How ghost kitchens are feeding on-demand city living

 —  Article by Natalie Holmes
chefs cooking in a kitchen
Image credit: Shutterstock

In unassuming corners of cities across the world, chefs are preparing food for popular restaurant brands. Rather than going to guests seated in one of the restaurant’s branches, however, these meals are picked up by drivers and delivered directly to diners in their homes and offices.

Known as ‘virtual’, ‘dark’ or ‘ghost’ kitchens, the storefront-free spaces are often located in lower rent areas close to key submarkets, providing fully fitted kitchens in a more industrial setting. And demand for these spaces is growing quickly as the consumer appetite for take-out food from their favourite restaurants continues to rise.

“Today’s consumers want quality food on-demand and are prepared to pay for delivery,” says Adam Griffin, Associate Director of JLL’s Foodservice Consulting team. “Restaurant brands are being encouraged to meet growing levels of take-out demand by delivery networks like Deliveroo.”

In April 2017, Deliveroo launched its delivery-only kitchen venture, Deliveroo Editions, in the UK, providing restaurant brands with space to cook and prepare food without opening a brick-and-mortar store to reach new consumers in new areas. It has around a dozen sites in play in cities across the country with plans to double that going forwards. At the end of last year, Deliveroo then rolled out the concept to Australia’s foodie capital, Melbourne. Meanwhile, in the U.S., DoorDash has opened a 2,000 square foot commissary, where brands who don’t operate restaurants in the nearby area can rent space.

A changing food scene

For restaurants, this rising demand for take-out dining is creating new opportunities that require new solutions to work as efficiently as possible. “The proliferation of delivery services is pushing brands into the space,” says Griffin. “But diners don’t like to see delivery drivers walking through the restaurant picking up orders. And, from a back-of-house perspective, it’s difficult to cope with the increased volume.”

Ghost kitchens not only provide solutions to these issues—they also make financial sense. “With the likes of Deliveroo providing the kitchen facilities and the delivery riders, it leaves restaurant brands to just focus on the food – saving them a significant amount in real estate and business rates, as the footprint is a lot smaller,” says Griffin. “Plus, of course, there is no need for front-of-house outfitting.

Although smaller brands are signing up to these ghost kitchens, they primarily appeal to the established high street chains and well-known restaurants that can adapt menus to ensure product offerings are suitable for delivery.

The retail impact

The growth of ghost kitchens is already impacting development decisions. “We’re seeing mall developers put ghost kitchens in basements and car park areas, both to utilize traditionally under-used space, and to avoid the constant flow of delivery drivers through public spaces,” says Griffin. As such these off-site kitchens are one of the emerging factors driving rising demand for industrial land in cities such as London.

They also play into other trends at work in the retail leasing market. “Across the industry, we’re seeing a reduction in overall unit sizes,” says Griffin. “Restaurants brands are opting for spaces in prime locations with fewer tables and a faster turnover.”

While ghost kitchens might be a growing area, they’re not without their challenges. Staffing is one common issue, with chefs accustomed to working in more standard restaurant environments, rather than on production lines in fringe areas. On the customer side, too, image is important. “Diners have an idea about where their meals are produced, and it’s strongly linked to brand identity,” says Griffin. “The reality of ghost kitchens is potentially less appealing.”

That’s not stopping the concept from evolving as start-up restaurant brands seek to enter the market without the hefty price tag of setting up a full-service restaurant – in London this can easily reach at least £500,000.This new iteration of ‘ghost restaurants’ are skipping the storefront altogether.

These delivery-only outlets have taken hold in major urban hubs, such as New York, London, Sydney and Paris. “Such cities are seeing growth in part due to the rising cost of real estate in central locations,” explains Griffin.

And while consumers still very much have a taste for high quality take-out food, storefronts remain highly relevant in the modern food retail world, says Griffin. “Ghost kitchens will never replace restaurants,” he says. “A strong brand identity on the high street is still important—arguably more so now than ever.”

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