traditional restaurants because it involves less operational and fixed costs.
For instance, a mainstream restaurant will have to rent a bigger space, install furniture, labour costs and several other accessories to make the place appealing to their dine-in clients.
Such costs are significantly lower or non-existent for ghost kitchen businesses. Ghost kitchens are also more flexible and can adapt to the changing needs of their customers and industry in general. For example, shifting from one location to another may not have a huge impact on their sales.
5.Lower Barrier for Entry and Success
It is much easier and cheaper to start a ghost kitchen business than a mainstream restaurant. All you need is a small working space, cooking equipment, and marketing your brand. You can even choose to operate your ghost kitchen from home if you don’t want to incur any rental costs at the start.
However, the lower barrier of entry leads to more competition. This requires cloud kitchen brands to intensively market themselves to let consumers know that they exist. It is also important to maintain high-quality standards since most online customers will likely write a bad review about your brand if the quality of your food is lacking.
6.Digital Marketing Power
Digital marketing has also been one of the major catalysts for the success of ghost kitchens. The only effective way of communicating to people who buy stuff online is through digital marketing. Any brand that intends to get into the ghost kitchen business needs to aggressively use digital marketing strategies such as social media marketing, SEO, and email marketing to let people know that they exist.
The good news is that digital marketing is also way cheaper and more effective than traditional marketing.
We will likely continue to see the trend of ghost kitchens growing in the coming years. It is a business model that clearly has a lot of advantages for both entrepreneurs and consumers. This win-win environment is what any business model needs to thrive. Several traditional restaurant brands such as KFC and MacDonald’s have also adapted the guest kitchen model alongside their physical dine-in option to stay competitive in the market.
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