How Will “Ghost Kitchens” Impact Conventional Restaurants?

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There is one topic that’s been impossible to ignore for chain restaurant executives in recent months — ghost kitchens, cloud kitchens, or virtual kitchens. It’s yet to be seen how significant these kitchens will become, but there are some indications that the trend is only going to grow.

The mere word “ghost” often causes fear within many people. However, some restaurateurs are starting to embrace this word as a part of their daily activities, creating a new business model with virtual-style restaurants that offer direct delivery. Ghost kitchens take the idea of traditional restaurants and eliminate the role of bartenders, servers, and all other staff, operating with only chefs, dishwashers, managers, line and prep cooks, and delivery drivers. Hence, the term “ghost kitchen” (in simple terms, also known as a delivery-only restaurant).

Traditional restaurant business models usually face high overhead costs, high upfront investments, and an oversaturation of competition. The ghost kitchen model allows restaurateurs to enter the market with less of a risk since the investments and costs are usually much lower. A ghost kitchen model also allows for restauranteurs to try new recipes and concepts quickly, giving the consumer a wider variety of food options/choices.

Before the rise of food-delivery sites, restaurants were not affected by the growth of the Internet. However, the trend of ordering food from home has expanded, creating more competition for traditional restaurants that are not ready to adapt.

The rise of delivery-only restaurants will definitely affect the future of commercial real estate developments. For example, the location of future CRE developments will be affected by the rise of ghost kitchens. CRE developers whose goal is to attract these restaurants as tenants will have to choose locations with convenient parking for delivery vehicles.

However, unlike traditional restaurants, ghost kitchens are not as heavily impacted by foot-traffic. Although it may be ideal for them to be located in higher-volume areas, they are more likely to get a lot of orders from less convenient locations than traditional restaurants, which means they can receive more consistent business. As more eateries transition to the delivery-only concept, CRE developments will be forced to accommodate these changes.

This could lead to a major disruption of how chain restaurants work today. Most probably, such a result would have to mean a huge general reduction in store numbers. Restaurant companies with big portfolios and already disinterested customers could end up with a significant real estate issue.

As a restaurant chain, they now have an obligation to explore different things, such as reducing the number of locations, and certainly including online delivery service if they haven’t already.

But it is also natural that traditional restaurants will resist. So when is this restaurant pushback going to start, and how? For some bigger restaurant chains, it has already begun, while others are already investing in ghost kitchens.

It’s only through nurturing real relationships with the modern customer and constantly evolving that restaurant brands can distinguish themselves from mere images and words on a screen. After all, restaurants will still be restaurants and not ghosts in the machine.

Do you need more information about new commercial property trends? For more information, you can reach us at joe@joekillinger.co

Written by

Entrepreneur-Investor-Founder. Posting tips and insights from my experiences in real estate, investing & entrepreneurship- https://www.joekillinger.co/

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