TrendTalk Interview - The Evolution of Ghost Kitchens

Michael Jones and Stephan M. Leuschner discuss about the challenges of today's ghost kitchen operations, trends and new concepts within the food-delivery eco system.

Michael: Stephan, we have seen over the last year that food delivery, online ordering and ghost kitchens have became well established in many countries and are – now – an integral part of our daily life and habits today. Given that, what do you believe was the main success for this development and why it is here to stay?

Stephan: Well, Michael, you could argue that the COVID crisis is responsible for the strong development of the food delivery eco-system, but that is only half of the truth and is not the only reason. I believe there we two major aspects which drove this development:

1.     one was the necessity. Yes, COVID crisis forced many restaurateurs to rethink their model and to pivot to delivery, as they simply had no other chance to keep their operation up and running

besides that, constant shortage of qualified labor also supported the development of consolidating cooking tasks in dedicated, optimized production sites, which we call ghost kitchens actually, and to streamline their processes, breaking them down to simpler steps so they could be performed by operators of lesser skill level, or even become automated one day.

As the labor situation is not going to ease, rather getting worse to be honest, I believe we will see more of these optimized kitchen systems in the future that can come along with less staff at higher efficiency.

Less artisan, individual creative cooking, and more standardization of operations as well as industrialization of the kitchen will be inevitable… unfortunately, I must say as a former chef, but it’s also exciting when looking into it from a business point of view.

Everything has to change one day. Remember when the “spinning Jenny” was introduced to the cotton mills in 1764… I am sure the weavers have their concerns as well at that time... 

Compared to that, we are often late in our take-up of innovation in the foodservice industry, where the most significant inventions only happened the last 50 years and of course more to come. Intelligent cooking devices and automation of certain traditional preparations and cooking steps are of course on the rise

2.     The other, actually even more important reason for the rise of food delivery and ghost kitchens, is Convenience! Whilst necessity is the medicine, the Convenience is the sugar cube you take it with.

“Dulce & Utile” as the Romans used to say, - “Sweet and Useful”

People appreciate to eat and consume anywhere anytime nowadays. Everything must be fast, easy and ideally cheap. The today’s contemporary working environments whether home office or flexible working time “work anytime – anywhere” does not match with the “good old” 12-1pm staff canteen peak time lunch anymore.

Even if in office, people hardly leave anymore for lunch or snack, they simply order rather than dining out.

Having the freedom to eat whatever you want anytime at a click of a button of your mobile phone app, even at reasonable costs and in more or less decent quality is satisfying the needs of the majority of the population. Therefore, the food delivery models will stay in general.

And as we all know, the best way to efficiently produce food for delivery or pickup in high volume, with a high variety of brands and menu offer therefore, coming from one site and with reasonable costs is the operation of a ghost kitchen!

Michael: I believe most of us will agree with that, but we do hear concerning news and challenges recently when it comes to operating ghost kitchens and providing food for delivery. What are the challenges we must overcome to ultimately operate profitable and to scale the business eventually?

Stephan: Good question Michael, we have several critical points to consider which limit the success of a ghost kitchen operation and to allow healthy growth ultimately.

One major topic is the delivery itself. During the recent month several companies tried to develop the food and grocery delivery markets all over the world. Companies like Getir , Gorillas or JOKR , which drove the trend of “ultrafast grocery delivery” are facing major challenges to operate efficient and rentable now. Reorganization and increased delivery times are the result. The initially aimed for “15min after order” may not be possible anymore, at least not everywhere.

Reduction of headcount already happens and logically does not improve the delivery times or coverage though it probably was necessary to prevent a “blowing up” of the organizations.

Anyway, there were initial hopes that these “ultrafast groceries” could play their part when it comes to prepared food delivery coming out of ghost kitchens. We hoped that “problem of the last mile” could have been reduced somehow and that synergies in delivery would happen. It seems like we need to wait some more time,

Ghost kitchen operators that can afford to develop their own flexible driver force to cover their demand will be on the winning side, but this requires a good utilization and constant orders volumes, despite the notorious lack of availability of staff in all sectors.

Automated delivery vehicles, drones, or smart in-house delivery solutions for big buildings like campuses or major office buildings which are good for some hundred meals a day will be the solution ultimately. Many successful proven cases support this development already.

On further challenge is the lack of a physical storefront. You may say, a ghost kitchen has no restaurant and therefore does not need one, but here lays the problem. We have a significant reduction in customer interaction when it comes to online ordering. The ghost kitchen operators do not get any direct feedback from the customers, as there is no personal contact nor any personalized follow up. In the best case the driver doing the delivery can give some feedback but that is not the same as real hospitality,

Feedback however is crucial to maintain and improve the quality and overall customer satisfaction at the end. Given the vast amount of (unfortunately generic) food brand online and endless ghost kitchen sites producing them, any failure will not be forgiven and there is always an alternative... Customer loyalty is very low when it comes to online ordered brands.

The main complaints when it comes to online ordered food is about wrong food delivered or in bad quality but interestingly also the lack real complaint management. You may argue that the brand operators also do not care about regulars, but of course they should.

Ultimately, the costs in many operations hardly allow a break even, also driven by rising food costs, but mainly by fees to pay to aggregators and order platforms as well as the costs of delivery. Ghost Kitchens on their own work quite efficient, as they are already optimized from a workflow perspective. ...at least when the utilization is there,

Michael: Stephan, how will these problems eventually get solved?

Stephan: There have been some very interesting initiatives and you can see a certain trend which ghost kitchen operators follow now.

First of all, many operators, like we learned from Simele Shange of Jozi Cloud Kitchens or during our recent TrendTalk No. 7 when Matthias Schneider from CloudEatery was presenting, they all bring back the opportunity to go to a physical location where you at least can pick up the order yourselves or even consume on site - though they are probably not making their locations to fully serviced sites. With that opportunity, you can win on several topics at the same time.

1.     You can reduce costs you would have for delivery of the customer is willing to pick up from your hub. This may work nicely in business districts during lunch break or before commuting home. Feels like a “Pret-a-Manger on demand” or so.

2.     People who consume in house may give you more feedback directly, which helps you to improve off course

3.     You also may still look at the older generation of customers which prefer counter order or at least any physical interaction, at least to talk to a person, not only apps. This group of people (let’s say some 60+) are completely ignored in the strategy when it comes to modern online food delivery marketing. Though they were always the ideal core customer which appreciate food delivery.

4.     Lastly, you can leverage beverage sales in addition, which as any restaurateur knows, makes the difference when it comes to margins. Picking up a drink, especially hot drinks, are more likely than getting them delivered. This can be the little detail which makes the difference to being profitable ultimately.

Michael:  Let me play devil’s advocate for a minute. What if I claim, that this is nothing more than any other catering operation, like a pimped up-canteen at the end?

Stephan: It may look so at a first glance, and we always understood that there is no black and white, but if we look deeper, we have many more benefits if we develop ghost kitchens into a kind of hybrid concept… The best of both worlds so to say.

On the one hand, we offer a food variety of various brands, which you normally could not get out of any traditional restaurant of canteen. Making this new concept a “virtual foodcourt”

We also benefit of all the aspects the virtual kitchen world can give. Fast and easy order, Intuitive platform and handling, instant communication, traceability of food, customer data, easy pay solutions, better sustainability due to consolidation of deliveries, speed of cooking, reduced overhead…. I could continue for ages.

On the other hand, we have the necessary personal touchpoints like in a canteen or Bistro which, to be honest also normally is limited communication anyway, to get the feedback we need and to create a certain personal flair again. One of the ways to create brand loyalty is to create something tangible, the location, the people something established brands use when creating a virtual brand… If you would order a “real” brand online, you do have the same expectation as in the “brick & mortar” sites.

Michael: What else do you see being relevant to guarantee the success and growth of ghost kitchens?

Stephan: It is definitely to bring back some part of the genuine customer experience you get when dining-in. Consistency and an improve in food quality as well as the way it is delivered sound important to me. Companies like Wonder actually go down that road.. preparation on site with a kind of “mobile ghost kitchen”, this definitely gives room for more creativity, better presentation and may solve the “problem of the last mile”. the only question will be: is it affordable and will utilization over the day be sufficient. As this concept also requires better skilled staff, which can work independent on a higher level of quality, the challenge is in the availability and consistency. Food trucks have always existed but normally were static during operation. Delivering the entire kitchen with the food is now another way.

Using smart technology for preparation, for example like a RATIONAL AG iCombi, off course helps to keep food quality constant and high. Independent who is operating unit.

Another example, like Melina Michna from nourisha.kitchen told us, is to specialize to stand out of the crowd. Whether it is a vegan offering or some other focus. Being anything but generic, ideally combined with locally sourced materials will be a winner. Focusing your brands on specific customer group will help to create higher awareness and also allows you to offer “tailor made” menus and food items your customers crave for.

Traditionally, a restaurant or chef created a menu, made their offer to you. If you liked it, you went dining there, if not you may never have entered their restaurant. Today, we can change the process. Identify the customer and preferences in your catchment area first and create a menu which matches to them. More product, less ego.

Michael:  Last question Stephan, where do you see the ghost kitchens developing to in the future?

Stephan: I see more and more other segment players like retail companies or caterers to engage stronger into food delivery and ghost kitchen operations, therefore.

While the first ones already started to benefit of their locations and infrastructure, combined with the strong customer flow they already have in their stores, the caterers still do not think, let’s say “virtual” enough. Many catering sites are underutilized during most time of the day, and not only since COVID. The could easily operate, preparation kitchens for food delivery in their off peak times... or rent them out as KAAS, Kitchen as a service.

The retailers already understood the opportunity to create a contemporary offer. If you have a look for example at major retailers such as Walmart in the US or Canada, they already modified their locations to host operators like Canadian company Ghost Kitchen Brands , which offers multiple brand menus for delivery and pickup rather than the traditional QSR companies which used to be present there before but with limited menu offer. Customers will always live the variety. 

See the full interview in our recorded session of TrendTalk 8 - The evolution of Ghost Kitchens on YouTube.

about the interview partners:

Stephan M. Leuschner , RATIONAL AG 's expert for international foodservice industry and ghost kitchen projects, founder of webinar series TrendTalk, business consultant and former executive chef shares insights how to develop your individual solution to setup optimized kitchens for delivery-only purpose.

Michael Jones , voted 'Editor of The Year' at the CMA's International Content Marketing Association Awards 2020, Michael Jones is Editorial Director for Progressive Content in the UK. An experienced editor and writer, since 2013 he has headed up the content team for Foodservice Consultants Society International (FCSI), including its multi award-winning, quarterly magazine Foodservice Consultant and website. Michael also writes for additional clients in the foodservice sector, including KTCHNrebel .