Virtual restaurants go by many names such as ghost kitchens, and dark or cloud kitchens. But, like Shakespeare said, “What’s in a name?” That which we call a virtual kitchen by any other name would be a food establishment that exists primarily to deliver food.
The quote aside, the ingredients of this disruptive model are all present in today’s restaurant industry:
- Hourly rentable commercial kitchen spaces
- Gig economy workers
- Tech-enabled ordering platforms
- Consumer demand for delicious, convenient, and on-demand food
Virtual restaurants offer a larger market opportunity to food entrepreneurs who are looking to start a delivery-only business with significantly lower capital or overhead costs and simultaneously delight their customers. But, how to start a virtual kitchen? Here’s a list of five key steps to get started:
Step 1: Find Out Your Niche
First and foremost, a business needs research to find a unique gap in the current market. Find out the specific audience that is best suited for delivery-only service? Is it students? busy executives? office complexes?
Try to find your target audience by surveying people on the streets or in your neighborhood. If you find out that there is a 5-star-rated restaurant delivering in your area, competing with them may not be wise. But, if you find out that there’s a lack of quality food delivery options in the area, you might have found your niche.
Step 2: Scout Up a Commercial Kitchen
To deliver your food, you must cook it in a licensed commercial kitchen. In the past few years, there has been a boom in shared-use kitchen space or commercial kitchens. Think of a commercial kitchen as a co-working space for caterers, chefs, and food trucks. If you find a commercial kitchen that suits your needs, these are questions all commercial kitchens will ask you:
- Is your business registered?
- Do you have a ServSafe Food Handler Certification?
If you fulfill the requirements, you have to fill out an application. And after that, there are a few steps you have to follow:
- Select a plan: Daily, hourly, monthly, or pay as you go
- Liability insurance: Commercial kitchens will ask you to have a general liability policy
- Apply for inspection: Health department will visit you for quality control before you become operational
Step 3: Optimize for Delivery
Food trucks have to outfit and maintain their trucks, which runs a high cost. Also, legal restrictions regarding operating and parking the vehicle, bad weather, and inconsistent sales are some of the biggest challenges of a food truck. Physical restaurants, on the other hand, face challenges such as low margins, low customer footfall, and more.
Both these service models have realized that food delivery has become necessary and their menus are not designed with delivery in mind. So, if you are starting a virtual restaurant, optimize your food for delivery. Time and temperature are the two biggest challenges when delivering food. If the food arrives, soggy, cold, or messy, you might lose your repeat customer business. Therefore, optimize your menu for delivery as it is a critical component to a local operation.
Step 4: Choose your service provider(s)
The next step in opening a virtual restaurant is finding a food distributor and supplier. Many virtual kitchens buy their inventory using cash, debit card, or ACH, and yet they have to spend approximately 5-figures a month to acquire the inventory. Moreover, virtual kitchens don’t know where to go for insurance and payroll.
This is where empathy-first financial partner Ghost Financial comes in. With the first-ever credit card or the “charge card” as per John Meyer, CEO and founder of Ghost Financial, ghost kitchens can get 1 percent on their inventory expenses, which allows you to increase your margins without any credit checks. The CEO says, “We lead with empathy, not our pockets and we want to create a truly independent financial and banking backbone for the fast-growing ghost kitchen space.”
Step 5: Launch and Iterate
After all the hard work, you are ready to launch your first virtual restaurant. Now, all you have to do is be flexible as you might have to change your menu as per the changing needs of the customers. Focus on the quality of the food and enhance your menu with foods that travel well, hold temperature, and arrive as intended.
Have periodic quality checks on the food and between the cook and delivery service. Curb the food wastage as it is directly tied to your money. Also, focus on delighting the customers with fun collectibles or handwritten notes.
Final Thoughts
Today, the barrier to entry in the ghost kitchen space is very low. Setting up a ghost kitchen and running it has also become simpler and with organizations such as Ghost Financial, increasing the profit margin has become easier as well. You just need to identify your niche, design your menu properly, choose your service providers, and your virtual restaurant is good to go.
FAQs
1. How does the ghost kitchen concept work?
Ghost kitchens are also known as virtual or cloud kitchens. These are restaurants that don’t offer a dine-in service. They solely focus on fulfilling online orders and thus, they are delivery-only. A ghost kitchen doesn’t have to invest in tables, chairs, a dine-in area, and hotel staff.
2. How do I start my own ghost kitchen business?
Nowadays, starting a ghost kitchen is much simpler than before and the COVID-19 pandemic has pushed the delivery-only model for the past couple of years. Here’s how you start a ghost kitchen:
Step 1: Find Out Your Niche
Step 2: Scout Up a Commercial Kitchen
Step 3: Optimize for Delivery
Step 4: Choose your service provider(s)
Step 5: Launch and Iterate
3. What is the meaning of ghost kitchen?
To put it simply in one line, ghost kitchens are restaurants without dining space. Their sole focus is to fulfill online orders from third-party apps such as DoorDash, Grubhub, UberEats, or their own delivery service.
