We all know that ghost kitchens and virtual brands aren’t anything new to the industry.
Savvy restauranteurs were testing ghost kitchens nearly a decade ago, followed shortly by clever brands planning how to capture the latest to-go order with a trendy new, virtual brand ‘restaurant’ option. What has changed is consumer awareness of both, combined with a dynamic shift to off-premise dining. Let’s take a look at the meteoric rise in ghost kitchens and virtual brands, along with some exclusive insights from a few industry leaders.
One of the early adopters of the ghost kitchen concept was Geoff Alexander, President and CEO of Wow Bao, a fast-casual Asian concept. He saw what the future could look like and decided to expand into the space in 2019.
“We believe that any kitchen can be a dark or ghost kitchen.” He adds, “With just a few pieces of equipment, and frozen products distributed nationally, just about any store can start selling out the back door to third-party delivery drivers,” said Alexander.
Although ghost kitchens and virtual brands were growing in popularity as operators realized the opportunity to create brand-specific food delivery programs, once the pandemic hit in 2020, that opportunity became a necessity. A nice to have had suddenly become a need to have. Cue our tried-and-true sentiment, ‘At Branded we subscribe to the theory that the pandemic has changed nothing, but accelerated everything’ – and when it comes to ghost kitchens, they accelerated at a meteoric pace with an astounding growth rate of 5 years in just 3 months.
When reflecting upon the pandemic, Alex Canter CEO of Nextbite said, “It’s been quite an emotional roller coaster to watch the restaurant industry shift so dramatically in such a short amount of time.” Specifically referring to virtual kitchens he adds, “We had these predictions over the next 10 years… and it just all got accelerated into a couple of months,” said Alex Canter, CEO of Nextbite .
The COVID crisis had restaurants ‘running to catch up’ to delivery demand. The previous curiosity surrounding virtual brands matured into a full-fledged and hopefully curative way to give restaurants a much-needed lifeline to survive. Fortunately, consumer demand drove U.S. food delivery sales to top $19.4 million in 2019.
Although ghost kitchens might be the growth phenomenon of the pandemic, smart operators realize that they’re not just a solution to a short-term problem. They offer consumers a wide range of food options and convenience while providing brands a variety of benefits that are likely to expand their continued growth. Atul Sood, Chief Business Officer of Kitchen United, believes that ghost kitchens are vital for the industry.
“While each model varies, ghost kitchens essentially offer a fast and easy way for consumers to order food to go with options from a variety of restaurant brands, all under one roof,” said Atul Sood
While many operators initially launched a virtual brand to capture more of the hot delivery segment spurred by the pandemic, leaders in the space anticipate the trend is here to stay.
Industry veteran Robert Earl, Co-Founder of Virtual Dining Concepts says, “I would predict that in very few years, let’s say 3 from now, there will not be a restaurant that doesn’t have a virtual brand.”
Over the next few years analysts are predicting kitchen spaces to be 70% kitchen, 30% front of house, with lots of restaurants that are just opening up specifically designed to service the off-premises world.
There are still a lot of questions surrounding both ghost kitchens and virtual brands. Here’s some food for thought:
- Are they a phase or are they here to stay?
- As virtual brands continue to flood the space, will they lose their unique appeal?
- Do ghost kitchens pose a potential threat to traditional restaurants?
- Could the projected scale of drive-through concepts impact delivery models?
- Will consumers decide to return to dine-in options at pre-pandemic numbers?
While only time will tell the answers to our questions, what we can say with conviction is that the past few years have necessitated the adoption of delivery throughout the industry, paving a path to future growth that is strong for ghost kitchens and virtual brands. According to Euromonitor, ghost kitchens could create a $1 trillion global market by 2030. Restaurants that are equipped stand to make a high profit from what is likely a permanent shift to off-premise dining caused by the pandemic.