Instead of a shared space with multiple operators, the new iteration of ghost kitchens includes ghost menus that are executed out of a commissary production kitchen or a restaurant that is typically owned by one entity.
Many ghost or digital kitchens are designed like commissaries: It is all about flexibility and flow. Image courtesy of Cini-LittleCall them what you will — ghost kitchens, cloud kitchens or digital kitchens — these behind-the-scenes businesses exploded onto the scene amid the takeout frenzy during COVID-19. Since then, they’ve evolved to become less of a stand-alone concept in their own right to more of a piece of the overall puzzle of doing business in today’s increasingly competitive, penny-pinched industry.
“The term ‘ghost kitchen’ does get thrown around quite a bit,” says Ryan Mikita, principal, Ricca Design Studios, New York. “The model I hear about going under these days refers mostly to the third-party, outsourced kitchen approach where a developer buys a space and builds a commissary to support different foodservice platforms.”
Mikita’s mostly referring to shared kitchen spaces like Kitchen United. In late November 2023, Kitchen United executives announced plans to close all its physical locations to focus on its software. This was around the same time that grocery giant Kroger closed all its Kitchen United virtual food courts, which had opened as part of a 2021 partnership. Other ghost kitchens, such as Reef, were pared down by Wendy’s due to underperformance. And that was followed by CloudKitchens’ downsizing announcement, among news that other ghost kitchen companies were slowing or closing down. Just last year, the virtual restaurant company Nextbite — once a buzzed-about business — announced a series of layoffs and a subsequent sale.
“Coming out of the pandemic, society seems to be moving back toward more traditional outlets and maintaining balance or distancing a little bit more from these technologies,” says Mikita. “We hear about more of a desire for more up-front cooking and for opportunities for people to see their food being made — and that somehow has to be part of that experience. Everyone thought mobile ordering was going to be the next big thing, and it’s definitely here to stay. But what we’re seeing is that the [ghost kitchen concept] has its own pitfalls. There are labor issues, and the technology is less predictable. And so, it’s harder to plan around those spaces and whether they’re going to be effective. There’s a lot of risk in designing a space with multiple operators today.”
Despite these changes, slightly more than 34,000 ghost kitchens remain in operation in the U.S., as reported by third-party research firm Datassential. That’s not too shabby, and then there’s the stat from 2021 that the U.S. ghost kitchen market stood at about $56.71 billion — part of a global market projected to grow to a whopping $157 billion by 2030. If we’re going by Mikita’s comment that the term “ghost kitchen” can mean a lot of things, however, those numbers could be slightly inflated.
If we’re just talking about ghost kitchens as that shared or cloud kitchen concept, there’s at least one such business going strong: e.terra Kitchen in New York City still leases out space to budding restaurateurs, according to restaurant consultant Mark Moeller. He designed the space to create a series of mirrored kitchen suites consisting of 12-feet-by-16-feet hoods and dedicated equipment, such as 4-burner ranges and convection ovens with some shared combi ovens and high-volume equipment, as well as remote cold and dry storage. “It’s expensive for the landlord to operate, but those costs are passed to the end user,” he says.
Maybe that’s precisely the problem driving developers out of the ghost kitchen market — these expenses that newer restaurant brands need to take on, not to mention the high commissions taken by third-party delivery platforms. “I don’t hear the term ‘ghost kitchen’ much anymore. I mostly hear a desire for a ‘commissary’ or ‘central production kitchen,’” says Kip Serfozo, FCSI, LEED AP, ID+C, WELL AP, design director, Cini-Little International Inc. “They might seem like ghost kitchens or shared kitchens, but instead of being rented out to multiple operators, they’re production centers for multiple brands or menus owned by one large operator like a university, corporate campus or healthcare facility.”
In that case, the same design rules that apply to commissaries apply to any type of shared or multi-kitchen space handling multiple menus: flexibility, flexibility, flexibility. “There have always been these commissaries; the difference is the way they’re used,” Serfozo says. “Nowadays, with the technology piece, it’s easier to offer virtual options.”
Rather than throw all eggs into one ghost or shared kitchen basket, it seems more operators today essentially offer ghost menus or perhaps, better stated, virtual/digital brands out of their own brick-and-mortar locations — or at least mostly.
Take, for example, San Francisco-based Starbird Chicken, owned and operated by Aaron Noveshen of The Culinary Edge, a restaurant consultancy. Starbird Salads, Starbird Bowls and Starbird Wings used to be delivery-only, produced in brick-and-mortar locations, as well as in leased ghost kitchen facilities. But now there’s the option to pick up items from those menus at physical Starbird Chicken locations.
And then there’s Smokey Bones Bar & Fire Grill, which produces all the food from its digital concepts — The Wing Experience, The Burger Experience, Tender Box and Bowl Market — at its 61 brick-and-mortar locations for pickup or third-party delivery. “With our barbecue concept, the prep is basically all on the front end; because we’re retherming and serving, we’re able to do these additional concepts,” notes Peter Farrand, chief food and beverage innovation officer.
Even some independents are getting into the digital brand space to build revenue streams. Caribbean restaurant Bronx Soul Food in New York City offers three additional menus for pickup or delivery out of its existing restaurant: Bronx Variety Wings, Bronx Fish and Chips, and JerkFish Jamaican Restaurant. “We start cooking at 7 a.m. every day, and everything is oven-cooked or grilled or fried in batches and held in our warmers out front or packaged for pickup or delivery,” says owner Philip Duncan. With only a few seats in the actual restaurant, 90% of the revenue comes from off-premises consumption, so the restaurant has been poised to handle virtual brands from the get-go.
Having multiple menus “creates more awareness about us” outside of the physical restaurant location, Duncan explains. Customers will find the virtual brands online and then realize the food is coming from Bronx Soul Food. He’s currently working on separating the various brands with their own websites that will still funnel orders on the backend to the same place.
The Great Greek Mediterranean Grill recently added a few digital kitchen operations to its portfolio to break into dense, urban markets. Traditional restaurants, however, remain at the core of the franchise chain’s business. The virtual brands also generate more revenue outside of traditional peak lunch and dinner rushes. “We’ve been able to hold a steady stream of orders throughout the day,” Duncan says.
For The Great Greek Mediterranean Grill — like the other operators mentioned — running virtual or digital brands is just another tool in the toolbox for building volume and revenue, not the be-all and end-all. The franchise chain’s original brick-and-mortar locations still make up the core of its sales and business. But, in some markets, diners have the option of ordering food from The Great Greek’s digital kitchen; they can order through the restaurant website or a third-party delivery platform and either have their food delivered or pick it up themselves from ghost kitchens (shared kitchen spaces) in Miami, Dallas-Fort Worth, Los Angeles and San Diego.
“We saw there were some good opportunities to explore low cost of entry in markets that are difficult to expand in — where they would take too long or cost too much to develop new brick-and-mortar locations,” says Bob Andersen, president of The Great Greek. “The real key was not to be a ‘ghost kitchen’ per se; we just wanted these [digital kitchens] to be another tool to expand the brand. Our overall strategy is still to have that brick-and-mortar presence but use the digital kitchens as a way to serve more customers in dense, more urban environments.”
In addition to opening digital kitchens, The Great Greek has also introduced some smaller-format locations to expand its customer base and sales while saving on overhead and labor costs. Compared to its standard restaurant’s 30- to 45-seat, 1,700- to 2,000-square-foot dine-in model, Great Greek To Go models are takeout-only locations in busy retail and shopping areas. These units occupy 500 to 900 square feet and feature just a service counter and no indoor seating. The first Great Greek To Go opened last year in College Park, Md., near the University of Maryland. In addition, The Great Greek has also developed buildout options for a variety of nontraditional venues, such as shopping malls, entertainment venues, stadiums and more. Rollout for those locations is slated for this year.
Even with their digital kitchens, the goal is “to have that brand presence; we’re not interested in existing in a market without a physical presence,” says Andersen. Eventually, the chain hopes to open a brick-and-mortar location in those emerging markets. But, in the meantime, “our menu travels exceptionally well for takeout, so why not try to reach more customers?” The digital kitchens come in handy for overflow catering orders as well.
What does this all mean for the ghost kitchen market? Perhaps The Great Greek’s Andersen puts it best: It’s hard to have a restaurant brand without any physical presence, but then again, it’s limiting to only have that physical presence.
“Here’s the biggest question restaurant executives are facing today,” Andersen says. “How do we transition from being old-school restaurant people who only cater to dine-in customers to figuring out how this digital piece enhances our brand and gets more product in places with the same experience with the food?” Ghost kitchens, digital kitchens or virtual brands — call them what you will — they’re just another option to explore when building revenue streams.
