Back in February, when I was bedridden with COVID-19, I did a lot of DoorDashing. I noticed a lot of food places nearby that I don’t ever remember seeing, with names like BBQ Boyz, Pardon My Cheesesteak, or Wok & Roll. I wondered why I had never noticed these places before.
One of them I used often was a restaurant called Pho Sho. I ordered from them every day of the week during my suffering. When I got better, I thought it would be nice to drive over and patronize the folks that helped get me through. That’s when I discovered the truth, and learned about this new phenomenon that I admit I didn’t even know existed.
Back in the day, if you ordered something to be delivered, you knew exactly who made your food:
When the interwebs became a thing, these orders could be done online. I still remember this scene from the 1995 movie “The Net” that blew everyone’s mind because it seemed so … futuristic. Nowadays, we’ve gone back to ordering food by phone—just not by calling. Most of us use delivery apps such as GrubHub, DoorDash, or Uber Eats. I imagined the place my pho came from as having tablecloths and bamboo decor. Yet it turned out that it was sharing a crowded space with dozens of other virtual restaurants making everything from burgers to bento bowls.
Pho Sho is a ghost kitchen, also referred to as a “dark kitchen,” “virtual restaurant,” or “cloud kitchen.” It’s defined as a commercial-grade kitchen that does not have a dining room but prepares restaurant-style food exclusively for delivery or pickup. Ghost kitchens come in three forms: existing restaurants, ghost kitchen companies, and satellite kitchens.
Existing restaurant ghost kitchens set up over a dozen ghost kitchens in their current facility, even if the food is completely different. (For example, Taqueria El Ranchito has 20 virtual restaurants that sell everything from Greek food to pizza.) However, ghost kitchen companies set up a facility in a massive warehouse with multiple kitchens that can handle high volume. Finally, remote trailer ghost kitchens set up shop in areas with unmet demand in a new location either in portable trailers, shipping containers, or parking lots.
The use of ghost kitchens dates back to around 2013 but exploded during the pandemic, and it’s possibly the biggest trend in the food industry since fast food. Love it or hate it, it’s not going away.
Keep in mind that the restaurant business is tough—really tough. Although opening a restaurant is still one of the most popular kinds of new businesses to open, it’s also one of the riskiest. According to the most recent statistics, three out of five new restaurants won’t survive within one year, with four out of five failing within five years.
In the promotional material I reviewed for ghost kitchen companies, they pitch that it’s a low-risk way to start a restaurant. After all, for a brick-and-mortar restaurant, there’s an entire infrastructure you must create and maintain. Now here comes a company that offers to share the cost, will provide you the kitchen space, maintain the facility, and even help you with marketing. For talented cooks who have always wanted to open their own restaurant, this arrangement seems to be quite a deal to pass up. Sometimes, it seems too good.
I began my journey by taking a trip to a facility in my city that housed multiple ghost kitchens. I was lucky enough to talk to both a current and former owner of a ghost kitchen here, and it was not what I expected.
The ghost kitchen company I visited provides its tenants with a small kitchen space (around 260 square feet), a modern stove with hood range, water (which is a big deal), a gas line, and hand-washing stations. One of the tenants was kind enough to show me around. Because I didn’t secure permission, I couldn’t take photos of the non-public interior section, but it’s simple enough to describe. Just imagine several hallways with multiple doors. It looked like the hallways of a city apartment building, but instead of an apartment, each room contained a 260-square foot kitchen.
It was here that I met May Jang, co-owner along with her husband, of the very popular Drunken Dumpling. My daughter and I had ordered from them multiple times, and I admit I had always thought it was a physical restaurant. Jang corrected me that the ghost kitchen was a vastly cheaper option. “Oh no, the margins are always very tight.”
She said although it’s true you don’t have some of the costs that come from owning a physical dining restaurant, there’s costs and fees that a lot of potential restaurateurs for ghost kitchens need to prepare for. “One of the biggest expenses is the delivery app fees. DoorDash charges 30% per order.”
DoorDash justifies its high fees on the restaurants by saying it covers delivery driver costs, customer service, technology, and processing fees. But keep in mind that they are already charging their customers delivery fees. Several large cities have capped their commission fees to 15%, but DoorDash simply tacked on additional charges to make up the difference.
But it’s not just delivery fees. Jang said there’s another big cost that comes with owning ghost kitchens. “You have to market! People who don’t pay to market will fail. There is no storefront, so I have to pay each week to advertise online. I average paying about $1,700 per week.” The prominent ad space at the top of these apps for “specials” isn’t free, but that kind of placement can mean the difference between 60 orders a day and six. Also, when you see advertisements on those apps running promotions like free delivery, keep in mind that those costs are paid for entirely by people like Jang.
Marketing is even more critical with a virtual kitchen because there is no organic traffic or the ability to connect with your customers in a physical space. The co-owner of Sfera Sicilian Street Food, Steven Jarczyk, lamented to Back of House, “We had to spend quite a bit of money on PR and marketing. Otherwise you have to give UberEats and DoorDash more of your money to be more visible, when these apps are already taking a massive amount of your top line.”
At least Jang had a big advantage: She already owned a successful physical restaurant and had decades of experience in the restaurant industry. That knowledge has helped her survive in this new format. She also said the ghost kitchen allowed her to test out her new concept focusing on handmade dumplings, as opposed to having to refurbish an entire brick-and-mortar restaurant. Thankfully, Jang has managed to turn a profit her entire time. Most brick-and-mortar restaurants don’t do so until two years after opening. “This was my first ghost kitchen. But I’ve been doing this type of work for years. Unfortunately, a lot of people don’t make it.”
Jang and her husband have been at this for a little over a year, and according to her, that’s a long time. “I’ve seen a lot of people open restaurants here, and most are gone within two months.”
Although I have statistics for restaurant failures, it’s very hard to find statistics for ghost kitchens. Yet from what I could find, what Jang observed is accurate, at least regarding the first year. According to Insider, their analysis of five locations from CloudKitchen, a well-known ghost kitchen company, revealed that “41 out of 71 restaurants that were open in May 2021 were no longer operating there a year later.” As a comparison, only 12% of brick-and-mortar restaurants had closed during that same time period.
Jang put me in touch with someone who recently closed his ghost kitchen. Eugene Aristil owned a virtual kitchen called Scratch. Like Jang, he was no stranger to the industry. He had a very successful brick-and-mortar business until COVID hit and he was forced to shut down. Rather than try his luck at a different location, he decided to retool his business into a ghost kitchen. He too lamented the high commission fees by the delivery apps but also said there is no choice but to pay them. “When I had a brick-and-mortar business, the delivery apps were only a part of it. But ghost kitchens are solely based on those guys.”
Aristil had a lot of advantages. He had a built-in clientele from his physical restaurant. He had really good food, which was all made from scratch, (hence the name), and was featured on multiple cooking shows. Yet after one year, he had to shut down.
“It just wasn’t sustainable. The ghost kitchen facility I was using charged me the same rent as when I had a 2,000-square foot restaurant, as well as what amounted to a processing fee. The utilities were high, and the commission fees by the delivery apps were ridiculous. Plus, I easily paid $1,700 or more per week on marketing. I was just getting hit from all sides.” Long-term, Aristil is considering opening his own ghost kitchen company that would charge less rent for start-ups.
Although ghost kitchens seem to be tailor-made for mom-and-pop shops, the big boys love them because it allows them to get in on the delivery app craze. In some cases, a chain might not want to open an entire new restaurant, so they use a company like Kitopi to open remote trailers in a new location. Kitopi compares it to franchising.
Ghost kitchens also give them a chance to cash in on other types of food. Did you know that these virtual kitchens are actually owned by major chains?
- Applebee’s: Neighborhood Wings.
- IHOP: Thrilled Cheese, Pardon My Cheesesteak, Tender Fix, Super Mega Dilla.
- Denny’s: Burger Den, Melt Down.
- Buffalo Wild Wings: Flippy Wings.
- Boston Market: Rotisserie Roast.
- Chilli’s: Just Wings, Maggiano’s Italian Classics.
- Outback: Tender Shack.
- Ruby Tuesday: Wow Boa.
- Chuck E. Cheese: Pasqually’s Pizza & Wings.
Some customers complained that it’s deceptive for major chains to pose as locally owned restaurants. To be fair, some are transparent, but others aren’t. People said they felt tricked into thinking Pasqually’s was a local mom-and-pop, as there is no reference to Chuck E. Cheese anywhere. (Pasqually, by the way, is a reference to the animatronic chef in their show.) The chains would argue that it’s not illegal, and besides, would you have given Chuck E. Cheese a chance to make your wings otherwise?
The competition in this industry is fierce, and now wealthy celebrities have gotten in on the craze. Several have teamed up with ghost kitchens by cashing in on their brand. It hasn’t always gone well. One very popular YouTube creator, Mr. Beast, has been in the news for suing his ghost kitchen, claiming they took advantage of his brand to expand rapidly rather than focus on the quality of the food.
The big winner of this trend is clearly the food delivery service apps, which have morphed into a billion-dollar industry. The apps can afford to always push their ads at the top of a search engine, even above the restaurant you try searching for. Storefront restaurants would prefer you order with them directly, so they don’t lose money on commission fees. (What does DoorDash do with all that money? For one thing, they joined other gig companies spending $200 million to deny drivers access to employment protections.)
Restaurants have enough trouble as it is. Labor concerns, product shortages, and rising prices have put the maximum squeeze on their industry. When the delivery apps first came on the scene, they were seen as a lifeline for struggling restaurants. Now, however, the high fees are driving some out of business. Ghost kitchens are completely dependent on the apps, so the high fees are just part of the equation. Oftentimes, the labor force gets squeezed. The food service industry already has well-known issues regarding low wages and long hours, but ghost kitchens make the problem even more opaque as workers are completely hidden from view of the public.
The quandary for customers
One big problem ghost kitchens pose for customers is the lack of transparency. An investigation done in Chicago found 300 ghost kitchens in the area, but the vast majority of the names were not found in any health department food inspection records. A physical restaurant that has a failing inspection is easy to find, but if they have ghost kitchens running out of the same facility, you wouldn’t know it without doing some digging and trying to cross-reference addresses.
Right now, ghost kitchen sponsors or companies are simply being asked to be transparent, but there’s little to no regulation since this is a burgeoning concept. Even jurisdictions that require restaurants to file the names of all the restaurants they do business under don’t often have the manpower to force them to do so.
Yet customers seem to be adapting to this new trend. Soon, the same way you can order any merchandise online and have it delivered to your home will be the new model for food delivery. On the bright side, maybe I will be able to eat a Philly cheesesteak from Pat’s or a beignet from Café Du Monde right here in Orlando, using a network of dark kitchen hubs near me.
But if I’m being honest with myself, I hope that doesn’t happen. Part of the joy of visiting a new city that prides itself on local culture is to experience their cuisine and local eateries and engage with the people who make the food. I’d hate for that to be replaced by an industrialized, faceless ghost kitchen in some warehouse district. Yet I’m not the one trying to keep a restaurant afloat.
In the meantime, Aristil of Scratch has been making plans to open his restaurant again. To my surprise, even after the bad experience he had, he said it will be another ghost kitchen. “These are the wave of the future,” he said.
RELATED STORY: Tales of a second generation hourly worker