DISCLAIMER: This content is provided for informational purposes only and is not intended as legal, accounting, tax, HR, or other professional advice. You are responsible for your own compliance with laws and regulations. You should contact your attorney or other relevant advisor for advice specific to your circumstances.
Ghost kitchens deliver restaurant-quality experiences and a wide variety of cuisines to customers at their convenience. These delivery-only restaurant concepts operate without wait staff or seating, totally transforming the playbook for what a successful restaurant brand can be.
A few different business models provide opportunities not only to restaurateurs looking to expand but also to those seeking a way into the market. We’ll take a detailed look at ghost kitchen business models so that you can help your business successfully reach its goals.
Different Types of Ghost Kitchen Business Models
How do ghost kitchens work? Ghost kitchens are delivery-only restaurant concepts that operate out of a shared kitchen or dark kitchen – a kitchen with no front-of-house to serve guests, which some restauranteurs see as a major benefit. Virtual restaurants, on the other hand, are brands that expand into kitchens that run storefronts but want to expand their operations.
Three components combine to create unique ghost kitchen business models: origin, ownership, and structure.
The origin of a ghost kitchen concept is where it gets its start. Some expand range or capacity by creating partnerships with other kitchens that can produce their menus. Other ghost kitchens start as one-off delivery-only concepts that fulfill orders from a shared kitchen space.
The ownership of a ghost kitchen is who owns the brand's intellectual property. This property includes everything associated with the brand - the name, menu, unique color scheme, and operational structure.
Structure defines how a business operates. Some ghost kitchens only operate in one location, producing everything in a large commissary kitchen, while others expand using a hub-and-spoke system with prep kitchens. There is also the option to create a shared kitchen for restaurant teams to test new concepts.
Here's how you can promote your online ordering program to both increase orders and build strong customer relationships, even at a distance.
What is the structure of different ghost kitchen businesses?
Whether you’re looking to strike out on your own with a new ghost kitchen concept or are ready to expand your best-selling brand, these different ghost kitchen business models have paved the way. The amount of work, capital, and risks differ for each model, so consider which is right for your independent or third-party business.
Ghost kitchen concepts independently owning and operating their kitchen operations are the most comparable to the traditional restaurant model. It also comes with a lot of the same risks, such as finding the right location, stocking it with equipment and supplies, hiring staff, and maintaining the kitchen and building.
Keeping the ownership and structure of the business simple is a reliable way to keep overhead costs down, but you will need the capital and funding to get it started without help from an outside partner.
Here are a few things to consider about independently owning your ghost kitchen:
Some restauranteurs like being in full control, while others are happy to let a third party assume some of the risks.
Managing costs is critical, but restaurant-owned ghost kitchens stand to earn a higher cut of the profit.
Scaleable businesses are best when to start small, expanding when you’re ready.
Marketing a new brand is a challenge that new restaurant concepts must face head-on to stay competitive in delivery markets.
Third-party, commercial-grade kitchens
Businesses that maintain and lease commercial kitchen space to other concepts offer an opportunity to grab a piece of the ghost kitchen hype. Shared kitchens and commissaries are turn-key solutions that do not focus on brands or services – instead, they provide fully-equipped, commercial-grade kitchen spaces that make it easy for new concepts to get started.
Operating a ghost kitchen out of a shared kitchen space is an elegant solution for that brand you just know would succeed. All you need to get started is a marketing strategy, a delivery solution, and a business license.
Here are some pros to choosing a third-party kitchen:
You’ll have a little less control over the details and location.
Less initial capital is required to get started.
Equipment maintenance and some staff are part of your lease.
It has lower utility costs than traditional restaurants.
Offshoot locations of a successful brand
Ghost kitchens are an innovation for restaurants that want to expand their reach with less hassle, overhead, and risk than traditional restaurants. Start with a tested menu you know guests love and add the streamlined delivery experience they demand.
Some of these expansions offer curbside pickup and delivery, but many make use of dark kitchens and only interface with customers through delivery orders. You might be thinking of the take-out offshoots of some national corporate brands, yet that’s one example of this business model. Thriving local businesses utilize ghost kitchens to expand their reach at their scale and pace.
Don’t miss the tips below when starting an offshoot location:
Start with a proven brand and menu.
Rely on existing marketing channels and customers.
Prioritize capital and investment in staff, training, and equipment for a new location.
Option to lease third-party kitchens to test expansion into a new market.
Hub-and-spoke business models look a lot like offshoot locations, but with subtle differences. Offshoot locations are self-sustaining. Hub and spoke business models support satellites like food trucks or dark kitchens from a large central hub.
Because they can take advantage of an area’s resources and have access to its customers, fine-tuned hub and spoke businesses are smooth and generate steady revenue.
These business models are a little more complex and aren’t designed as an expansion of an existing business. It can also be difficult to expand once a hub-and-spoke business is established.
Delivery-only ghost kitchen concepts
Delivery-only ghost kitchens, owned and operated under various structures, focus on providing restaurant-quality meals with delivery convenience. These concepts forgo the brick-and-mortar experience for a new style of service.
The process of starting a delivery-only ghost kitchen concept is about the same as a traditional restaurant. However, all the upfront and operating costs associated with in-person service are null. The cost of bathrooms, decor, tables, front-of-house labor and technology, rent for that space – none of these costs apply to delivery-only concepts.
Marketing a delivery-only concept requires an aggressive online strategy that convinces customers to try an unfamiliar brand. For example, an attractive website featuring a partnership with a famous chef or an endorsement from a trusted critic can go a long way.
What are the expected margins for ghost kitchens, and how does that compare to traditional restaurants?
One of the biggest appeals of ghost kitchens for restauranteurs is that they can expect to have slightly larger margins than traditional restaurants. This increase is because many ghost kitchens don’t have the overhead costs associated with FOH operations.
This growth in margins doesn’t come without additional work. Ghost kitchens must run aggressive online marketing campaigns to stay on customers’ minds. And, there are the costs associated with third-party delivery services, which vary by location and your business's needs.
These additional costs make it unrealistic to expect a drastic decrease in operating cost – ghost kitchens might see an additional 5-15% in profit compared to a traditional restaurant model.
The profit margins of traditional restaurants range from 0-15%, but most restaurants make 3-5% profit, especially in the first 3-5 years of operation.
Ghost kitchens can expect to be profitable sooner, which depends on labor costs. If you’re the chef and hire a friend for a few hours a week to create marketing content, the business should become profitable quickly.
Regardless of your ghost kitchen situation, ambitious businesses will have to make the significant investments typical of the restaurant industry and can expect to become profitable after a year or two of business.
Pros of Ghost Kitchen Models
Flexible and adaptable to the needs of a brand or the capacity of the restaurant
Slightly lower overhead costs than traditional restaurants
Meeting customer demand for convenience and high-quality delivery
Focus on menus that deliver restaurant-quality meals
Freedom from some customer expectations that come with FOH operations
Cons of Ghost Kitchen Models
Marketing for ghost kitchens has to be aggressive and is limited to the web, social media, and app marketplaces
Customers can be reluctant to try a brand they don’t recognize or have experience with
New business models that haven’t yet proven their stability
Less control over customer experiences – ghost kitchen owners have to trust the delivery services they partner with to provide great experiences
Customers create their ambiance – the experience of eating from a takeout container in front of the TV isn’t the same as the elevated experiences on which some brands rely
Ready to start a ghost kitchen?
Ghost kitchens are exciting new business models that could make your cool new restaurant concept a successful reality. Once you determine the type that works best for you, all you need is a business plan and your ambition to pave the way to achieving your goals.
Does a ghost kitchen sound like an accessible foot in the door of the industry? Check out all of our resources on Ghost Kitchens: