How to pick the Best business Model for your Ghost Kitchen

August 16, 2022
ghost kitchen

Ghost kitchens (aka dark kitchens or virtual kitchen) started popping up in the 2010s following the growing demand for quality food delivery and rising real estate prices and now become a potentially highly profitable model in the restaurant industry. Without public presence such as foot traffic, parking lot, and waiters, this food business is fully functioning on ordering and delivery apps like One2. It enables lower labor costs and overhead costs, minimal risk, adjustable menus, rapid deliveries, customer convenience, and higher revenues via off-premise dining. 

Should you be wondering how to start a ghost kitchen, it is crucial to discover the ghost kitchen model that fits your firm’s goals and composition. We shall explain some best models to help you with that.

Is the ghost kitchen model for any restaurant owners? 

Image: NebraskaTicketToWork

If yes is your answer to all these questions, you will definitely get on well with the ghost kitchen concept:

  • Are you interested in the latest hospitality management software? 
  • Are you interested in data-driven optimization? 
  • Do you prefer studying data carefully to interacting with customers face-to-face? 

6 best types of ghost kitchens

Image: Forbes

Here are the main virtual restaurant models with high restaurant brand awareness and profit potential:

Brand-owned ghost kitchen

1. Definition

Brand-owned ghost kitchens (aka traditional ghost kitchens or delivery only brands) are the delivery only restaurant type without dining or takeout. One brand. One kitchen. One physical location.

2. Setup

  • The cheaper-rent location that is still near frequented areas
  • Having multiple aggregators handle deliveries for maximum exposure. Occasionally, running self-delivery operations.

3. Upfront investment

Low cost

4. Business scaling

Possible with the original operation expansion and a centralized kitchen creation. You can thus grow multiple pop-up locations and concurrently ensure smooth management of operational costs.

Dine in restaurants with in-location food delivery

1. Definition

This virtual brand model refers to adding a ghost kitchen space to your brick and mortar restaurant/ traditional restaurant for improving volumes, fending off downsizing and financial ruin, generating additional revenue, or testing out new food concepts. The restaurant’s best-sellers are in the food category focused here and are tweaked for delivery.

2. Setup

  • High-rent, densely populated real estate location
  • Aggregator partnerships for delivery services (and sometimes operating its own ghost kitchen delivery)

3. Upfront investment

Low but rises when the restaurant owners pay more attention to growing the ghost restaurant delivery side, say powerful software and higher labor costs.

4. Business scaling

Hard as it is not a true virtual kitchen. 

Dine in restaurant brand running from shared kitchen space(s)

1. Definition

In this business model, your ghost kitchen operates in a separate location from your existing restaurants/ established restaurants with dine in customers. You prepare food in a shared kitchen space (aka commissary kitchen).

2. Setup

  • Low-rent kitchen facilities
  • Helping separate your restaurant business operations and expand reach.
  • Running during peak periods, for example, holidays. 
  • Having delivery drivers from aggregators handle the delivery business. 

3. Upfront investment

Medium. There are additional costs like renting a space. Should the operation grow, employing more employees is necessary.

4. Business scaling

Possible but subject to your setup and direction. For instance, instead of operating multiple shared kitchens that can cause uncontrollable logistical issues, you may expand the operations in a location before growing reach with one temporary physical storefront or some (e.g., food trucks).

Hub and spoke

Image: FoxBusiness

1. Definition

Having variants (e.g., shared kitchen, multi-brand, and one brand), hub & spoke (aka centralized kitchen or central production kitchen) has a production hub that prepares practically all the food and pop-up location (aka ‘spoke’) that finalizes the meals, assembles the orders and works out food delivery, enabling widespread distribution. A food truck or fleet of food trucks can be the ‘spoke’ because of their less preparation space than a commercial kitchen.

2. Setup

Low-rent location (leased or owned, not a shared kitchen)

3. Upfront investment

High overhead costs owing to the high volumes pertained. 

4. Business scaling

Simple given that you have seamless ‘hub’ operation with low-cost ‘spoke’.

Multi-brand virtual restaurant

1. Definition

Multi-brand virtual restaurant (aka multi-brand single operator or multi-brand conglomerate) means one business operates multiple brands (virtual brands/ virtual restaurants that serve many cuisines) in a shared or own kitchen, accessing a wider audience. No pop-up locations. No dine-in brick and mortar restaurants. No takeout. Delivery only. 

2. Setup

  • Prime location
  • The ghost kitchen brands are connected (e.g., poke and sushi), enabling preparation by one team and ingredients purchased at volume for a lower price.
  • Aggregator partnerships for the food delivery service (often)

3. Upfront investment

Low to medium. These ghost kitchen facilities are costly to set up compared to ghost restaurants serving only one cuisine. For instance, a larger space is necessary. But they only need one physical location, not being as costly as the hub & spoke virtual restaurants.

4. Business scaling

Relatively simple, provided that what is on offer suits the demographics.

Virtual franchise 

1. Definition

A virtual franchise (aka outsourced ghost kitchen) is a virtual brand that is a base of operations and sometimes has a hard time working out its marketing strategy and keeping its slice of the market.

2. Setup

  • A pop-up without a centralized kitchen
  • Ordering semi-prepared dishes and having outsourced food preparation and food delivery. 

3. Upfront investment

Extra low

4. Business scaling

Simple if you successfully set it in a centrally-located place without excessive competition.

Image: fermag

Bottom line: Based on the educated guess, the most sustainable ghost kitchens are:

  • the multi-brand shared kitchen, 
  • and the owned hub & spoke multi-brand ghost kitchen.

Because of:

  • their scalability. Handling large volumes lets them reduce their food cost. Also, they diversify their investments to minimize risks (multiple restaurants that serve many cuisines).
  • their experimentation potential with various virtual restaurant brands without spending lots of money along the way.

Turn a profit with One2 software for ghost kitchens 

One2 for Ghost Kitchens

One thing for sure is that what makes a restaurant business successful in the ghost kitchen industry is cost control and business optimization. And this is where One2 comes in. 

One2 delivers best-in-class discovery, ordering, and fulfillment solutions to help you devise effective business strategies, simplify business plans, minimize costs, streamline the supply chain, and maximize your own kitchen’s reach, customer experience, and revenues.

Some of the software’s beneficial features include:

Related questions

1. How do ghost kitchens work in general?

  • The order and order details received from the customer 
  • Food prepared
  • The order packed
  • The order delivered to the customer by the delivery driver

2. Are ghost kitchens the future?

Yes, considering their big market size at $43.1 billion in 2019 and projected to reach over $71 billion by 2027 and the prevalence of food delivery services. Besides, the recent pandemic is more than enough to prove the uncertainty of the business world and the importance of not putting all your eggs in one basket. 

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