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Diversey Holdings Ltd.

11/24/2021 | News release | Distributed by Public on 11/24/2021 12:54

The rise of the “GHOST KITCHEN”

I am sure we can all agree that the pandemic has changed many aspects of our daily lives, from how we work, travel, shop and especially, how we dine. Due to mandatory lockdown of restaurants across the country in 2020, many of us became very familiar with sitting in drive through lines, curbside pickup lanes, and mastering online ordering and food delivery apps on our phones. Restaurants across the United States had to adapt quickly from traditional dine-in operations to keep their businesses going or quickly become one of the estimated 100,000 food and drink establishments that closed their doors forever six months into the Pandemic.

During this time of transition, industry trade outlets and organizations started reporting on the rise of "Ghost" kitchens across the US. Ghost Kitchens, also known as cloud or dark kitchens, are essentially just restaurants that offer only internet or phone based ordering with no dine-in facilities. They are typically a small footprint, basic kitchen, and because they do not have a storefront, can be located inside facilities in areas that require lower rent. "Location is Key" does not apply here in terms of store front location, but kitchens located in areas that have high populations of millennials and Gen Z'ers that order delivery multiple times per week and are also conducive to delivering their product quickly and efficiently seem to fair better. Because these locations do not offer dine-in service, the overall operational costs are reduced significantly and they do not have to worry about table turnover.

These locations are not limited to small hidden kitchens around cities however. Large national restaurant chains have taken notice and have adapted their underutilized kitchens to offer virtual brands from their facilities as well. For instance, Chuck E Cheese launched the Pasqually's Pizza & Wings delivery only brand in March 2020 from their kitchens to keep their facilities operating and profitable, and they have no intention of stopping. Other national chains are launching or have launched delivery-only brands in their brick and mortar kitchens as well including Applebee's, Boston Market and Chili's, to name a few.

Another outcome of this trend are companies that have created networks of these ghost kitchens, such as Virtuant. According to their website, Virtuant is a delivery-only virtual restaurant brand company that increases revenue in traditional restaurants by using their underutilized staff and kitchen equipment by preparing sub-brands from their facilities. It features a turn-key process that attracts new customers through food delivery apps and offers over 20 unique brands.

These networks of kitchens across the country have also allowed new virtual restaurant brands to launch into hundreds of locations almost overnight with minimal capital investment compared to traditional brick and mortar location restaurants that could take years or decades and millions of dollars. Even large retailers such as Walmart are getting into the game with a partnership with Ghost Kitchen Brands starting in September 2021. Ghost Kitchen Branded Outlets located inside Walmart's will offer over 20 brands from their kitchens allowing customers the ability to pick and choose their favorites from each menu. As a father of two very picky teenagers, I can certainly appreciate the advantage of having so many options available from one outlet to quell the standard "what do you want for dinner" argument!

As the saying goes, the one constant is change, and the pandemic has forced the food and beverage industry to adapt and re-imagine how it reaches the consumer. According to report from Statistica, the global cloud kitchen market size was estimated at 43.1 billion U.S. dollars in 2019 and is forecast to reach 71.4 billon U.S. dollars by 2027. Innovation, technology and more choices for consumers will continue to drive this industry forward.