Ghost Kitchens Are On the Rise: Phantom Food, Anyone?

Written by Meghan Cappitelli

Ghost kitchens - A Model That Benefits All

A pepperoni pizza from Little Caesars; a side of traditional homemade egg rolls from your local Chinese restaurant; a blueberry and cream cookie from Milk Bar for dessert. What would typically require the hassle of three separate orders being placed, this smorgasbord of a meal can now be conveniently prepared in one place. Brooklynite DoorDash users with versatile palettes or those who suffer from meal indecision are in luck, as the company recently opened a new ghost kitchen location in New York. Ghost kitchens, an emerging sector in the food industry projected to reach $1 trillion by 2030, offer a unique opportunity for brands to congregate under the umbrella of one kitchen to maximize efficiency and benefit from mutually bearing the burden of overhead costs. This saves them thousands on rent, labor, and utilities that come with operating a full-scale restaurant.

Ghost kitchens are taking the restaurant world by storm, with well over 1,500 locations in the U.S. The model was first adopted by players in the delivery-service industry, as ghost kitchens presented an opportunity for companies to further ride out their pandemic-induced growth. DoorDash was one of the first food delivery service companies to take the plunge. 

DoorDash operates three ghost kitchens, with a fourth scheduled to reopen soon, but this is its first location on the east coast. The delivery-centric, food-court style location – operated by self-described, “hands-on investor” firm, Nimbus – will offer food from five different establishments: DOMODOMO, Kings Co Imperial, Pies ‘n’ Thighs, Little Caesars, and Moonbowls. In addition, the kitchen will have a dining area for up to twenty customers, a first for the previously delivery-only company. On-site diners will also have access to Birch Coffee, Kado Patisri and Milk Bar.

Image from Restaurant Business Online

A handful of fast-growing startups

Many entrepreneurs are discovering that the key to overcoming many of the barriers to entry in the food industry is the ghost kitchen model. Kitopi, a Dubai-based KaaS company and newly declared unicorn, has partnered with over 200 brands, including Shake Shack, Papa John’s, and iHOP to prepare over 200,000 meals a week for eateries across the Middle East. Kitopi relies on its Smart Kitchen Operating System (SKOS) to efficiently manage a handful of brands operating out of one kitchen. London-based Karma Kitchen is another champion of ghost kitchens that helps transform commercial spaces into shared kitchen and storage facilities suitable for food and beverage entrepreneurs’ needs. CloudKitchens operates on the same basis of renting out real estate to delivery-only restaurants, and was founded by former CEO of Uber, Travis Kralanick. The startup raised $850 million at a $15 billion valuation in January. Last year, Alliance Kitchen was launched, offering cuisines from five of the brands owned by its parent company, Inspire Brands. Arby’s, Sonic, Jimmy’s Johns, Buffalo Wild Wings, and Rusty Taco can all be ordered at the new, one-stop shop in Atlantia, Georgia. 

A tool for ghost-kitchens: KaaS

The ghost kitchen company is certainly not isolated in its endeavors. At the intersection of technology and the food and beverage industry, Kitchen-as-a-Service (KaaS) has emerged as a tool for restaurant hopefuls. In the same vein as Software-as-a-Service (SaaS), these “cloud kitchens” provide the space and equipment necessary to jumpstart a food operation. Existing chains seeking to expand their footprint and food startups alike can benefit from this model, as it eliminates many of the initial expenses and headaches associated with opening a storefront restaurant. KaaS makes the promise of profitability a feasible reality by aiding in the launching, operating, and growth of ghost kitchens.

Startups helping startups

With all of these startups cropping up, an additional opportunity for ghost kitchen growth was taken advantage of by entrepreneur and tech-heavy investor, John Meyer, who launched Ghost Financial last month. The company was founded to provide capital to ghost kitchen operators. Ghost Financial raised $2.5 million in its pre-seed funding round, and plans to facilitate the growth of other startups undertaking restaurant ventures through offering insurance, payroll, credit cards, and loans for growing kitchens. Its first product is a credit card offering 1% back on inventory expenses and automatic eligibility for a loan to help with expansionary efforts. 

Startups helping startups is sure testament to the high-risk, high-reward potential of the ghost kitchen sector. Meyer himself dove headfirst into the business in 2020, when he attempted to launch Keto Kitchen, a delivery-only restaurant in Austin, Texas. What Meyer found, however, was that, while an inventive and lucrative concept, ghost kitchens can accumulate costs quickly. Delivery apps that kitchens often partner with eat up a large chunk of their revenue, and in the already thin-margins business of the restaurant industry, this leaves little room to grow. Additionally, traditional banks lacked the understanding and resources to finance these types of restaurants. And hence, out of empathy for the entrepreneurial experience and belief in the need for a banking backbone for ghost kitchens came Ghost Financial, the first company to provide a cash-back credit card for food and beverage inventory and employ data and technology to underwrite restaurant expansion loans. 

Phantom food?

As the ghost kitchen sector continues to grow, consumers can expect to see other delivery service companies adopt this model, as well as other tech-centric business ventures that will branch off to facilitate growth in this burgeoning ecosystem. Who knows, maybe your next meal will be prepared by a ghost chef.

About the Author

Hi, I’m Meghan Cappitelli and I’m senior at Notre Dame where I study Finance and English. A native of New York, I spend most of my time writing, running, and searching for the perfect sandwich.