How to Start a Ghost Kitchen


how to start a ghost kitchen

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It’s kind of a misnomer. Ghost Kitchens aren’t spooky figments of the imagination. They are real.

Ghost kitchens are places where food is prepped, cooked, and packaged for delivery. Orders are accomplished digitally.

There are several ways you can start ghost kitchens:

  1. Within a restaurant that you already own or lease.
  2. Within a restaurant that you don’t own or lease.
  3. From your home.

Ghost kitchens grew hugely as a response to Covid restrictions. That’s when “ordering in” became even more popular. In fact, according to stats the average person in the US orders food at least once a week.

The big restaurant operators are already taking advantage of the ghost restaurants trend. For more information, you can look at Big Brands Posing as Ghost Restaurants on Delivery Apps – Small Business Trends (smallbiztrends.com).

What is a Ghost Kitchen?

Ghost kitchens, virtual kitchens, or cloud kitchens use licensed commercial kitchen facilities to prepare, cook and package food. They operate on a delivery-only concept, most often using delivery apps to pick up and deliver the food. Ghost Kitchensare a relatively new and innovative business model in the food industry. They are transforming the way people dine and how restaurants operate.

Here’s a more in-depth look:

Concept and Operation

  • No Physical Dining Space: Unlike traditional restaurants, ghost kitchens don’t have a physical space for customers to dine in.
  • Delivery-Only: They operate solely through delivery, using platforms like UberEats, DoorDash, and Grubhub.
  • Shared or Standalone Kitchens: Ghost kitchens may operate from shared commercial kitchens where several brands prepare food or have a standalone space dedicated solely to one virtual brand.

Advantages

  • Cost-Efficient: Without the need for dining space and related amenities, overhead costs can be significantly lower.
  • Flexibility: Ghost kitchens can easily change menus, try new concepts, or even host multiple virtual brands from one kitchen.
  • Scalability: The model allows for quick expansion into new markets without the significant investment required for traditional brick-and-mortar locations.
  • Data-Driven: By relying on online orders, ghost kitchens can utilize data analytics to understand customer preferences and trends better.

Challenges

  • Competition: The lower entry barrier means increased competition among virtual restaurants.
  • Quality Control: Ensuring consistent quality across various delivery locations can be a challenge.
  • Dependence on Delivery Platforms: A reliance on third-party delivery services can lead to complications, such as high commission fees or issues with delivery times.

Trends and Future

  • Integration with Traditional Restaurants: Some restaurants are using ghost kitchens to expand their delivery capabilities without overburdening their existing kitchens.
  • Sustainability Concerns: With delivery at its core, considerations around packaging and environmental impact are becoming more crucial.
  • Global Expansion: Ghost kitchens are becoming popular worldwide, especially in densely populated urban areas.

Ghost kitchens represent a significant shift in the restaurant industry, capitalizing on the growing demand for food delivery. They provide opportunities for both new entrants and established brands to innovate, experiment, and grow. However, they also bring new challenges and considerations, particularly around quality control, competition, and sustainability.

As technology and dining habits continue to evolve, ghost kitchens are likely to play an increasingly prominent role in shaping the future of food. Whether as a response to changing consumer needs or as a strategy to optimize resources, the ghost kitchen model offers a glimpse into the potential future of dining.

How Much Does It Cost to Start a Ghost Kitchen?

Let’s go back to the places where you can start virtual restaurants. Obviously, the cost will vary.

  1. Within a restaurant that you already own or lease – Your additional overhead costs for this will be labor. You’ll need additional staff members who will only work on take-out orders.
  2. Within a restaurant that you don’t own or lease – You’ll lease space in an existing restaurant. On an annual lease, you may be able to get in for $20,000 to $30,000. But in a major metro area, you may pay as much as $100,000 to lease kitchen space.
  3. From your home – The equipment you’ll need depends on your menu items. As a minimum, you’ll need food storage areas, including refrigeration. You’ll be inspected to ensure you meet food quality and safety requirements.

How to Start a Ghost Kitchen in 17 Simple Steps

No matter the type of physical space you’ll need for your commissary kitchen, you must take similar steps. Whether you own, lease or operate from your home, here are the steps you need to start your ghost kitchen.

1. Research Nearby Ghost Kitchens

Since the market share for this type of restaurant is driven by digital technology, that’s where your research will be. You can start by checking with food delivery services like Uber Eats and others. Those who are running a ghost kitchen operation are linked to food delivery partner apps.

2. Choose a Niche

If you’re going to start a ghost kitchen within your own dine-in restaurant, choose items from your menu that lend themselves to delivery. You already know what’s most popular with your existing customer base.

There may be more than one ghost operation in commercial kitchens in brick-and-mortar restaurants. The space is chosen to be leased by its fit to your menu. Your meals should be easy to make using existing equipment at a restaurant.

If you’re ghosting from home, consider equipment costs and the best fit for your menu.

No matter where food is prepped and prepared, the ghost menu should be a specialty. It should fill a niche that is not already taken in the local market.

3. Name and Brand Your Business

Experts recommend that there are no more than three words in your business name. It should define your menu and be easy to search. Names for virtual brands or virtual restaurants must be catchy and definitive.

4. Write a Ghost Kitchen Business Plan

Remember, you are optimizing to be delivery only. Your business plan is similar to any restaurant business place, but you are locked to the delivery-only concept.

Here are key elements you’ll add to a routine restaurant business plan: Packaging essentials, point of sale and delivery apps, delivery-friendly menu, and separate staff.

5. Form a Legal Entity and Register

You’ll register your business with your secretary of state to obtain a business license.

The limited liability company, or LLC, is most often chosen as the business entity. That’s because your personal assets will be protected.

Other choices are Partnerships and Corporations (c-corp and S-corp)

6. Open a Business Bank Account

Opening a separate business bank account is a critical step in setting up your ghost kitchen. It provides a clear financial separation between your personal and business finances, which is essential for legal protection and financial organization.

A business account simplifies tracking expenses, revenues, and profits, which is crucial for effective business management. Using a business account for transactions adds a level of professionalism and credibility when dealing with vendors.

Furthermore, establishing a business credit card is important for building credit, beneficial for future business financing needs. Having a separate account also eases the process of filing taxes and claiming business expenses, making it a practical choice for any business owner.

7. Choose a Location

Here are critical components of your choice of location: average delivery distances and availability of delivery subcontractors. As a minimum, the facility must be licensed to sell food legally.

When people order food, they have an expectation that it will arrive ready to eat. If distances are great, it will be challenging for drivers to keep the food warm or cold (whichever is required).

If you’re in a rural area, a lack of delivery services may challenge your delivery-only concepts. If you hire your own delivery team, your overhead cost will be much higher.

8. Make Sure You Have the Licenses and Permits Required in Your State

Restaurants are much more regulated than other low-risk businesses. The potential for food-borne illnesses exists, and you’ll be regularly inspected.

You’ll need kitchen liability insurance.

Every person who handles food must have ServSafe Food Handler certification.

9. Design Your Menu

You’re a new restaurant with a new concept – prepping and preparing food that is specifically for takeout customers. Those customers, hungry people all, need a menu with catchy names and accurate descriptions.

For aspiring restaurateurs, this is a new food concept. Remember that because you’re poking into new markets, start with limited ingredients to keep costs low. Choose dishes that are easy to make and transport.

10. Design Your Packaging

Many states have adopted new legislation regarding packaging, such as eliminating the use of styrofoam containers. Before ordering packaging for cold or hot foods, ensure you meet state and local requirements.

Should you put your ghost kitchen name on the packaging? Some say that customers will throw the packaging away. Instead, provide a business card that customers can keep handy.

11. Set Your Menu Prices

In addition to your food price, you’ll have to add the price of packaging and also the cost of third-party delivery. There are commission fees paid to delivery services.

  • Factor in Costs: When setting your menu prices, consider the cost of ingredients, packaging, and labor. Remember that ghost kitchens often have lower overhead than traditional restaurants, which can be reflected in the pricing.
  • Delivery Costs: Include the fees for third-party delivery services. These fees can be significant, so you’ll need to find a balance between covering these costs and keeping your prices competitive.
  • Competitive Pricing Analysis: Research prices of similar food items in your area. Being competitive while maintaining a good profit margin is crucial for sustainability.
  • Dynamic Pricing Strategy: Consider implementing a dynamic pricing strategy where prices may vary based on demand, special promotions, or time of day.
  • Transparency with Customers: Be transparent about your pricing. Customers appreciate knowing what they’re paying for, especially when additional costs like delivery are involved.

12. Get Your Taxes in Order

You’ll need an Employer Identification Number (EIN) to pay employees and state sales taxes. If you’re an LLC, you’ll be taxed on net income at the individual level.

Tax requirements vary by state.

13. Purchase Business Insurance

Standard insurance needed for a commercial kitchen is general liability and property insurance.

Since your profits depend on digital technology, you should also purchase cyber and business interruption insurance.

14. Choose Delivery Partners

Your main delivery partners may be GrubHub, UberEats, DoorDash, and Postmates. You may also have a local food delivery service.

Create a Website and Market Your New Business

You’ll be found through an internet search, a food delivery companies search and/or via social media. In order to thrive, you’ll need a strong social media presence and affiliation with food delivery companies.

You won’t see customers face-to-face. A top marketing tool for the ghost kitchen is the handwritten note tucked inside the packaging. It’s a personal touch that will separate you from the competition.

16. Hire Staff

Hiring the right staff is crucial for the success of a ghost kitchen. This includes skilled chefs and kitchen staff who can prepare meals quickly and efficiently, which is vital for a delivery-focused business.

Additionally, dedicated packaging staff are essential to ensure that food is securely and attractively packaged for delivery. If you opt to manage deliveries in-house, you’ll need a team of reliable and punctual delivery personnel, preferably with a good understanding of the local area for efficient delivery.

Providing thorough training is essential to maintain consistency in food quality and packaging, as this directly impacts customer satisfaction and retention. Staff should also be flexible and adaptable, ready to handle the dynamic and evolving nature of a ghost kitchen operation.

17. Launch Your Ghost Kitchen Business

Announce your opening on social media and get ready for those online orders.

Ghost Kitchen Vs. Brick and Mortar Restaurant

AspectGhost KitchenBrick and Mortar Restaurant
Operational Focus- Food Preparation: Focuses exclusively on preparing, cooking, and packaging food for delivery.- Full Dining Experience: Includes ambiance, customer service, and entertainment.
- No Front-of-House Operations: No hosts, servers, or bartenders.- Requires Front-of-House Staff: Staff for greeting, serving, bartending, etc.
- Limited Customer Interaction: Limited to the digital platform or delivery driver.- Direct Customer Interaction: Engage customers, respond to feedback, personalized experience.
Cost Structure- Lower Overhead Costs: Less space, no dining furniture or decor.- Higher Costs: Rent for dining space, furnishings, decor, additional staff.
- Fewer Staff Required: Typically only chefs and kitchen staff.- More Complex Operations: Managing kitchen and front-of-house requires coordination.
Marketing and Branding- Digital Presence: Online marketing, social media, delivery platforms.- Physical Presence: Location, signage, appearance attract customers.
- Limited Physical Brand Exposure: No physical storefront for walk-ins.- Broader Marketing Options: In-person events, local advertising, digital channels.
Customer Experience- Delivery Convenience: Focuses on home or office delivery.- Dining Experience: Enjoy ambiance, service, social aspects of dining in.
- Limited Personal Connection: Less opportunity to build customer relationships.- Potential for Loyalty: Opportunities for face-to-face interactions to build loyalty.
Flexibility and Adaptation- Agile and Adaptable: Quickly change menus, test concepts, operate multiple brands.- More Fixed Structure: Changes require significant adjustments in training, marketing, decor.

There is a big difference between a ghost kitchen and a brick-and-mortar restaurant. And both have their pros and cons depending on where you are on your entrepreneurial journey. These two models’ choices depend on the business objectives, target audience, and market trends. Some businesses even find value in combining the two models to leverage both benefits.

1. Operational Focus

  • Ghost Kitchen:
    • Food Preparation: Focuses exclusively on preparing, cooking, and packaging food for delivery.
    • No Front-of-House Operations: No need for hosts, servers, or bartenders.
    • Limited Customer Interaction: Interaction is typically limited to the digital platform or the delivery driver.
  • Brick and Mortar Restaurant:
    • Full Dining Experience: Offers a full dining experience that includes ambiance, customer service, and sometimes entertainment.
    • Requires Front-of-House Staff: Staff needed for greeting, serving, bartending, etc.
    • Direct Customer Interaction: Opportunities to engage customers, respond to feedback, and create a personalized experience.

2. Cost Structure

  • Ghost Kitchen:
    • Lower Overhead Costs: Less space required, no need for dining furniture or decor.
    • Fewer Staff Required: Typically only needs chefs and kitchen staff.
  • Brick and Mortar Restaurant:
    • Higher Costs: Rent for dining space, furnishings, decor, and additional staff can be substantial.
    • More Complex Operations: Managing both the kitchen and front-of-house requires more coordination.

3. Marketing and Branding

  • Ghost Kitchen:
    • Digital Presence: Relies heavily on online marketing, social media, and delivery platforms.
    • Limited Physical Brand Exposure: No physical storefront to attract walk-in customers.
  • Brick and Mortar Restaurant:
    • Physical Presence: The location, signage, and appearance can attract customers.
    • Broader Marketing Options: Can engage customers through in-person events, local advertising, and digital channels.

4. Customer Experience

  • Ghost Kitchen:
    • Delivery Convenience: Focuses on the convenience of home or office delivery.
    • Limited Personal Connection: Less opportunity to build relationships with customers.
  • Brick and Mortar Restaurant:
    • Dining Experience: Customers enjoy the ambiance, service, and social aspects of dining in.
    • Potential for Loyalty: Opportunities to build customer loyalty through face-to-face interactions.

5. Flexibility and Adaptation

  • Ghost Kitchen:
    • Agile and Adaptable: Can quickly change menus, test new concepts, or operate multiple brands from one kitchen.
  • Brick and Mortar Restaurant:
    • More Fixed Structure: Changing concepts or menus might require more significant adjustments in staff training, marketing, and decor.

Ghost Kitchens and Brick and Mortar Restaurants cater to different food industry segments. Ghost Kitchens focus on delivery efficiency, offering flexibility and lower operational costs, but with limited direct customer engagement. Brick and Mortar Restaurants, on the other hand, provide a complete dining experience that allows for more profound customer connections but comes with higher costs and more complex management needs.

FAQs About Starting a Ghost Kitchen

What Is a Ghost Kitchen?

Ghost Kitchen, also known as a virtual or cloud kitchen, is a licensed commercial kitchen that prepares food exclusively for delivery. It operates without a physical dining area, often utilizing delivery apps.

How Much Does It Cost to Start a Ghost Kitchen?

The cost varies depending on factors such as location, kitchen size, equipment, and licensing. It typically ranges from $10,000 to $100,000 or more.

What Licenses and Permits Are Required?

Similar to traditional restaurants, ghost kitchens need to obtain food service licenses, health permits, and possibly local business permits. Regulations vary by jurisdiction, so it’s essential to consult with local authorities.

How Do I Choose a Location for My Ghost Kitchen?

Location considerations might include proximity to delivery areas, accessibility for drivers, and rental costs. Shared commercial kitchens can be an affordable option for startups.

How Do I Market My Ghost Kitchen?

Effective marketing may include using social media, partnering with popular delivery apps, SEO optimization for your website, and offering special promotions or loyalty programs.

Can I Operate Multiple Brands from One Ghost Kitchen?

Yes, one of the advantages of a ghost kitchen is the ability to operate multiple virtual brands from a single kitchen, allowing for varied menus and target audiences.

What Are the Main Challenges of Running a Ghost Kitchen?

Challenges might include quality control across delivery areas, competition with other virtual restaurants, dependence on third-party delivery services, and maintaining customer relationships without face-to-face interactions.

Image: Depositphotos, Envato Elements


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Lisa Price Lisa Price is a staff writer for Small Business Trends. She has a B.A. in English with a minor in journalism from Shippensburg State College (Pennsylvania). She is also a freelance writer and previously worked as a newspaper circulation district manager and radio station commercial writer. In 2019, Lisa received the (Pennsylvania) Keystone Award.

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