Ordering food from a delivery app? The odds are it might come from a ghost kitchen. And if you don’t know what these are, you will soon. Industry analysts say that these kitchens – which prepare foods either from online-only restaurants or from several traditional restaurants in an area – are becoming a big part of the U.S. restaurant business.
Ghost kitchens, at their most basic, are commercial kitchens that don’t come with storefronts. They also don’t come with any physical dine-in or drive-through restaurant attached.
Instead, they are spaces that restaurant owners might rent to prepare food off-site so that they can deliver it more quickly to their customers. A single ghost kitchen space, then, might prepare the food from several different restaurants in an area.
Then there are those restaurants that don’t have any actual dining or carry-out spaces at all. They instead rely on an Internet presence and several ghost kitchens across the country. These so-called ghost chains run no physical restaurants. Customers instead order food online where it is then prepared in a ghost kitchen near them.
This allows entrepreneurs to open online restaurants without worrying about operating actual dine-in or drive-through facilities. Most of the ghost kitchens that prepare the food offered at these ghost franchises are located in less expensive parts of town, often on the edge of industrial areas, where rents are cheaper.
Matt Giffune, co-founder of Occupier, a provider of transaction and portfolio management software, told Midwest Real Estate News that ghost kitchens are a smart business model in a world in which online ordering and food delivery has become so popular.
“These were already an existing concept before the COVID-19 pandemic,” Giffune said. “The pandemic, though, just accelerated the demand for these operations. A lot of people were working from home. They had nothing in the fridge. If you ordered your salad on DoorDash, it was most likely made in a ghost kitchen than in the actual retail outlet you were ordering it from.”
Consider MrBeast Burger. MrBeast, real name Jimmy Donaldson, is a YouTube star with more than 54 million subscribers to his channel. Late last year, Donaldson opened MrBeast Burger with locations across the country. The trick, though, is that diners can’t drive to any physical locations. The food from this ghost chain is created in other kitchens across the country and delivered to customers. Those hungry for a MrBeast Burger can only order the food through delivery apps.
Another YouTube star, Larray, a musician, launched his own ghost franchise in October of this year, Larray’s Loaded Mac. On its website, Larray’s Loaded Mac advertises itself as a delivery only restaurant. Again, the food here is created in the kitchens of restaurants across the United States, depending on from where customers order it.
These aren’t isolated examples. Ghost kitchens are growing, thanks in part to the COVID-19 pandemic. Throughout the pandemic, many customers have been hesitant to dine in-person at restaurants. That fueled an increase in online ordering. As more diners ordered their food for delivery, restaurants that offered delivery only didn’t seem unusual.
CBRE, in a May report, said that it expects ghost kitchens to account for 21 percent of the U.S. restaurant industry by 2025. Before the pandemic, CBRE said, ghost kitchens were only expected to account for 10 to 15 percent of the restaurant industry market share.
It’s not surprising that ghost kitchens have gained traction. CBRE in its report said that online food ordering rose 17 percent in 2020, largely because of the pandemic. And those habits — even people who might not have ordered much food delivery in the past have now learned how convenient it is — are expected to stick, something that will keep demand high for ghost kitchens.
“These ghost kitchens are 100 percent here to stay,” Giffune said. “The pandemic not only accelerated the demand for online food ordering, it created a new normal of expecting on-time delivery for pretty much anything. Ghost kitchens are just one example of this trend. If you need a gallon of milk or some toothpaste, you can order it online and someone on a scooter will deliver it to your house within 10 minutes. That is such a level of convenience that demand for it will only continue to increase.”
Giffune, who works in the Boston area, said that street-level retail is just starting to come back around the office building in which he works. This can make it difficult to know which nearby restaurants are actually open for lunch.
But Giffune can go online and have lunch delivered to the office, without having to worry about which restaurants are open and which are still closed.
“That solves a real need,” Giffune said. “It’s more convenient. I don’t see that trend going in the other direction.”
And while ghost kitchens are mostly thought of as an urban trend, Giffune said that they are actually opening everywhere, including suburban areas. This trend will only gain strength as more companies move to a hybrid work schedule in which their employees work some days in the office and others at home.
“People in the suburbs desire the same level of convenience that people living in the city do,” Giffune said. “The ability of people to work from anywhere will drive that expectation of convenience to more areas. Ghost kitchens will spread out from the urban areas and into the suburbs.”