What Is a Ghost Kitchen?

The future of food might just be in a warehouse near you.

Written by Hal Koss
What Is a Ghost Kitchen?
Image: Shutterstock
UPDATED BY
Hal Koss | Oct 11, 2023

A ghost kitchen is a restaurant that makes meals for delivery and pickup only. It doesn’t have a typical storefront or provide a dine-in experience with tables and a waitstaff. Instead, it operates out of a shared commercial kitchen facility.

What Is a Ghost Kitchen?

A ghost kitchen is a meal preparation facility optimized for off-premise dining, such as delivery and takeout.

Ghost kitchens have been around for a few years, and surged in popularity during the pandemic due to dine-in restaurant closures. The phenomenon appears to be here to stay: In 2022, the U.S. ghost kitchen market size was $2.6 billion. And some estimates have it that ghost kitchens could account for 50 percent of the drive-through and delivery takeout market by 2030.

 

How Do Ghost Kitchens Work?

The way a ghost kitchen works generally looks something like this:

  1. A restaurant subleases space and equipment from a ghost kitchen provider, where it will receive orders and cook food.
     
  2. The restaurant signs up on delivery apps such as DoorDash, Grubhub, Uber Eats and Postmates.
     
  3. A customer goes on a delivery app and orders a meal from a ghost kitchen restaurant. They may or may not realize their food is being prepared in such a facility.
     
  4. Meanwhile, in the ghost kitchen, customer orders come in through a single tablet. The restaurant cooks the food and prepares it for delivery.
     
  5. Finally, delivery drivers pick up the food from the ghost kitchen’s pickup window and take it to the customer.

 

Ghost Kitchens vs. Virtual Restaurants

While the term ghost kitchen is often used to refer to virtual restaurants, they are different concepts.
 

Ghost Kitchens

Ghost kitchens, sometimes called dark kitchens or cloud kitchens, are large-scale commercial kitchens where food is prepared only for delivery (and sometimes pickup). Multiple restaurant brands exist under one roof, like tenants in an office building. Typically, they are given kitchen space, as well as ordering software and logistics support, from the ghost kitchen provider. 

“They’re essentially the digital modern landlord,” Matt Newberg, founder of HNGRY, a media company that covers food business and technology, said of the ghost kitchen providers, which he noted are “very hands on with everything from start to finish, except for the food prep.”

Some of the restaurants within ghost kitchens are established restaurant brands that want to expand their delivery operations, while others are virtual restaurants (meaning they don’t have traditional physical storefronts).

 

Virtual Restaurants

Virtual restaurants are only found on meal delivery apps, and they often have punny names that reference the type of cuisine they make, like Kale Me Crazy or What the Pho. Their food is typically prepared in the kitchens of existing brick-and-mortar restaurants, which license the rights to the virtual brand and are provided with menus, photos and recipe instructions. In this arrangement, the restaurant makes food not only for itself, but also for the virtual restaurant that now exists “on top of” its kitchen.

For example: You can order food from Pasqually’s Pizza & Wings through a delivery app, but its food is actually made in the kitchen of a Chuck E. Cheese. And if you ordered a MrBeast Burger online, it was probably prepared by the Italian restaurant chain Buca Di Beppo, if not a nearby mom-and-pop diner.

Virtual restaurants aren’t without controversy. In 2023, Uber Eats delisted thousands of them from its app, hoping to prevent virtual restaurants from listing the same menu under different names.

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Advantages of Ghost Kitchens

Ever since ghost kitchens arrived on the scene in the mid-2010s, they’ve provided restaurant operators and food entrepreneurs with a number of advantages.
 

1. Quick to Get up and Running

Opening a traditional brick-and-mortar restaurant takes lots of time. You have to find the space, acquire permits, work with engineers and architects, procure distributors, and hire and train a staff to serve both the back and front of the house.

With the ghost kitchen model, restaurant operators can test out their concepts quickly and hit the ground running with a skeleton staff focused solely on food prep. The ghost kitchen provider takes care of the rest.

“The time to get started is obviously a lot faster,” Newberg said. In his estimation, not too many people want to “open up a place and then find out six months later that it doesn’t work, and [get] stuck with a lease.”

 

2. Lower Overhead Costs

Opening a restaurant the old-fashioned way isn’t just time-consuming. It’s also expensive. Rent, utilities, permits, licenses, inventory, labor, equipment — it all costs a lot of money, and eats away at profits.

“The ghost kitchen is primarily solving the problem of the incredibly high capital requirements to start a restaurant. And in today’s market, it’s a CapEx-intensive business,” said Kristen Barnett, who co-founded the food technology company Hungry House. “The ghost kitchen can really help you bypass all of those potential hurdles and extreme costs associated. In many ways, it reduces the typical risks associated with opening a restaurant.”

Barnett, who previously led operations for ghost kitchen provider Zuul (which was acquired by Kitchen United in 2021), would generally advise against someone spending millions of dollars to build out a space for their first-ever restaurant.

“There are other, cheaper ways to test out your concepts and get product market fit or get some hype in a market,” she said. “And that could be leveraging a ghost kitchen to do so.”

 

3. Meets Growing Delivery Demand

Ghost kitchens, which are optimized for handling large volumes of delivery orders, help restaurants navigate a world in which consumers increasingly prefer to get a meal delivered, rather than sitting down in a restaurant or cooking it themselves.

In a 2023 survey of 1,000 Americans, US Foods found that the average person ordered delivery 4.5 times a month. And according to a survey commissioned by Derelict, a food delivery management company, respondents said they order delivery and takeout more often now than they did before the cost of living went up.

Indeed, a report by market research firm Market.US shows that the global online food delivery market was valued north of $160 billion in 2022 and is expected to climb to $483.9 billion by 2032.

Ghost kitchens are primed to help restaurants meet the growing delivery demand. They offer a streamlined infrastructure, tablets where orders from all the third-party apps are fed into one queue, and dedicated delivery-driver parking spaces. They also typically find real estate in a strategically placed location for maximum route efficiency.

 

4. Gives Consumers More Cuisine Options

Consumers rarely have access to multiple types of cuisine in the same delivery order. According to Atul Sood, chief business officer at Kitchen United, that’s a problem ghost kitchens are perfectly positioned to solve.

“If I want Chinese, and you want barbecue, we’ll have to order through third-party delivery from two different restaurants, which increases the cost and makes our food arrive at different times,” Sood explained. “Through ghost kitchens like ours, you can order both Chinese and barbecue on the same ticket and get it delivered with the same delivery driver. And that is a convenience for everybody.”

 

5. Allows for Flexibility and Experimentation

With reams of data at their disposal, ghost kitchen restaurants have the ability to optimize menu items (no reprinting paper menus required), test promotions, experiment with price points and hours of operation — and tweak everything on the fly.

Indeed, this lean-startup-esque approach to running a restaurant allows entrepreneurs and chefs to iterate upon their offerings and pivot quickly if things aren’t working, all without sinking in too much money.

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Disadvantages of Ghost Kitchens

Despite the pros of opening a ghost kitchen, the business model comes with plenty of disadvantages that should be considered.
 

1. Quality Control Can Be Difficult

Food delivery logistics make it challenging for ghost kitchens to meet consumer expectations. Food typically sits in a container for a half hour or so (sometimes even longer) before it’s delivered to the customer, which can negatively affect the quality of the product — and tank the restaurant’s ratings.

And if you’re operating a restaurant out of a ghost kitchen, your food is being shuttled to customers by a delivery driver contracted by a third-party delivery app, so you have no control over the consistency of that delivery experience.

 

2. Disconnection From Diners

Despite the surging popularity of ghost kitchens, research shows that the majority of consumers still prefer that their food comes from restaurants with a traditional storefront — even when it’s delivered.

According to the National Restaurant Association’s 2023 State of the Industry report, 74 percent of adults surveyed said it was important to them that their food be delivered from a place that has a physical location and is accessible to the public.

Operating a restaurant out of a ghost kitchen can also be challenging from a branding perspective. Having a physical presence in a neighborhood that people can see as they walk or drive by provides a stamp of validation and lends an air of legitimacy. When you only exist on a delivery app, there’s an inherent disconnect between your restaurant and many diners.

 

3. Delivery-Only Isn’t a Sustainable Business Model

Delivery is a distribution channel that’s growing in the food industry, to be sure. At the same time, many experts are skeptical of restaurants that think they can put all their eggs in one basket.

“Delivery alone cannot sustain the restaurant,” Sood said. “To make a ghost kitchen work, or any restaurant work, you have to rely on multiple legs of the stool, and in the ghost kitchen space, that’s delivery, takeout and catering.”

 

Frequently Asked Questions

Ghost kitchens are commercial kitchens designed to fulfill online food delivery and takeout orders. They are essentially restaurants without a storefront, dining space or waitstaff. This saves on overhead costs and leverages data from meal delivery apps to optimize menus and pricing.

A warehouse or industrial facility will have several licensed commercial kitchens inside it where food is prepared for delivery.

A virtual restaurant lives only within a meal delivery app. Its food is prepared in the kitchen of an existing brick-and-mortar restaurant that has a totally separate brand and menu.

Ghost kitchens are optimized for delivery and takeout orders, which are increasingly popular among consumers. They also require less start-up and operating costs than a traditional brick-and-mortar restaurant.

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