Discovering the Perfect Ghost Kitchen Model for Your Restaurant
There is no good business like the food business. But if you have been keen, watching the trends during the pandemic, you have observed the rise and rise of the food delivery business. Ghost kitchens have become a full-fledged business model that makes entrepreneurs drool.
When I started penning this piece, I envisioned a pillar post for everything you need to learn about cloud kitchen business models, the erudite term for virtual kitchens. It turns out there is an entire university of information to share.
I think there have been between 20-40 different concepts of the same business model. Still, the situation is made more complicated by the fact that some of those concepts have been recycled as ideas for new restaurants and restaurants that weren't directly related to the original concept. If I were to tell you how many different types of ghost kitchens exist - you'd probably think I was crazy. But the reality is that ghost kitchens are so numerous they could fill an infinite number of journals with writing pieces! And here's why:
The first reason is that consumer experience has drastically changed over time due to companies like Amazon. Consumers want everything right this minute, which resulted in aggregator platforms that help bring together customers with the types of services that will give consumers precisely what they want when they require it. To satisfy growing demand, restaurants invested in their delivery fleets to provide customers with convenient experiences.
Another exciting development has been an increased focus on logistics to deliver goods faster. This is the leading edge of the digital strain on logistics to allow for better response rates due to shorter delivery times so that driving apps are also starting to explore this avenue. It's a Wild West situation with everybody tossing themselves into the game. Now, individual micro-entrepreneurs and macro restaurant entrepreneurs are scrambling for the same pie of ghost kitchens. What's more, platforms such as UberEats and Deliveroo have thrown their hats in the ring.
Here are the six main ghost kitchen business models with the high-profit potential to help you get it right when you choose to run with it.
Model #1 – Brand-Owned Cloud Kitchen
Ghost-kitchen models don't get more clear-cut than this. A single location. A single brand. Just one kitchen. This is a one-cuisine ghost kitchen with delivery-only operations that don't serve takeout or dine-in. Kitchens are usually located near densely populated areas but not too far away from lower-rent areas.
Several different aggregators handle orders and deliveries to maximize exposure. There are times when the kitchen is also operating a self-delivery service, especially when looking to reduce delivery costs. The investment is low upfront. Ghost kitchens always require a lower investment. It is possible to scale this as a business. For scaling, the best approach is to expand the original operations and create a centralized kitchen.
Model #2 – Dine-in With a Separate In-Location Delivery Production Line
Old-school by adding a ghost kitchen to an existing restaurant. Delivery items are essentially the restaurant's best-selling items.
Restaurants take their menu hits and modify them for delivery. Kitchens typically have high-rent and frequent use areas. The purpose of these operations is mainly to generate additional revenue. This ghost kitchen model requires a bit of extra money at the beginning. You'll have to rent an extra room. Growing this business requires some effort, but it depends on how things are set up and your direction.
Model #3 – A Dine-In Brand Operating from One (or More) Shared Kitchen Locations
In this case, the restaurant already has dine-in operations, but the cloud kitchen aspect is located in shared kitchen space and runs separately.
The brand running on this model affordably rents out kitchen space from restaurants with huge space and looking to serve more people. Kitchen space is usually only accessible during peak periods (weekends, holidays, evenings).
Several aggregators handle orders and deliveries, with staff rotating between the restaurant and the cloud kitchen. It is sometimes necessary to deliver semi-cooked items to restaurants to provide for a larger customer base.
Model #4 – Hub & Spoke
There are several hubs and spoke kitchen models variants - single brand, multi-brand, shared kitchen, etc. There will be a centralized production kitchen where most items will be made, along with pop-up shops facilitating reaching (and finishing).
A high upfront investment is required. Before you can deliver your first order, you have to hire and train employees, so you'll lose money for a few months.
You can scale this business easily. One can find a residential area with 8 square meters and hire an individual to run that specific operation there.
Model #5 – Multiple Virtual Brands in a Shared or Business-Owned Kitchen
An owner or a shared kitchen space is used to run several virtual brands by one business. A model like this one doesn't include pop-up locations, but the kitchen would be located in a highly-populated area. There usually are several production lines where different brand items are prepared in a large kitchen.
Aggregator partnerships handle most of the order and delivery processes. Initial investment costs are low to medium. As long as what's on offer resonates with the population, it should be relatively easy to replicate a successful multi-brand ghost kitchen in a different area/city.
Model #6 – Virtual franchise
Rather than open your restaurants, you contract with other establishments to prepare your meals. You get to keep overheads to a minimum, and the main concern becomes finding more restaurants to collaborate with.
It's just your virtual brand. You have no kitchens. The partner handles the ordering, deliveries, and food preparation. The model is very inexpensive and easy to scale. However, businesses like this find it difficult to capture a significant market share (and keep it).
What is the best business model for ghost kitchens?
A ghost kitchen is an excellent way to take advantage of the off-premises dining trend. At KitchenHub, our mission is to help businesses tap into the massive takeaway and delivery demand sweeping the industry. Our system allows us to aggregate orders and menus from multiple delivery methods. Orders are sent to the POS automatically, so your staff needs not re-punch orders.