Here’s the Low-Down on Ghost Restaurants
August 2, 2018
If you’re drawn to the idea of food truck or shipping container restaurants, we’ve landed on a new trend that’s sure to get your entrepreneurial brain buzzing. Ghost restaurants are an interesting phenomenon born from the digital age and a growing demand for a variety of quality food, delivered straight to customers. If you’re asking yourself, “What is a ghost restaurant and how do they work?” Keep reading.
What are Ghost Restaurants?
Restaurants are notoriously difficult businesses to run. Customers are fickle and profit margins are low. However, some innovative chefs have decided to address both those concerns by pioneering ghost restaurants. Also named virtual restaurants, these establishments take orders through online platforms and deliver made-to-order cuisine straight to customers. That’s it.
After you remove those elements, what’s left over is commonly called the back of house. For ghost restaurants, it’s the whole enchilada.
Ghost restaurants function in a similar way to any other food-delivery service. Many of them can be found on delivery apps including UberEats and GrubHub. But those services aren’t a virtual restaurant’s only option. Truly exceptional establishments may offer their own ordering and delivery services. But, be warned- ghost restaurants have no storefront and no foot traffic. If you’re going to reject mobile applications (with an existing client base) in favor of your own online platform, make sure that your marketing is on point. If customers can’t find it, they can’t place orders.
Ghost Restaurants are a Great Option if…
You live/ work in an area with inflated rents
It’s pretty simple: businesses pay higher rents for foot traffic. Mixed-use properties, malls, and “high-street” shopping districts bring in extravagant rents because most businesses need the anchor tenants or community spaces to lure in a large volume of customers, who eventually dissipate into profitable foot traffic. Ghost restaurants don’t need that- so they don’t have to pay for it. Instead, you can set up shop in an area with affordable rent or skip the facility altogether. More on that later.
You aren’t utilizing your dining room
Many establishments, particularly those in the fast-casual and QSR space need to have seating and standing room for walk-in customers to order, wait for, and occasionally sit down to consume their meals. What’s the problem? A large percentage of QSR customers aren’t dining in the restaurant. A typical QSR will dedicate 75% of their space to seating, while 90% of their customers just grab and go. In this equation, the largest portion of a restaurant is underutilized. These days, dining rooms aren’t an effective value proposition for QSR customers and they aren’t helping franchisees grow profit (especially if you’re employing a profit to square foot ratio).
You desire creative flexibility
When you intend to serve your customers in the restaurant, you’ll need to print menus, signage, and branding collateral. People will order from the menu. So, aside from weekly specials, restaurants are stuck preparing whatever food is printed on the menu or investing money in reprinting. When your brand lives digitally, there’s no cost associated with changing the menu. This freedom from a fixed menu means that ghost restaurants can scrap ideas that aren’t working and experiment with new flavors, new methods, or even completely different cuisines.
But… You still need a facility. What are your options?
Own or Lease a Custom Kitchen Space
In ghost restaurants, the facility is 100% kitchen. Depending on the space you rent, you may be able to repurpose space formerly used for seating to add additional stations and equipment. You’re still renting a commercial property, so you’re at the mercy of the market. However, ghost restaurants aren’t handicapped by location in the same way as restaurants that rely on foot traffic. You may be able to serve customers in higher-volume areas from a location that’s inconvenient or unexpected (read cheaper rent).
Join a commissary
If you’re just starting or the budget is tight, your business can find a way to thrive in commissary kitchens. Commissaries rent out their large, commercial kitchens. Equipment is included in these deals, so you don’t need to outfit your own space. Commissaries can be private, but most are shared with caterers and food truck operators. Food trucks and caterers only use the space to prep and will often opt to finish off meals at their destination. While you’re weighing your options, keep in mind you’ll need to rent the space for all the hours you plan to be open for business.
Whichever way you slice it, this is an interesting chapter in the foodservice industry’s evolution. Ghost restaurants are putting a new spin on instant gratification and we can’t wait to see how these budding businesses grow.
If you’d like information about how we design, develop, and deploy shipping container restaurants, download our eBook below, “Shipping Container Restaurants 101”