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“Ghost Kitchens” Offer New Foodservice Opportunities and Market Resilience

Paul_Hepperla Paul Hepperla | Vice President, Solutions Strategy – Cold Chain

Emerson’s Commercial & Residential Solutions Business

According to the National Restaurant Association (NRA), more than 110,000 restaurants and bars in the United States closed for business either temporarily or permanently in 2020. “Ghost kitchens” — which refers to any foodservice operation that prepares orders for off-premises dining only — were among the few foodservice business models that proved resilient to the pandemic’s negative economic effects. In a recent article for Foodservice Equipment and Supplies, I discussed the business opportunities and challenges of this emerging virtual restaurant strategy.

Prior to the coronavirus pandemic, only an estimated 15% of operators reported setting up ghost kitchens. Yet by May 2020, more than half of restaurant operators had implemented a ghost kitchen strategy for some or all of their delivery orders. Not only did ghost kitchens allow many restaurants to stay open, but they also helped to offset the loss of dine-in sales with an off-premises business model that required less labor and offered the potential for shared real estate costs.

Out of necessity, consumers quickly familiarized themselves with the concept of virtual foodservice, which typically has the following characteristics:

  • Operates without a physical storefront
  • Provides no on-site dining or waitstaff
  • Offers third-party delivery service or take-out options only

Today, with the easing of in-person dining restrictions, it appears that ghost kitchens are here to stay. Industry experts expect sales from virtual foodservice to increase 42% this year and rise 25% annually over the next five years.

Advantages of a ghost kitchen model

The ghost kitchen concept appeals to a wide variety of foodservice segments, covering nearly every culinary category and operating under a range of business models, including:

  • Large, shared kitchen spaces with individual stations
  • Pop-up segments within existing restaurant kitchens
  • Fully functioning and autonomous kitchen pods

One similarity among these approaches is that multiple ghost kitchen brands are typically designed to share a common operating space. Regardless of the business model, ghost kitchens offer a variety of operational benefits, including:

  • Reduced start-up costs — Entrepreneurs can launch a ghost kitchen operation without significant capital investment or new construction.
  • Greater menu flexibility — Operators can introduce new brands in regional, smaller scales while larger, established brands can trial new menu items. They can also quickly change their offerings without concerns of having to update signage or printed materials.
  • Improved customer access — Operators can place ghost kitchens in strategic locations in metropolitan and/or rural areas to shorten the distance to their customers.

Key operator considerations

With the likelihood that multiple operators will share the same ghost kitchen space, equipment uptime and reliability become mutual concerns. Even though each vendor may have many unique food preparation requirements, they may still share walk-in coolers and freezers, combi-ovens and fryers. This will also result in larger refrigeration loads and potentially a greater variety of cooking equipment to accommodate offering diversity.

Equipment sharing also raises questions about owning and/or leasing of these critical assets. Will the facility operator incur costs, or will the vendors lease equipment based on a flat fee or usage? Additionally, usage monitoring will become more important, both to understand utilization patterns and assess equipment condition to ensure it is running at peak performance and efficiency.

To protect consumers and ensure food quality and safety, ghost kitchen operators will be required to implement standard protocols, such as:

  • Establishing hazard analysis and critical control points (HACCP) programs
  • Using temperature monitoring and probing devices to automate data collection and recordkeeping for local health inspectors

Determining energy consumption will be important in understanding the energy profiles of each ghost kitchen facility, food vendor or equipment type. Operators should consider a sub-metering energy measurement strategy to record usage per vendor and monitor energy consumption of each equipment asset. Whether energy costs are assessed via a flat fee per vendor or per equipment energy usage, this data will be important in developing energy-efficient and sustainable operational strategies.

Emerson has the tools and technologies to support all stakeholders in the ghost kitchen value chain. From refrigeration technologies to connected monitoring devices and facility management control platforms, we’re helping ghost kitchen operators and vendors to maximize food quality and safety, increase equipment reliability, and monitor performance to meet this emerging market need.

 

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