Costs soar + many competitors “Ghost Kitchen” is difficult to earn

As competition intensifies and costs rise, ghost kitchens threaten to take off and fall.

The rise of “ghost kitchens” and the creation of virtual brands is seen as a way to survive for struggling restaurants, accelerated by the New Crown virus (CCP) pandemic. However, these once highly creative solutions have been repeated over and over again, sometimes to the detriment of effectiveness.

Ghost kitchens, also known as cloud kitchens or dark kitchens, offer only delivery Food. As consumer demand for food delivery continues to grow, this is becoming increasingly important to the restaurant industry. Third-party food delivery sales jumped 138 percent in December, according to analyst firm Second Measure.

Meanwhile, virtual brands are only appearing on third-party delivery apps, relying on these platforms rather than physical storefront marketing. The brands’ food is made in traditional restaurant kitchens or dark kitchens to boost sales performance and thus reduce labor and rent costs.

But every success story is followed by others. Full-service restaurant chains Applebee’s and Bloomin’ Brands have also decided to dip their toes in the water and create their own virtual brands to sell chicken wings.

A similar trend is emerging at Ghost Kitchen. New companies like Trolley Eats seem to pop up weekly, while well-known companies like Dave’s and Fat Brands have also announced they are renting dark kitchens.

BTIG analyst Saleh (Peter Saleh) noted, “As far as I can tell, demand for these ghost kitchens has skyrocketed, and prices are skyrocketing. Some restaurateurs are willing to pay the same price for a 200-square-foot ghost kitchen as for a 3,000-square-foot restaurant.

Dan Fleischmann, vice president of Kitchen Fund, a restaurant-focused venture capital firm, doesn’t think most restaurants can make money off of it, “It’s a very low-margin business to begin with, with the owners taking 30 percent of the profits and then platforms like DoorDash or UberEats cascading the profits. It’s really hard to make money.

Restaurants have to pay a commission to the platform for each order placed by third-party delivery apps. These fees account for 15 to 30 percent of the total order.

With vaccines being administered across the U.S., take-out food sales are expected to turn steady. Even though the new crown crisis has introduced many consumers to Grubhub or Postmates for the first Time, they may want to return to brick-and-mortar restaurant dining in the future. Declining demand could mean fewer tenants at Ghost Kitchen and fewer orders from virtual brands.