The Rise of Ghost Kitchens in the Age of Coronavirus

July 23, 2020

By: Cal Tiger

CLEARWATER, Fla. – Ghost Kitchens are proving to be the salvation for today’s restaurants across Florida.  Ghost Kitchens are also called Cloud Kitchens or Virtual Kitchens or sometimes, Dark Kitchens.  When the Pandemic hit earlier this year, most restaurants had to close off their dining facilities.  However, the restaurants that were tech-savvy adjusted to Take Out and Delivery only models weathered the Pandemic pretty well and “pivoted” as they say in the Startup world. In fact, some restaurants have experienced Covid19 as a blessing due to increased take out orders and less cost due to not having to maintain a waitstaff and lesser costs of dishwashing, etc.

In the COVID-19 era, restaurants are resorting to Take-out & Delivery options. Currently, local restaurants pay as much as 30% of their gross daily sales to their Food Delivery Partners (eg, Grubhub, Ubereats & Doordash, etc). The race is on to develop a new online portal plus a local driver network that cuts delivery fees by 20% or more. Ghost Kitchen’s provide a way for traditional brick & mortar restaurants to compete more effectively by implementing a new framework, which combines food prep, delivery, contactless ordering and new disruptive models such as Food Incubator, culinary workshops, coworking, retail options, and other innovations. In summary, they help restaurants increase sales and cut their food delivery costs.

So, what are Ghost Kitchens exactly? Ghost Kitchens aka Cloud Kitchens or Virtual Kitchens are technology-powered restaurants that offer an array of food products, retail items, and liquors from a single restaurant or a group of nearby restaurants via app-based delivery services. Ghost Kitchens compete with other restaurants, Food Delivery Partners, and retailers like Amazon/Whole Foods as well as the local Publix.

While a single restaurant can function as a Ghost Kitchen (eg, Papa Johns and Little Caesars Pizza and Dominos have long offered Take and Delivery only) a new trend is emerging in the Restaurant space that combines technology, real estate, and skilled professionals to develop something that could be a hybrid establishment that is part co-working space, part Restaurant, part Coffee Shop, and part Retail store.

In fact, as I write this article, I am sitting either in a completely vacant Fast Food restaurant, with great seats, free Wi-Fi, and free amenities, including plenty of parking.   With every other table being closed off due to Social Distancing, there is a lot of space to lean back and relax or get some serious work done!

Such restaurants had easy to use point of sale systems connected to the Kitchen, driver delivery network and well-trained staff, typically younger millennials that have been able to adapt and thrive despite the numerous challenges brought about by Covid-19 crisis.  In fact, the restaurant I am involved with as Chief Operating Officer has nearly tripled their daily sales since the Pandemic shutdown went into effect in early March.

The Ghost Kitchen model is rapidly evolving and new business models are evolving daily. Due to the Pandemic, many restaurants have excess dining space and this can be converted into a low-cost coworking space.

Coworking is a trend that has caught on in the last few years, leading to the spectacular rise and fall of WeWork, a company that was valued at $47 Billion until Wall Street realized that the company was merely a glorified leasing business model. 

Many of the smaller restaurants, so-called “mom and pop” restaurants are holding their own in the face of the Pandemic, but due to the PPP or Payroll Protection Plan and other local City government initiatives, restaurants are holding up, as they have been considered an Essential Service during this crisis.

However, despite the increase in Take-Out, fueled by Food Delivery apps such as Uber (ie Ubereats), GrubHub, DoorDash, etc, while revenues are increasing, their profit margins are flat, due to the fact that their Food Delivery Partners take out a 30% chunk off the top. Given that restaurants may be operating at a 30% gross profit model, to begin with, their profits are practically wiped out, as we found out via our own Ghost Kitchen startup in Clearwater. 

While restaurants help the local community, the 30% chunk goes back to Silicon Valley companies that do little to help out our local communities.  So, the race is on to develop new contactless ordering technologies as well as new Food Delivery apps as well as local driver network to combat the threat of Silicon Valley in our backyard.  As newspapers have discovered, Silicon Valley technology comes at a cost, whether that is your privacy or the exorbitant cost of doing business.  Consumers must realize that the FAAANG Group (Facebook, Amazon, Apple, Alphabet, Netflix, and Google) can destroy our mainstreet economy if we let it. 

It is essential that we support our local small business and local startups.  Thankfully, boosters of technology startups such as Florida Funders, Synapse Florida, Embarc Collective, and investors such as Jeff Vinik and Dr. Kiran Patel have shown willingness to invest in local Tampabay companies.

For more on Ghost Kitchens, please reach out to local entrepreneur, Cal Tiger via Linkedin.

Cal Tiger is the Chief Operating Officer of Indian Bistro, a licensee of myfood.cafe, a new Ghost Kitchen app that is being developed to address the need of smaller, owner/operator style Ghost Kitchens that use CloverPOS.

Contact:

Cal Tiger, CEO

Virtual Technologies

www.linkedin.com/in/tigerventures

727-565-8954

Please read my upcoming Technology column in The Free Press- Tampa weekly.

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