Have you heard about ghost kitchens? Ghost kitchens are also referred to as micro-cloud kitchens or virtual kitchens. It is a co-working space where there are multiple kitchens in the same place that does not offer dine-in services but solely focus on delivery sales. With 3rd party delivery apps such as Foodora and Wolt, it makes delivery easier and more accessible to consumers. Especially after the covid pandemic, it has been attracting a lot of attention in the restaurant industry since it generates opportunities for those who want to start a restaurant business with low risk and investment. (Society Insurance Team)
There are 2 main types of ghost kitchens. Firstly, commissary/Shared kitchens. These shared kitchens are often owned by big companies or resourceful business owners, and they rent out the space or equipment on a monthly basis. Since kitchens are already set with the necessary appliances and equipment, it is relatively affordable for microentrepreneurs as it doesn’t require huge startup costs. Secondly, Incubator/Pop-up kitchens. In this type of kitchen, there are already existing kitchens for dine-in customers, and on top of that, it integrates delivery operations to make extra profit. It is useful for restaurateurs because they already have the restaurant space and equipment. (EHL insights) Third of all, Kitchen pods. It is a small shipping container provided with kitchen equipment. They are cost-effective because it doesn’t require a rented space but still you need to consider zoning regulations.
Let’s dig into the pros of ghost kitchens. Since it doesn’t require tables or walk-in customers, the indirect cost is significantly low. When it comes to opening a restaurant, the costs are high. From renting, furnishing (decoration of the premises), and kitchen appliances to employment expenses, it is intimidating for especially micro-entrepreneurs to start a business. For instance, the location is crucial, and there are many things to consider such as visibility and size of the place. But with ghost kitchens, you don’t need any of these. You don’t have to pay wait staff employment, but you can customize your menu that only focuses on delivery. It makes more opportunities for micro-entrepreneurs to start a business and for existing restaurant owners to expand their brand in delivery. (EHL insights) Often preparing delivery options increases hassle in the kitchen and takes a lot of attention away from the seated customers within the restaurant. An external facility where they could focus on delivery sales would take this problem away and at the same time, the restaurants could maintain the delivery sales. Ghost kitchen maximizes the workflow, by enabling staff to focus on their area of specialization. Moreover, it gives you a wider audience because the services are provided online not in a physical location.
How big is the market size of restaurants and takeaway food operators in Finland? The market size (measured by revenue) is 4.0bn euros in 2022, and there are 8,981 Restaurants & Takeaway Food Operators in 2022, an increase of 2.7% from 2021. And the number of it has grown by 2.7% per year on average over the five years between 2017 – 2022 (IBIS world 2022). It seems promising to open a ghost kitchen in Finland. For example, in Helsinki, there is a commission-based virtual food court for restaurants that are operated by a company named “Huuva”. They currently operate in Helsinki and Espoo powered by top restaurant brands in Finland, such as Lie Mi, Via Tribunali, Green Hippo, Bites Burgers, and Pupu. Huuva has its own delivery system which enables multiple restaurants to operate as one in every Huuva kitchen. Then what about in Tampere? From the market research and Huuva, I was thinking about how we can bring this concept to Tampere and differentiate it from the already existing one. That led us to have an interview with Johannes from “Raina” restaurant. As we were having an in-depth interview with him, we found out that one of the main obstacles that they faced was a lack of knowledge in terms of essential restaurant management such as budgeting, accounting, etc. It gave us a business idea about ghost kitchens, but we also learned there are cons to it.
How about the disadvantages of ghost kitchens? Although selling online is cheaper due to a lot of reasons that are mentioned above, it loses opportunities to serve curious walk-in customers. There might be a lack of connections between the restaurant owner and the customer that can be only generated in a brick-and-mortar store (a traditional business that has a physical place). On top of that, the range of food menu can be quite limited as certain foods are harder to be served fresh with a delivery. More importantly, even if there are cost reductions in ghost kitchens, prices for end users can be higher due to delivery service fees (Society Insurance Team).
Coming back to the interview, Johannes (a restaurant owner of Raina) pointed out the current problems of delivery companies’ systems. Primarily the commission for delivery companies is very high which doesn’t really benefit them. The restaurant itself is built for dine-in customers where they can get not only food but also experiences like live music performances. However, he was considering offering delivery services, not for the delivery itself but to improve brand visibility via third-party delivery companies’ platforms. Foodora is charging the partners a lot of fees such as start-up fees, monthly fees, service fees, etc. (Foodora 2021) In addition, there are unsolved ongoing issues between Foodora and Wolt and delivery couriers such as decent payment, fair working conditions, and basic worker rights. Because couriers have no employment contracts but work under freelancer contracts(self-employed), they don’t get basic legal rights such as protection against summary lay-offs, sick pay, sick leave, or even insurance.
In conclusion, even though there are some benefits generated by ghost kitchens but there are things to consider and improve such as high commission burden for restaurateurs and working environment for couriers. Hence, not only focusing on the positive effects of ghost kitchens but also researching more about current delivery companies’ issues should come first.
-Society Insurance Team n.d. WHAT IS A GHOST KITCHEN & WHAT DOES IT MEAN FOR THE RESTAURANT INDUSTRY? https://societyinsurance.com/blog/what-is-a-ghost-kitchen-what-does-it-mean-for-the-restaurant-industry/
-Lorri Mealey 2018. Tips on where to locate your restaurant
-EHL insights n.d. What is a ghost kitchen? The future of fast food.
-Gustavo Guida n.d. 3 Types of Ghost Kitchens and Which One Is the Best Business to Start.
-IBIS world 2022, Restaurants & Takeaway Food Operators in Finland – Industry Statistics 2008–2026
-Foodora 2021. GENERAL TERMS FOR PARTNER AGREEMENTS – SHOPS (January 2021), https://euvolo-images.foodora.com/marketing/production/po/images/nl/Terms%20and%20conditions%20foodora%20FI%20-%20Shops%20%28January%202021%29%20ENG.pdf?v=1421756004