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What Are Ghost Kitchens and Virtual Restaurants?

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The rise of on-demand food delivery is driving a sea change in the global food and drink industry. Ghost kitchens represent an important component of this process, as more operators adapt their businesses to a growing torrent of delivery demand. As freshly prepared meals and snacks become a larger part of our lives, more production will move “into the cloud,” with a growing separation between production sites, points of sale and consumer interaction.

But, what is the difference between ghost kitchens, virtual restaurants and third-party delivery apps? How are these new formats transforming mealtimes?

Delivery apps are not a new concept, but their evolution has created new opportunities for food and beverage players. Starting with the likes of GrubHub and Just Eat, these third-party delivery aggregators connect consumers with restaurants offering in-house delivery. Over the past few years, more players entered the space like UberEats and Meituan-Dianping, connecting consumers to restaurants and delivery couriers. These newer apps allow potentially any food and drink seller to offer delivery.

The power of third-party delivery players comes in the way they aggregate thousands of restaurants and brands under a single portal. Over time, aggregators become immensely powerful brands in their own right, even as they lobby to bring major brands and their traffic to their services. The data amassed by an aggregator can be used to drive the formation of new brands, often in direct competition with other brands on the platform.

Ghost kitchens, also referred to as dark or shared kitchens, are delivery-only kitchens that can be owned by brand or a third party working with multiple brands. Brands using ghost kitchens can also operate brick-and-mortar restaurants or virtual restaurants. On the flip side, brick-and-mortar restaurants can use separate ghost kitchens to provide more efficient delivery.

Over time, ghost kitchens could drive a process of scaling, resulting in drastically lower prices for prepared, delivered food. Carried forward, this could create a host of daily eating occasions toward restaurants in general and delivery aggregators more specifically. Ghost kitchens represent the first step toward the creation of third-party production platforms, which theoretically any brand can plug into, continuing the ongoing modularization of the restaurant industry.

Future innovation points toward virtual restaurants and beyond. Virtual restaurants are online-only brands, focusing solely on delivery. These players can operate their own kitchen space or work with partners, either through third-party ghost kitchens or existing brick-and-mortar restaurants. The capital outlay for starting a virtual restaurant is far lower than a physical restaurant, whilst menu changes and even concept changes can be made very quickly. This is expected to drive the emergence of more innovative concepts, faster—a trending menu item or concept could be rolled out in virtual form across multiple sites or even markets quickly, then adapted as market conditions demand.

The future global food and drink industry will be built, and operated atop third-party platforms—cultivation, production, purchase and delivery. Ghost kitchens, virtual restaurants and delivery more broadly are forcing operators to reexamine what the restaurant should look like in an era of ubiquitous delivery and smartphone ordering. Delivery and online ordering are now basic expectations for consumers.

Ghost kitchens and virtual restaurants both represent adaptations to this booming delivery demand, one from the production side, the other branding. Both will continue to expand as more operators look to adapt their operations.

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