Over the past six years working in the restaurant industry, I’ve seen the rise in popularity of innovative solutions like ghost kitchens, which are reshaping the food service industry.
The global ghost kitchen market is projected to reach $157.26 billion by 2030, growing at a 12% CAGR. This highlights that the rising demand for online orders and food delivery services has made ghost kitchens an attractive option for restaurants looking to increase their profit margins.
In this guide, I’ll explain what a ghost kitchen concept is, its benefits, and how it can transform your restaurant operations.
Key Takeaways
- Ghost Kitchen Definition: A ghost kitchen is a delivery-only food establishment that operates without a dine-in space, focusing solely on fulfilling online orders.
- Ghost Kitchen vs. Virtual Restaurant vs. Cloud Kitchen: A ghost kitchen focuses exclusively on food delivery service, with no physical storefront. A virtual restaurant uses an existing kitchen to serve online orders, offering one or more virtual concepts. A cloud kitchen is a shared facility for multiple restaurant brands, designed for delivery-only operations.
- Ghost Kitchen Main Advantage: One main advantage of a ghost kitchen is the ability to reduce overhead costs by eliminating the need for a physical dining space, allowing for a more efficient and cost-effective operation.
- Virtual Restaurant Main Advantage: A key advantage of a virtual restaurant is the ability to operate exclusively through online orders, leveraging an existing kitchen space to create multiple brands or concepts.
- Reduce Overhead Costs: Eliminate the dining area to reduce expenses and share equipment with other ghost kitchens, cutting investment costs by 60-70%. Choose an efficient location and secure the necessary permits before launching.
- Capitalize on Delivery Apps: Use food delivery apps to reach a larger audience and take advantage of the growing demand for online ordering.
- Build a Strong Online Brand: Leverage online ordering systems, website builders, and marketing software to create a strong digital presence, driving traffic and increasing customer engagement.
What is a Ghost Kitchen?
A ghost kitchen is a delivery-only restaurant that doesn’t serve dine-in customers.
Unlike traditional restaurants, it has only a kitchen and storage space for food preparation and packaging for delivery. This allows restaurants to focus on making food without the need for a physical dining area.
According to Statista, the global cloud kitchen market was valued at $58.61 billion in 2022 and is projected to grow to $177.85 billion by 2032.
Ghost kitchens are also projected to account for a 50 percent share of the global drive-thru and takeaway foodservice markets by 2030.
How do Ghost Kitchens Work?
A ghost kitchen operates as a delivery-only foodservice model, where the kitchen prepares food exclusively for online orders, without any dine-in or traditional storefront.
Below, I briefly described how ghost kitchens work.
- Rent Space: Start with renting a commercial kitchen space where you can prepare food for delivery without the need for a physical dining area or front-of-house staff.
- Equip Your Kitchen: Set up the necessary cooking equipment for food preparation and packaging, ensuring efficiency for delivery orders.
- Create Your Restaurant Brand: Develop a strong brand identity that resonates with your restaurant’s target audience.
- Select Order Channels: Offer ordering through popular delivery apps or your website to increase accessibility. Use an all-in-one solution with a website builder and built-in online ordering system, and create a mobile app to streamline the process. Our data shows that over 63% of customers prefer mobile ordering, so be sure to promote this option in your restaurant. Additionally, our clients report a 29% increase in online orders since implementing the restaurant mobile app.
- Promote Your Brand: Use digital marketing strategies to promote your brand, attract customers, and drive online orders.
- Optimize Order Fulfillment: Concentrate on optimizing the kitchen layout, processes, and delivery times to fulfill orders quickly and efficiently. Ghost kitchens can reduce operational costs without the overhead of a traditional dining area.
- Focus on Delivery: Once the food is prepared, pack it and deliver directly to customers’ homes or offices, relying heavily on third-party delivery drivers or an in-house delivery system.
Alternatively, you can also partner with a company that specializes in providing technology and infrastructure for ghost kitchens. Here is how it works in that case:
You get access to fully equipped kitchens and the necessary restaurant technology for order fulfillment. Once a customer places an order, you prepare it in the kitchen according to their specifications.
You can update and track the order status in real time using the tablet provided.
After the order is completed, either your couriers or those from the partnering company will handle the delivery directly to the customer.
Why Ghost Kitchens Are So Popular
Ghost restaurants are growing in popularity for several reasons:
- Low Startup Costs: A typical 800-square-foot ghost kitchen requires an equipment investment of $50,000 to $100,000. Staffing is optimized for kitchen efficiency, with most operations operating with 3-4 line cooks, one expeditor, and one manager per shift. Ghost kitchens allow restaurants to increase delivery orders without the expense of setting up a dining area, making it the cheapest way to open a restaurant.
- Higher Profit Margins: By saving on rent, labor, and overhead costs, ghost kitchens help restaurants boost profits and offer lower prices to customers. Learn more about ghost kitchen profit margin.
- Reach More Customers: Partnering with third-party delivery services enables restaurants to quickly expand their customer base and increase sales.
- Convenience for All: Customers enjoy the convenience of ordering from home, while restaurants avoid costs associated with decor and in-house staff.
- Easy Setup: Existing restaurants can easily convert their kitchens to focus on delivery and takeout, expanding operations with minimal changes.
- Available Software Solutions: Online restaurant delivery software and apps make it simple for ghost kitchens to connect with customers and manage deliveries.
What’s the Difference between a Ghost Kitchen and a Traditional Restaurant?
The main difference is that traditional restaurants offer dine-in services, while ghost kitchens specifically produce food for delivery-only restaurants.
In addition, ghost kitchens are typically smaller, and their kitchen management is easier.
Below, I created a table showing the differences between ghost kitchens and traditional brick-and-mortar restaurants.
| Ghost Kitchen Restaurant | Traditional Restaurant | |
|---|---|---|
| Restaurant Location | Online Only | A brick-and-mortar restaurant complete with a seating arrangement, appropriate decor, and serving staff |
| Fulfillment & Business Model | Delivery mostly, or may allow pickups at most | Any fulfillment type – Delivery – Pickup – Dine-In – Curbside etc. |
| Customer experience | Limited customer interaction, typically through websites and food delivery apps | Tailored experience through in-person interaction, atmosphere, and table service |
| Sales channels | Online, selling mainly through third-party delivery services and branded online ordering systems and apps | All sales channels – Direct – Phone – Online |
| Delivery Flow | Designed for efficient and smooth delivery operations | May cause congestion, affecting the experience for walk-in or dine-in customers. |
| Restaurant Brand | One or multiple brands share a kitchen | One brand per kitchen |
| Food type | Many food types per kitchen, which makes it more cost-effective and generates better profits | One food type only |
| Menu Flexibility | Easy to test and change menus or introduce new concepts | Menu changes can be more difficult due to physical setup and customer expectations |
| Kitchen Location | The location of the kitchen can be independent of the location of the restaurant | The kitchen is physically linked to the restaurant location |
| Kitchen size | Usually around 200 to 300 square feet | Usually around 2000 square feet |
| Kitchen Business Model | Rented or owned kitchen | Own kitchen |
| Startup Costs | Lower startup costs, due to no need for a physical dining area | Higher startup costs due to the need for a physical location, decor, and seating |
| Revenue Streams | Delivery only, or delivery and pickup | Dine-in, private events, catering services, pickup, and delivery orders |
| Staffing Requirements | Fewer staff needed, typically limited to kitchen and delivery drivers, usually four people | More staff required, including waitstaff, hosts, and cleaning staff. Usually over 25 people |
| Flexibility & Scalability | Ghost kitchens can easily expand or contract their operations based on demand | Rigid in structure (may find it hard to react flexibly to changing food trends and production capacities) |
Sources: Eats365, CloudKitchens, WebstaurantStore
Advantages and Disadvantages of Starting a Ghost Kitchen
Below, I will outline the key advantages and disadvantages of starting a ghost kitchen, helping you weigh the benefits and potential challenges of the ghost kitchen model.
Advantages of Ghost Kitchens
- Increased Efficiency: Focus solely on food preparation and delivery, improving delivery efficiency and customer satisfaction.
- Flexible Menus: Experiment with different menu offerings without sacrificing quality.
- Quick Brand Testing: Test and implement new concepts quickly.
- Greater Reach: Serve a larger audience by delivering directly to customers.
- Meeting the Delivery Demand: The ghost kitchen market continues to expand rapidly, meeting the growing demand for online food delivery.
- Scalability: Easily adjust operations based on demand, allowing for growth.
- Increased Online Presence: Use digital platforms to reach a larger audience.
- Reduced Risk: Lower restaurant costs reduce the financial risks compared to traditional restaurants.
- Specialization: Focus on dominating a specific food category.
- Adaptability: Meet changing consumer behavior as delivery demand grows.
- Lower Overhead: Save on rent, labor, and dining room setup costs.
- Lower Staffing Costs: No waitstaff required and minimal labor.
- Reduced Marketing Expenses: Partner with delivery services to reach more customers without costly restaurant marketing.
- Management Made Easy: Rely on online ordering systems to track orders, streamline deliveries, and manage operations efficiently.
Disadvantages of Ghost Kitchens
- No Physical Location: Lack of a storefront means no restaurant foot traffic, reducing spontaneous customer visits.
- Limited Customer Interaction: Minimal face-to-face interaction makes it harder to build personal relationships with customers.
- Brand Recognition Challenges: Without a physical presence, it may be harder to establish brand visibility and recognition compared to traditional restaurants.
- Dependence on Delivery Platforms: Ghost kitchens rely heavily on third-party delivery apps, which means losing control over customer data, pricing, and customer experience. That’s why I recommend switching to receiving direct orders via the restaurant’s own website.
- Limited Marketing Opportunities: Ghost kitchens miss out on traditional in-store restaurant promotions and impulse purchases without a physical location.
- Competition: High competition in the online space, as multiple ghost kitchens may operate from the same location or cater to similar customer groups.
- Delivery Logistics: Dependence on third-party couriers for delivery can lead to delays, inconsistent service, and potential issues with food quality.
- Scaling Challenges: While scalable, growing a ghost kitchen may require significant investments in technology and marketing to maintain quality and manage increased order volume.
Types of Ghost Kitchens
Below, I briefly described the different types of ghost kitchens, each with its unique setup and operational focus.
| Criteria | Commissary Kitchen | Incubator Kitchen | Kitchen Pods |
|---|---|---|---|
| Purpose | Used to prepare food and distribute it to various locations, supporting multiple food outlets | Temporary, flexible kitchen spaces that support new or testing food concepts | Mobile kitchens that can be relocated to different locations for flexible food preparation. |
| Setup Time | Setup is quick, often taking a few days to a couple of weeks, as the space is usually already equipped | Setup is fast, typically a few days to a week, as these spaces are flexible and often fully equipped | Generally moderate, with setup times ranging from a few weeks to a couple of months |
| Operating Costs | Hourly rates range from $20 to $60 per hour. Monthly memberships cost $250 to $1,500. Storage fees can be $25 to $200 per month. | Operating costs include rent or membership access, salaries, utilities, maintenance, and insurance. | Rental rates vary, but kitchen pods are considered cost-effective due to their portability and reduced overhead |
| Regulatory Compliance | Must comply with local food safety regulations and ensure compliance across multiple locations | Generally subject to less stringent regulations as they serve as temporary spaces | Must comply with food safety and transportation regulations |
| Adaptability to Different Concepts | Highly adaptable to multiple food concepts | Highly adaptable, suited for testing new concepts and menus | Very adaptable, especially in testing new markets or concepts with mobility |
| Space Efficiency | Efficient for large-scale prep, but space is dedicated to storing and distributing food | Space-efficient, as they are designed to be temporary and flexible | Space-efficient due to portability and flexibility |
Sources: CloudKitchens, The Restaurant HQ, Econsult Solutions, Inc., Ohio Food Policy Network (OFPN), ContekPro
Type 1: Commissary or Shared Kitchens
This is a co-working space where multiple restaurants share a single kitchen space.
Each business is responsible for its own equipment and ingredients, but they share the same facilities, such as refrigeration, cooking equipment, and storage.
This restaurant business model is ideal for businesses that do not want to invest in their own kitchen space and equipment.
Type 2: Incubator or Pop-up Kitchens
An incubator kitchen provides support and resources to start-up food businesses. It gives the kitchen space, equipment, and resources needed to start and grow a food business.
This is ideal for businesses that are just starting and need support to get off the ground.
Type 3: Kitchen Pods
Kitchen pods are designed for businesses that want private kitchen space. They are fully equipped with all the necessary kitchen equipment, such as refrigeration, cooking equipment, and storage.
Kitchen pods offer businesses the flexibility and independence needed to operate their own food delivery and takeout service. They also provide the convenience of being located in centralized locations, making it easy for businesses to reach their customers.
Setting up a Ghost Kitchen (13 Steps)
Starting a dark kitchen is relatively simple, and there are a few key steps to follow. Here’s a quick look at the entire process:
- Step 1. Conduct market research: Figure out if delivery-only meals are the right opportunity for you. Understand the market and the potential competition.
- Step 2. Choose your ghost kitchen location: Select a location that allows for efficient food preparation and delivery while minimizing overhead costs.
- Step 3. Decide on the right concept and menu: Decide on the type of food you want to serve. Focus on items that are easy to prepare, pack, and transport. Learn about how to make a restaurant menu.
- Step 4. Develop a business plan: Create a comprehensive ghost kitchen business plan outlining your concept, target market, financial goals, and growth strategies.
- Step 5. Meet restaurant regulations and required licenses: Ensure that your ghost kitchen meets all local health and safety regulations, and obtain the necessary licenses and permits.
- Step 6. Create a marketing plan: Develop a marketing plan to promote your restaurant business.
- Step 7. Build your brand: Create a unique brand identity. Focus on your logo, creative food packaging, and messaging to build recognition and loyalty.
- Step 8. Look for suppliers: Establish reliable supplier relationships to ensure a consistent food supply for your ghost kitchen.
- Step 9. Build a restaurant website: Create a user-friendly, mobile-optimized website where customers can view your menu, place orders, and provide restaurant feedback.
- Step 10. Set up an online ordering system: Select and implement an efficient online ordering system integrated with your website.
- Step 11. Consider partnering with delivery platforms: Think of partnering with popular food delivery services like Uber Eats and DoorDash to start a delivery business and expand your reach.
- Step 12. Train your staff: Hire and train a skilled team to prepare orders efficiently and handle the kitchen’s operations smoothly.
- Step 13. Start promoting your business: Dabble with digital ads, social media, local SEO for restaurants, and email marketing to get your business off the ground.
For further details, check out our guide on starting a ghost kitchen.
Ghost kitchens are profitable due to their cost-efficient model, which eliminates the need for a physical dining area, front-of-house staff, and related overhead. The average profit margin for the industry is typically around 15%.
Ghost Kitchen vs. Virtual Restaurant vs. Cloud Kitchen
I’ve prepared a comparison of these three terms, as many people use them interchangeably. While this isn’t exactly wrong, there are minor differences between them. Here’s a quick breakdown.
| Feature | Ghost Kitchen | Virtual Restaurant | Cloud Kitchen |
|---|---|---|---|
| Definition | A delivery-only kitchen with no physical storefront, often operating in repurposed spaces | A restaurant that operates exclusively for delivery, often out of an existing brick-and-mortar restaurant | A facility that houses multiple delivery-only restaurant brands under one roof, often shared by different operators |
| Operational Model | Delivery-only, independent operation | Extension of a physical space, often operating out of existing kitchen | Shared space, multiple brands, scalable model |
| Menu Offerings | Can operate multiple virtual brands or concepts | Extends existing restaurant menu for delivery; flexible in terms of concept | Supports multiple restaurant brands with varied offerings |
| Location | Operates in rented or shared spaces, typically with no storefront | Operates out of traditional restaurants or commercial kitchens for delivery | Stand-alone commercial kitchens designed for delivery-only brands, with centralized facilities |
| Customer Experience | Limited customer interaction, typically through a food delivery app | Limited customer interaction, typically through delivery apps only | Limited customer interaction, typically through delivery apps only |
| Overhead Costs | Low overhead due to lack of physical storefront and minimal staffing | Moderate overhead, as it may still require restaurant space, staff, and operational costs | Shared kitchen space reduces overhead, allowing for cost savings for each brand |
| Delivery platforms | Primarily third-party platforms like Uber Eats or DoorDash | Often uses third-party apps like Grubhub or Postmates | Often integrates with several delivery platforms and its own ordering system. |
| Branding | Online-focused, often operates under one brand | Leverages an existing restaurant brand for delivery | Collaborative branding, supporting multiple restaurant brands |
| Target audience | New or independent restaurateurs | Existing customers and new audiences for delivery | Established or multi-brand owners |
Sources: Toast, Restroworks, Avanti Restaurant Solutions, Restaurant Growth
Ghost Kitchen or Virtual Restaurant: Which One Is Right for Your Business
A ghost kitchen may be the right option if you still need to get a kitchen where you can cook. Rent a setup and start your ghost kitchen immediately without worrying about the additional costs of starting a restaurant.
Existing chain restaurants and eateries are also increasingly interested in setting up ghost kitchens to experiment with menus and start delivery-only service in different locations without the overheads of creating a full-fledged restaurant.
Virtual restaurants are a fantastic way to create new restaurant revenue streams if you already have a kitchen. You can launch a virtual restaurant with a fresh menu, test new ideas, and attract new customers by using the same staff, ingredients, resources, and utensils.
