How Does a Ghost Kitchen Work?

Ghost kitchens—also known as dark kitchens, cloud kitchens, or virtual kitchens—have accelerated in popularity in recent years. But how does a ghost kitchen work, and is it the right business model for your restaurant?

The rise of ghost kitchens is often accredited to the pandemic, where people had no option but to order food for delivery. But, according to the National Restaurant Association, food delivery and takeout have become a part of our everyday dining experience.

Currently, more people are dining off-premise than on, which has only increased since the pandemic. For many restaurants, keeping up with technological advancements to enable online ordering, payment, reservations, and delivery management has become key to staying afloat.

The convenience of ordering food for delivery is unmatched, which is why the ghost kitchen market is estimated to exceed $112 billion by 2027. Businesses that capitalize on the demand can boost and streamline sales at scale.

So, are you a startup looking to open your first ghost kitchen? Or are you an established restaurant wanting to expand into new markets cost-effectively? Whatever the case, let's explore how to set up a ghost kitchen.

What are ghost kitchens?

Ghost kitchens need a traditional dining space or storefront. They're delivery-only restaurants, sometimes with click-to-collect options. So, while they have all the kitchen facilities to produce meals, these meals are exclusively for off-premise dining.

Customers can order from the restaurant via the branded website or app as well as through third-party apps like Uber Eats, DoorDash, or GrubHub.

Many restaurants that adopt ghost kitchens already have an established restaurant. The ghost kitchen is either a separate extension of the traditional restaurant or a standalone kitchen space in another location. But startups can launch ghost kitchens, too. For businesses on a budget, it's a great way to test the waters.

6 Ways ghost kitchens can streamline sales

Ghost kitchens significantly reduce the overhead costs and operational stresses of running a front-of-house floor space. So, you can focus on the thing that you're most passionate about—your food.

With significantly more funds and time to channel into your menu, you can concentrate on developing tasty dishes that wow your customers. Why not allocate more of your budget towards using higher-quality ingredients? Or, hire more experienced, niche chefs to diversify your menu?

In doing so, you can create a menu that entices new customers to place an order and keeps your existing customers coming back for more.

You'll also have more time to perfect another sales-driving tool: your online ordering platform.

Online menus need to be just as alluring and on-brand as physical menus.

Using online ordering apps like EasyOrder or UberEats, you can create a branded online order app that fully integrates with your existing website. Choose on-brand fonts, colors, images, and layouts that tempt customers to make a purchase.

Facilitates business expansion while minimizing costs

It's every restaurant owner's dream to service customers in multiple locations.That said, achieving this in the traditional way requires a hefty budget.

To set up a brick-and-mortar store in a new location, you need to rent a restaurant space and kit it out with enough equipment to handle the anticipated demand. And then there are the costs of decorating your storefront, furnishing your dining space, and allowing for operational costs.

Along with your chefs, you'll also need to hire front-of-house staff (hosts, wait staff, and bartenders) as well as additional cleaners to manage the demands of your dining area.

Ghost kitchens have the opportunity to branch out to different geographical locations without incurring many of these costs. Rents, labor costs, and other overheads are significantly lower. So, you can identify where your target customers reside and set up a ghost kitchen in the local area for a fraction of the cost.

But despite the lower risk, even ghost kitchens can fail at launch. Adopt accounting software that is fully equipped to give you 360-degree visibility of your business finances, from your bottom-line health to your daily cash flow.

Make sure it comes with a bookkeeping app so you can track your financial info on the go. This makes it convenient to record expenses, monitor stock levels, and manage supplier invoices, so everything is easy to keep up to date and on top of.

Enables low-risk testing of new concepts and locations

Getting your restaurant model, products, and pricing right takes trial and error. Ghost kitchens have lower overhead costs and increased flexibility, making experimentation much less of a risk.

Suppose a traditional restaurant wants to try new concepts, locations, pricing strategies, etc. To do this effectively, they'll have to work these changes into the structure, design, and branding of their established restaurant.

If customers don't resonate with the changes, it can damage the business's reputation, lost sales, and hurt bottom-line revenue. But it's different for ghost kitchens.

Ghost kitchens aren't as tied to a specific visual brand image, which makes it easier to tweak branding styles to see what your customers like most. Testing ingredients, flavors, and recipes also pose less risk, as they can be quickly changed in response to preferences.

These experiments can be carried out before you commit to a dine-in restaurant location. With a good idea of what your customers want, your traditional restaurant should enjoy a more successful launch should you go down that route in the future.

You could even consider mass-producing food or branded merchandise to boost sales. Think Hard Rock Cafe and Planet Hollywood. But instead of creating a retail extension (which is complex and financially draining), you can sell your branded products via your website, third-party marketplaces, and retail stores.

To do this, you'd need specialized software for manufacturing. This is essential for streamlining operations. So, you can more effectively manage inventory, keep an eye on production costs, and analyze profitability. Ghost kitchens have fewer dependencies and financial bottlenecks to consider, making this type of software easier to integrate.

Optimize staff and restaurant operations efficiently

Trying to coordinate front and back-end operations has reduced many restaurant owners to tears at some point. All it takes is one thing to go wrong, and you're dealing with slow processes, frustrated customers, and stressed-out staff.

Optimizing a virtual kitchen is less demanding because you don't need to worry about streamlining front-of-house operations. But if you want to streamline sales, there are still a few critical best practices to follow.

Separate takeout, delivery, and dine-in food production lines: This is essential if you're running your ghost kitchen within a restaurant space.
Use data to optimize processes: When are your peak delivery times? What are the most popular items on your delivery menu? What are your rates of overstock or understock? This can help you optimize staff volumes, workflows, and purchasing budgets.
Use automation and integration: Your restaurant management software, aggregator tools, POS system, website, and more should be integrated to streamline end-to-end processes.

Improves online order management for better customer service

Some traditional Restaurants tend to prioritize dine-in customer experiences, leaving online customers feeling neglected.

Ghost kitchens fully focus on giving customers a speedy, streamlined ordering and checkout process. With all of your attention focused on your online customers, you can optimize your ordering platform, delivery partner offerings, payment options, and delivery process to suit your customers' preferences.

Leveraging technology is key. The National Restaurant Association found that for 54% of consumers, ordering takeaway is essential to their lifestyle. This is particularly true for Millennials and Gen-Z, who are a growing market.

Utilize aggregator tools. Aggregator tools streamline order management by automatically sending tickets to your ghost kitchen and recording these transactions in your point-of-sale (POS) system.

You can partner with a variety of apps and be assured that all orders will be sent out and delivered accurately.

Paves way for effective marketing initiatives to attract customers

Customers who want takeout and delivery are active online. This means they will be susceptible to online marketing campaigns.

Incentivize customers: Contact customers with tempting new products and promotions. Do research on how to increase your restaurant sales by offering exclusive discounts, limited-time offers, or budget-friendly meal deals right within your online ordering menu.

Build your brand identity on social media: Use platforms such as TikTok, Instagram, and Twitter. Share photos, videos, and behind-the-scenes content to increase brand awareness and get mouths watering.

Use pay-per-click (PPC) ads: PPC ads are shown to customers who type your chosen keywords into Google or social media sites like Facebook and Instagram. Because you're at the top of the page, you'll naturally gain more traffic and, hopefully, more customers. You can also pay to be displayed on delivery platforms.

Create on-brand marketing campaigns: Are you eco-friendly and committed to using sustainable food products or reusable packaging? Are you a laid-back, low-budget company that wants to provide students with satisfying, stomach-lining grub? Communicate your brand story and values via online campaigns.

Encourage online reviews: Invite customers to leave ratings and reviews on the delivery apps they've used. Customers use online reviews to influence their purchase decisions so that good reviews can generate lots of new customers.

Wrapping up

So, how does a ghost kitchen work, and does it really streamline sales?

Essentially, ghost kitchens operate like traditional restaurant kitchens. But instead of bringing food to your customers in your dining area, you're packaging your meals up and delivering them to your customer's door.

As for streamlining sales, ghost kitchens are less financially and operationally demanding. This means that you can invest more time and resources into optimizing your online order app for sales as well as marketing and operations. Plus, you can work on crafting a tantalizing menu that keeps customers coming back for more.

How does a ghost kitchen work and streamline sales?