For traditional restauranteurs, ghost kitchens may seem like the scariest new addition to the exploding delivery sector, which is forecast to hit $75.9B in gross volume by 2022. With growth in delivery running over 9%/year , and the sector expected to soon comprise 11% of the total market, no one can afford to let any form of delivery eat away at their revenue. But how can restaurants operating in fixed locations, with significant front-of-house costs, compete with completely virtual restaurants that take orders solely via apps and only for delivery, using rented kitchen space from outfits such the rapidly expanding Kitchen United (which is backed by millions of dollars from Google)?
Here are three keys to not just surviving but actually thriving in the era of ghost kitchens.
1. Food delivery delivers new customers
If you’re not already offering delivery, either your own or via a third-party food delivery app like UberEats, Grub Hub or Door Dash, now is the time to start.
Yes, costs can be significant – third parties can take 25-35% commission – but delivery is increasingly the best way to capture the heart of your current and future customer base: millennials. This now-dominant generation spends a higher percentage of its income on prepared food than any other demographic group, puts a higher premium on convenience, and will have an increasing impact on your business. While they have many food delivery apps to choose from, you can now effectively reach them across delivery platforms by using consolidation apps like Chowly.
2. Restaurant branding works
As an established restaurant, you have a distinct advantage over new virtual restaurants that have no physical marketplace presence or awareness: your brand. Newcomers must invest in establishing a brand from scratch – a name, a concept, a promise of what kind of food they’ll be serving up. You, however, simply need to reinforce what people already know and love about you.
The simplest way to do this when delivering food is to brand your packaging, from bags to napkins. Custom print napkins can be particularly important, as many customers are loyal to a specific app, rather than a particular restaurant, this can leave your customers wondering “So, where exactly did we get that great burger?” In addition to your logo and website, you can print special offer new menu items, games, or, if it fits your brand personality, jokes and fun facts, to enhance and reinforce your unique brand experience.
3. Restaurants that experiment win
Perhaps most important of all is the need for restaurants to experiment, especially when the risk of doing so may be much lower than the risk of being left behind.
Some restauranteurs are already creating virtual kitchens inside their existing facilities, or within cloud kitchens as delivery-only additions to brick-and-mortar brands. The Cornerstone Group in Chicago, for instance, found that typical food delivery services couldn’t uphold the quality and experience their higher-end customers expected, so they opened a new brand, Urbanbelly, renting space from Kitchens United, and letting customers either pick up food or have it delivered via Caviar.
And if you’re a multi-location operation, you can exploit a particular advantage over ghost kitchens: closer proximity to more customers. All competitors, while in many ways operating virtually, are still constrained by the reality of geography: the food can only travel so far before it loses its appeal. In addition to offering delivery via apps, experiment with hyper-local marketing campaigns that target residents within a mile or two of each location, with specific incentives for being a truly local customer.
Ghost kitchens may be the latest challenge to the already-stressed dine-in restaurant business, but they certainly won’t be the last. By learning to adapt, via food-delivery apps and sheer ingenuity, supposedly old-line operations can develop the agility and adaptability required to take on whatever the new competition serves up next.
7 Shifts blog: Everything you need to know about virtual restaurants
The New Food Economy: The rise of the ghost kitchen could change the restaurant delivery game
The Spoon: Kitchen United announces another expansion
Restaurant Drive: Virtual kitchen start-up secures $13.5 M in funding