Ghost restaurants (also called dark kitchens, virtual kitchens, cloud kitchens, or headless restaurants) are popping up more and more. They are a departure from the traditional brick & mortar restaurant concept, having no seats, storefront, or waitstaff. Operating a ghost restaurant can help restaurateurs diversify curbside and takeout options while staying open and serving guests through this pandemic.

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Ghost restaurants operate entirely online, allowing customers to order through third-party delivery services, like GrubHub, DoorDash, or Uber Eats, and receive their food without any direct contact from the ghost restaurant itself. Another option is native online ordering, meaning the ghost restaurant has an in-house method for receiving online orders which cuts down on third-party costs.

Why Open a Ghost Restaurant?

Trends are constantly changing, meaning restaurateurs need to be in-the-know to stay afloat. More and more people are opting for delivery, rather than a sit-down meal. COVID-19 and social distancing measures have changed how restaurants operate — from February to April of 2020, we saw a 169% increase in the number of restaurants actively using Online Ordering with Upserve as restaurants quickly innovated and pivoted to takeout and delivery. This, paired with an 840% increase in weekly sales via online ordering left some restaurateurs uniquely prepared to capture customers during the first waves of social distancing.

Ghost restaurants capitalize on the online ordering and delivery service models most restaurants are now required to work within while reducing typical brick & mortar costs. They are most profitable in high-rent neighborhoods, where the need for expensive restaurant spaces is minimized while addressing demand for a specific dish in the area.

The Pros & Cons of Operating a Ghost Kitchen (Virtual Restaurant) from Upserve on Vimeo.

Pros of Opening a Ghost Restaurant

Lower Overhead Cost

Without a storefront, ghost restaurants are free to deploy new menu concepts or remove those that aren’t performing as well as the rest with ease. There is no need to update or change printed menus, simply update your offerings on delivery sites.

Meet and Exceed Online Ordering Demand

Ghost restaurants have the opportunity to exist on the websites of multiple aggregate delivery services, such as GrubHub or DoorDash, in addition to an in-house delivery system.

Quick Start-Up

Ghost restaurants do not need to be located in a highly trafficked location, and given the current social distancing measures, this is a significant advantage. Instead, owners can save money and rent an unassuming building without a need for large signage or foot traffic.

Data-Driven Insights

Ghost restaurants limit the opportunity to get direct customer opinions. Instead, owners can rely on data to bridge the gap between supply and demand of their delivery radius.

Increased Online Brand Awareness

Operating entirely online enables ghost restaurants to adequately serve generations that exist in the digital world of application-based ordering.

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Cons of Opening a Ghost Restaurant

Engineering Meals for Delivery

You’ll need to make sure your food is packaged in a way that will keep it intact for deliveries. Leave the sauces on the side to avoid a soggy sandwich and make sure your containers are properly insulated – ensure your guests are receiving just as good of an experience as they would in a traditional restaurant.

Eliminating the Touchpoints Between Restaurant & Customer

Ghost restaurants live solely online, meaning customers will not have the opportunity to pass your restaurant on the street and inquire about it.

Online Reputation

Managing a restaurant’s online reputation is important – more and more consumers are searching through the reviews to decide where they will eat next. Operating entirely online means your reputation lives online as well, and one bad Yelp review can significantly bring down your average rating.

Third-Party Integrations

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Companies like UberEats, Postmates, DoorDash, and GrubHub are convenient mobile ways to deliver to a growing customer base. Unfortunately, ghost restaurants have no control over the type of customer service these companies provide. A guest could have a bad experience entirely based off of their delivery service and opt to never order from your ghost restaurant again because of it. Using a native online ordering system in addition to third-party sites can help offset some of the third-party commission fees.

Different Types of Ghost Restaurants

Incubator Ghost Restaurants

Some restaurateurs are using extra space in their current establishment to create a ghost restaurant within their traditional restaurant. Simon Mikhail, owner of Si-Pie Pizzeria in Chicago, IL, was contacted by UberEats and notified of a high search volume for chicken in his area. Armed with this data, he decided to open a ghost kitchen within his brick & mortar restaurant called Si’s Chicken Kitchen. His incubator ghost restaurant enabled him to meet the demand for pizza and chicken at the same time.

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Another incubator ghost kitchen, the Denver Lobster Stop, was created by Concept Restaurant Group. It lives inside one of their pre-existing, traditional restaurant called Blue Island Oyster Bar. Lobster is sold at Blue Island Oyster Bar for a higher price, including a side ($25) or a lower price through the delivery only ghost restaurant (without a side) for $19.

Entrepreneur Ghost Restaurants

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Entrepreneur ghost restaurateurs rent and operate locations dedicated to virtual kitchens. This means they’re not operating a traditional brick & mortar to house their ghost concept. Green Summit Group is an entrepreneurial concept founded by Peter Schatzberg and Todd Millman. They operate nine restaurants out of two kitchens, headquartered in NYC. Their concepts include Leafage, Butcher Block, Maya Blue, Braised, Bushwick, Grind Meatballs, Crust Deli, and Milk Money.

Third-party delivery services are eager to enter the ghost restaurant markets well. DoorDash is currently renting extra space from the Santa Clara Fairgrounds in San Jose, CA and making it available to restaurateurs who want to create delivery-only options. Meanwhile, Postmates is leasing a commissary kitchen space in Los Angeles, CA so its pre-existing restaurant owners can reach more customers and deploy new concepts.

Ghost Restaurants in the U.S.

New York Ghost Restaurants

Good Uncle

Good Uncle is aimed at the college student market – a delivery-only concept that requires customers to pre-purchase meal packages running from $25 per week to $75 per week. These meals are distributed on the students’ accounts every Monday for the semester they sign up for, acting as a substitute meal plan and can be delivered to common spots on NY campuses.

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Gabriella’s New York City Pizza

Owned by Family Style Co., this kitchen offers ten different shell ghost kitchens inside of it’s concept, including Munch Box, Pizza Alla Vodka, and Sunny Day Creamery. These concepts are some of the most well-known ghost restaurants in NYC.

California Ghost Restaurants

Halal Guys

Halal Guys is planning to open a ghost restaurant location soon in Hollywood, CA via CloudKitchens, a venture from Uber Technologies Inc. co-founder Travis Kalanick.

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Forage Kitchen

Forage Kitchen is an incubator and shared kitchen space available for rent in Oakland, CA created by Iso Rabins and Matt Johansen.

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Illinois Ghost Restaurants

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ASAP Poké Chicago

ASAP Poké is a virtual restaurant that operates out of Rice Cafe, a sushi restaurant in Chicago. UberEats contacted Rice Cafe owner Jack Chaiyarat to address the demand for poké, as his kitchen already had fresh fish on the menu.

Green Summit Group

Green Summit group was founded in NYC, but operates locations in Chicago as well, including concepts Authentic, Blue Crown Wings, Melt 350, Bloodshot Nights, Mac Royale, and F.I.S.H. Poké Bar.

Seaside

Bill Nevruz, managing partner with Lettuce Entertain You Restaurants and owner of Oyster Bah, realized there was an abundance of seafood offerings in his restaurant’s radius. He created Seaside, a ghost kitchen concept operating out of Oyster Bah, serving ribs and fried chicken.

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Colorado Ghost Restaurants

Denver Wing Stop

Denver Wing Stop is a ghost restaurant created by Sean Huggard, director of operations at Concept Restaurant Group & owner of Denver Lobster Stop. Huggard approached UberEats with the idea for Denver Wing Stop after noticing a high demand for chicken wings at a local college bar near his brick & mortar locations.

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Thinking about jumping on the ghost restaurant train? Consider the large return on investment. Cheaper overhead costs, data-driven insights and flexibility of concepts are all advantages of operating a ghost restaurant. On the flip side, lack of control over third party delivery services and reduced touchpoints between the customer and your restaurant are roadblocks to keep in mind.