Ghost Kitchens: Invisible all the way to the bank.

The virtual kitchen trend is streamlining the restaurant dining experience by eliminating sit-down service and only offering delivery and take out.  This trend is quickly becoming a permanent part of “the new normal” in light of COVID-19.

Ghost kitchens are a white-hot trend in the restaurant industry. Also called a “virtual kitchen,” a ghost kitchen serves customers exclusively through delivery, usually for orders placed online. Virtual kitchens succeed because they have comparatively low overhead and are highly nimble and versatile.  Enabling them to be able to instantaneously react to market and industry changes. They can serve customers directly via delivery and/or takeout, provide food for other restaurants, or allow you to test out a beta restaurant concept without investing in a physical dining room. Restaurant owners can share a ghost kitchen space with other restaurants, or use one kitchen to serve different restaurant brands owned by the same parent company. There are many benefits to ghost kitchens, some of which include low overhead, reduced startup risk, and a pandemic-proof business model.

During COVID-19, takeout and delivery orders have become most restaurants’ bread and butter, and this trend is showing no sign of slowing down, especially as worries about the highly contagious Delta and Omicron variants and breakthrough infections are still keeping many would-be diners at home. The ghost kitchen trend has also been accelerated by leaps in technology that makes it easier for customers to order takeout, such as food delivery apps. According to a recent PYMNTS.com survey, 67% of restaurant orders now come from digital channels or phone orders.

Whether you already operate a restaurant and are considering expanding to a ghost kitchen, or you want to open a brand-new dark kitchen concept, read on to learn some tips and ideas for starting a ghost kitchen.

What Is a Ghost Kitchen?

A ghost kitchen is a restaurant kitchen used only to fulfill online and phone orders for delivery. Also called a “cloud kitchen” or a “virtual kitchen,”, a ghost kitchen has no storefront and no sit-down dining. Restauranteurs can rent space in a shared ghost kitchen, or use one kitchen for multiple restaurant brands.

How To Start a Ghost Kitchen?

1) Decide What to Sell

Perhaps you already have a tried-and-true product you want to sell, or maybe you’re starting from scratch. You could already have a full restaurant menu you serve at another location, or you may have a small menu of items you sell from a food truck. Wherever you’re starting from, you need to be very strategic about what you’re selling from your ghost kitchen and why. Try to pare down your ghost kitchen offerings to the most popular items with the highest profit margins.  Use a food cost calculator if you are not sure.

2) Make It Official

As with any business, you need to go through all the proper steps to make your ghost kitchen official. These include:

• Writing a business plan

• Registering your business

• Insuring your business

• Getting your business license (as well as relevant permits, certifications, etc.)

Depending on your state and jurisdiction, you will probably also need a food handler certification.

If you already operate a restaurant or food truck, you will already have most or all of these things in place, and may just need to update your business plan and liability insurance policy to include the new kitchen.

3) Secure Your Funding

Compared to a regular restaurant, a ghost kitchen requires a much smaller initial investment. You will have a smaller working space, less staff, and no storefront. Still, there are some startup costs, the major ones being payroll, inventory, and the kitchen itself. Food delivery software can also be expensive, depending on how much functionality you want it to have.

If you don’t have the capital to start your ghost kitchen, The ZRO Group Ltd. can help to find the best way to secure the capital you need. 

4) Find Your Kitchen

There are various options for the actual kitchen you will use for your virtual restaurant. You can rent a kitchen, buy commercial property and kitchen equipment to use yourself, and rent out space to cover overhead or use shared kitchen space with another restaurant. For most ghost kitchen startups, it will probably make the most sense to rent a kitchen on a month-to-month basis. The rising popularity of ghost kitchens means there are an increasing number of shared commercial kitchens where ghost kitchen businesses can rent space. All you really need to rent one of these kitchens is liability insurance and a small deposit.

Be aware: you cannot serve customers out of your home kitchen. As with any restaurant, you need to prepare food in a licensed commercial kitchen that has been inspected by the local health authorities.

5) Choose Your Delivery Provider

Your delivery provider is the software service you use to do things like:

• Accept orders for delivery (online and/or phone orders)

• Process credit card payments

• Manage delivery order status

• Dispatch delivery drivers

Your food delivery software may or may not be integrated into your point of sale, or your point of sale may include delivery functionality built-in. You have a lot of different options here, which I’ll discuss in further detail in the following section.

6) Build Your Online Presence

When you own a virtual business with no physical storefront, your virtual business presence is the face you show to the world. To reach customers, you’ll need to be accessible on the web, on social media, and in the apps, your customers already use to browse restaurants and order food. Fortunately, many food delivery software programs already have online marketing features, including online ordering websites and even built-in online ordering apps. Some businesses might also choose to hire an online marketing professional to help them build their web presence. 

HOWEVER, Just posting and praying for customers to rush to your site is a recipe for failure. You need to make sure you are aiming for your core customer and keeping them engaged.  A success story in that exercise would be the restaurant called “Slutty Vegan.”  They have successfully captured their audience with their online and social media presence.  They have turned their establishment into a destination place.  Pay attention to the successes in your industry and learn what works.  That will reduce the time and expense of guessing.

7) Test Your Concept

Finally, it’s time to start selling! But that doesn’t mean you should necessarily take off at full speed. As a ghost kitchen, you have more flexibility to test out what will work best for your business. In the early days, you should experiment with hours of operation as well as your menu–for example, by offering a limited or revolving menu. This way you can test what items and times are the most profitable for your ghost kitchen. You can also experiment with which areas you serve and adjust as needed.

Finding The Best Food Delivery Software

Food delivery software will be one of the most important aspects of your ghost kitchen. Most ghost kitchens will benefit from using a delivery POS system that not only helps you deliver food orders, but also takes payments, manages employees, and performs other business management tasks.

The following are some of the best point of sale systems with delivery management for ghost kitchens:

Toast 

Best full digital ordering suite.

Toast is a unique restaurant POS system in that it has a digital-only option for restaurants that only sell online. Toast’s digital ordering solutions include an online ordering website, online ordering via a mobile app (Toast Takeout), and delivery management with your own drivers or Toast’s drivers. With monthly plans starting at $75/month, Toast is not the cheapest delivery POS for a ghost kitchen, but it is probably the most complete.

Square for Restaurants

Best free delivery POS.

Square for Restaurants POS has a free plan that includes most or all features a delivery-based business would need, including a free online ordering website on which you can offer delivery, either using your own drivers or a third-party delivery service integration. You can add Square’s iPad kitchen display system for just $10/month per device, or upgrade to Square for Restaurants Plus ($60/month) for unlimited KDS devices and other advanced features.

Clover

Best for customizability.

Clover is a highly customizable POS with various hardware options and many app integrations that extend its functionality. Depending on your setup, you can use either a Clover Station, Mini, or Flex for your POS and order management, or you can use Clover’s $9.95/month no-hardware plan if you just want to process payments online a virtual terminal. Clover also has a built-in app to help you take payments over the phone. Clover’s $39.95/month Counter Service plan includes online ordering and can also integrate with third-party delivery apps.

Franpos 

Best for integrating multiple brands.

Franpos is built for franchises and is an ideal solution if you have a multi-brand ghost kitchen with one parent company. Franpos can streamline multiple menus onto one ticket, and orders placed on your online ordering website are fulfilled by Postmates drivers for a flat $4.99 fee, saving both you and your customers on delivery fees. If you want to use your own drivers, Franpos calculates the optimal delivery route for multiple orders. Franpos costs $199/month for a single terminal.

Rezku

Best for free delivery management.

iPad-based Rezku’s free POS plan for ghost kitchens comes with online ordering, delivery management, inventory management, loyalty rewards, and gift cards built-in. The free delivery portal includes driver assignments and delivery zones with variable fees. The POS can also support caller ID and phone ordering, and you can add Rezku’s excellent kitchen display system for $25/month.

Using Third-Party Delivery Services For Your Ghost Kitchen

Third-party delivery services include apps like DoorDash, Postmates, Uber Eats, Grubhub, and others. Nearly all restaurant POS systems integrate with third-party delivery apps so that you can take orders from these services. However, many restaurants may not want to use third-party food delivery software, as these services can take a big bite out of your profits, and the delivery fees on the customer end are not cheap either. Instead, some ghost kitchens may opt for a POS with built-in delivery management functionality for offering in-house restaurant delivery. It’s also an option to use your POS’s in-house online ordering and delivery platform, and also accept orders from one or more third-party delivery services. Most delivery POS systems will integrate online orders from multiple sources, including both in-house and third-party sales.

One major benefit of using third-party delivery services is that you don’t have to use your own delivery drivers. While some POS systems include their own delivery driver network (such as Toast and Franpos), other systems (like Square, Clover, and Rezku) require that you use your own drivers to fulfill online orders. Another obvious benefit of using third-party delivery services is being able to access the large network of customers who regularly use these delivery apps.

Final Thoughts: Tips To Market Your Ghost Kitchen

Ghost kitchens allow you to serve a wider customer base, while greatly reducing overhead. Ghost kitchens also allow you to test a new concept before opening a sit-down dining room. But since your virtual restaurant will have no customer-facing presence, you’ll need to market your ghost kitchen in order for people to find it.

Here are some actionable tips to help you market your ghost kitchen:

• Get a booth at a farmer’s market or rent a food truck for a local community event. With every order, you take, hand out your business card with your online ordering information on it. Your mobile POS should also collect customer contact information at these events, which you can use to keep in touch and offer loyalty rewards.

• If you already have a customer list (for example, from an existing restaurant business), send out an email, text, and/or coupon letting customers know about your new ghost kitchen. As your customer list grows, you can continue to send email newsletters with info about new menu items and promotions. Square Marketing has some free tools for this.

• Make sure your restaurant’s website and social media profiles (Instagram, Yelp, Facebook, etc.) are fully set up before you start taking orders. Include lots of photos, your operating hours, and any other helpful information. All of your social profiles should also link to your online ordering website.

The ZRO Group Ltd. has extensive experience in restaurant startups, expansions, and plans of growth.  We have the expertise to offer guidance and advice for both the startup entrepreneur and the seasoned business owner.  Our financing solutions generate the capital you need in order to successfully reach your goals without exposing you to unnecessary risk.

Contact us and see what we can do to help your dreams of success become reality.