Canada’s foodservice industry has been booming in the past couple of years, with growth of 5.3 per cent in 2017 and forecast growth of 4.3 percent in 2018. With growth comes innovation and experimentation. “Ghost” restaurants or kitchens are an innovation we’re seeing across North America, Australia, and Europe. They’re virtual eateries that skip the storefront and bring food straight to consumers by delivery. There is no direct interaction between the customer and restaurateur – food is ordered via a third-party food-delivery company. In eliminating the dining room and bringing meals straight to the customer, ghost restaurants can often sell more meals per hour and use less real estate than a traditional restaurant.
Given the added financial pressure from increases in the minimum wage in some provinces, there is more focus on reducing operating costs and keeping labour expenses in check across the Canadian hospitality industry. Ghost kitchens could appeal to Canada’s 95,000 restaurant operators who can leverage ordering and delivery services, especially for fast-casual food.
The delivery-only model is widespread across the U.S. and U.K., and is proving to be successful with such companies as Lettuce Entertain You Enterprises and Deliveroo leading the way. A survey of 100 of New York City’s top customer-rated restaurants via delivery services, Seamless and GrubHub found that more than 10 per cent came from ghost restaurants.
With revenue in Canada’s food-delivery sector expected to amount to $2.5 million in 2018 (an annual growth rate of 23.3 per cent), the trend toward ghost restaurants is something we expect to see grow in the next year – particularly in Canada’s urban hot spots Toronto, Vancouver and Calgary.
The ghost restaurant has many benefits for operators – the prime advantage being low overheads. Ghost restaurants don’t require expensive rents, wait staff, or tables for customers – all that’s required is a space kitted with industrial kitchen equipment, along with two or three chefs preparing food. Fixed costs are considerably lower in a ghost restaurant.
The model allows brands to be more agile and adapt easily to new dining trends and shifting consumer preferences. For a ghost restaurant that operates multiple food concepts, the sharing of ingredients can lead to better quality products and innovative offerings, which ties into economies of scale.
Food delivery companies such as UberEats, Foodora and Doordash, an important component of the ghost restaurant model, are building market share and allowing restaurants to expand their reach and profits without significant marketing spend.
Third-party delivery apps also give restaurateurs autonomy over the menu they present via the app. In the era of on-demand food, digital menus are another performance marketing tool, with restaurant owners able to use customer behaviour data to restructure and refine their offering, something they might not be able to do with the tattered paper menus at the back of customers’ kitchen drawers.
For larger brands with existing restaurant locations, having a ghost restaurant as well can ensure the quality of their dining experience is not impacted by overstretched kitchen staff or disruption by the delivery process. Naturally, this also presents difficulties, as brands seek to adequately recreate the flavour and presentation of food delivered to a customer’s door.
From a fast-casual restaurateur’s perspective, ghost restaurants can be effective. The front of the house in any restaurant is an expensive and inefficient use of space, especially as wages and rents continue to increase. However, the loss of walk-in footfall and the difficulties of upselling alcohol via delivery apps are potential challenges restaurateurs must consider if they are to sustain revenue levels.
This new round of digital-driven restaurants could solve many perennial industry challenges. Add to this the growth of third-party delivery companies, customers’ increasing penchant for mobile ordering and the recent explosion of such meal-delivery kits as Chefs Plate and Hello Fresh, and conditions seem ripe for the concept of ghost kitchens to do well.
The next wave of delivery restaurants won’t all be on busy street corners or in shopping mall food courts: some will be tucked away into discrete, semi-suburban commercial kitchens. But as promising as they are, ghost restaurants won’t single-handedly damage the traditional restaurant industry. Delicious food, combined with a beautiful setting and good service will always draw in friends and families looking for a wonderful night out.