Ghost Kitchens, Dark Kitchens, Cloud Kitchens – What Are They? Attributes To Consider For Their Location

The various kinds of business models could be a shared space ghost kitchen; a dedicated space ghost kitchen; a virtual brand; a traditional dark kitchen; multi-brand kitchen; takeaway dark kitchen; aggregator-owned dark kitchen; hub and spoke model or even an outsourced dark kitchen.

1. A shared space Ghost Kitchen is fully fitted with all the essential kitchen equipment and appliances and operates out of a rented space. Several ghost kitchens operate out of the premises, conducting their independent activities simultaneously within such space. One could find cleaning, technology and delivery services also being provided in some cases. This model may offer little flexibility in terms of what equipment the business might need in reality for its operations.
2. A dedicated space Ghost Kitchen is operated by a single brand only, which may either rent a space or even own one, for their exclusive use. Being used by a single brand affords several distinct advantages such as flexibility in purchase of equipment, moving the workstations around for enabling smoother workflow; offering a takeaway service apart from delivery; introduction of new technology within the kitchen and so on. The downside could be higher costs associated with purchasing own equipment and other capital expenses. This model may be more suitable for brands that are already established rather than new entrants who want to start a Cloud Kitchen. When servicing a single brand, it would be called a traditional dark kitchen and when servicing multiple brands, a ‘multi-brand kitchen’.
3. A Virtual Brand uses one’s existing commercial kitchen space, equipment and technology to experiment with a new cuisine or concept (a new brand). Instead of heavily investing in all of the above, from scratch, the idea is to introduce the concept into the market; evaluate results and then take the business model beyond just a ghost kitchen, if the market opportunity exists. The key is to effectively manage space within the existing kitchen infrastructure and to not disrupt operations of the existing brand. This is best done by separating the operations completely, which can also help in tracking cost heads independently for the existing and new brand.
4. Takeaway Dark Kitchen could operate as any of the above and with the additional feature of offering the customer an option of takeaway as well. The model could be that of customers waiting to pick up their packages; view the kitchen operations or even interact with the kitchen folks! The advantage of this model being, not eliminating the customer interaction element completely.
5. Aggregator-owned Dark Kitchen offers kitchen space and infrastructure for rent. In that sense, we could see this model as a sub-set of the second model, mentioned above, with a possible difference that a delivery aggregator has presence in the market with a fleet, online ordering platform or even advanced kitchen technology. It would become a sub-set of the first model, when many small kitchens operate within such a space and use the aggregator’s services.
6. In a Hub and Spoke Model, a central kitchen prepares the food and it is sent to smaller kitchens in a semi-cooked formed, to be cooked and delivered therefrom. This model is common and leads to cost savings due to the scale of operations and standardization.

Advantages and Disadvantages

While the online food delivery market is expected to grow exponentially by 2030, according to a UBS Report, from $35 billion to $365 billion and the Asia Pacific region is expected to register an unprecedented growth rate, given the population demographics, it is important to recognize some of the pitfalls or challenges of the Ghost Kitchen concept. We first highlight some of the distinct advantages of this model:

1. Low investment – There is no need to operate in a prime locality as target customer location would be the deciding factor in arriving at a suitable operating space. Kitchen equipment cost; restaurant rental cost, expenditure on restaurant interiors and labour costs are all reduced or eliminated. In essence the capital expenditure is low in a Cloud Kitchen allowing for expenses and creativity in other areas.
2. Experimentation – Ability to try new brands, without exposing oneself to significant risk is a clear plus in this model. While the life of a restaurant (not attached to a hotel and not in the Indian food segment) might be fairly short, we see that such a risk doesn’t exist with a Cloud Kitchen, as offerings can change and so can branding, based on market preferences.
3. Ease of expansion and scaling up operations.
4. Improves operational efficiency where existing restaurants use such spaces for delivery-only business without impeding their existing restaurant business. That is, cope with capacity-related challenges by using Cloud Kitchens to cater to delivery-only clientele. Also, when operating several brands from one kitchen, one can prepare batch-wise ingredients even for several menus.
5. Competitive pricing – there is a clear opportunity to not only experiment with menus but also give offers and price competitively to attract a wholly digital customer base. This is possible only because other expenses are either controlled or fully eliminated.

This model brings with it several challenges as well and a thorough understanding of the pitfalls could help one circumvent them and establish a thriving business. Experts believe that while several small and medium players experimented with the concept, there were certain inherent problems which they couldn’t overcome and therefore, didn’t survive.

1. Providing a consistent customer experience efficiently is the key and not easy to accomplish. Accurate order forecasting; a reliable supply chain; ensuring quality standards and comprehensive and continuous training of staff are all indispensable. Hygiene standards can well be compromised when there is no long-term focus and keen staff monitoring, as direct customer interface is absent.
2. Speedy execution for delivery to customers within stipulated time means the need for clinically efficient processes at the back end. Without proper tools and means, one could either falter on customer expectations or land up producing too much (in anticipation of demand), leading to losses.
3. If there are multiple ghost kitchens operating within a single business, managing inventories can be particularly difficult, including order placement, sourcing high-quality ingredients and inventory management across the board.
4. All of the above can be seamlessly tracked through technological means, which in essence implies an investment in the right tools. While costs would be cut elsewhere, investment in technology is a must for businesses that want to scale up.
5. The competition is very fierce for the smaller players, with high dependency on aggregators and paying out commissions to them. Most of the existing businesses need to resort to offers, as consumers continue to be price sensitive as per research or they could well see themselves out of the market place. Retaining consumers with promotional offers, loyalty rewards, discounts on future orders or special day deals are all ways to stay competitive.
6. Digital marketing and social media presence is a must, with no physical restaurant space. The rental costs for a restaurant are justified by the walk-ins and direct contact with customers that such a business model affords. With that advantage missing in a Cloud Kitchen space, the business has to necessarily resort to other means to attract customers, leading to an escalation of costs! Apart from getting the business registered on restaurant listings and review sites, there is a need to encourage positive reviews from consumers. While positive feedback attracts new clientele, addressing consumer concerns immediately can add to overall brand image or hamper it, if not addressed.
7. With zero customer interaction, one of the biggest hindrances is the heavy reliance on aggregators who deliver. One has no control over their efficiency and nor can one be entirely sure of the customer experience, which can be heavily influenced by the delivery agent’s demeanour and interaction with the customer.