Opening a brick-and-mortar restaurant comes with both risks and rewards. Large investments of both time and money can be required to get off the ground, and there’s no guarantee that the endeavor will be a success. However, there could be another way to chase your culinary dreams.
Ghost kitchens and ghost restaurants can help culinary school graduates start their own restaurants without all the risks of the traditional brick-and-mortar restaurant model. While these are two separate concepts, they are often employed together to get a new restaurant up and running.
Read on to learn more about the rise of these concepts as well as how to start your own.
What Is a Ghost Kitchen?
A ghost kitchen, also known as a shared commercial kitchen or cloud kitchen, is a kitchen where food is prepared but not served. It may be shared by multiple restaurants and food trucks, or it may house only one ghost restaurant.
One example of a ghost kitchen is Kitchen United. This company rents out fully equipped kitchen centers to a variety of food businesses, including national chains and small, local restaurants.
While ghost kitchens are now a popular concept, much of this growth has happened in the last five years. As demand for delivery increased during the COVID-19 pandemic, ghost kitchen companies rose to meet the demand, providing ready-made commercial kitchen space for a wide variety of food businesses.
What Is a Ghost Restaurant?
Where “ghost kitchen” refers to the physical space where delivery orders are fulfilled, “ghost restaurant” refers to a virtual brand. While customers can’t dine in at these restaurants, also known as virtual restaurants, they can order meals online for pickup or delivery.
An example of a ghost restaurant is It’s Just Wings. This restaurant operates out of the brick-and-mortar stores of restaurants like Chili’s and Maggiano’s, but their offerings of wings and fries are only available for pickup and delivery.
Before we move on, it’s important to note that many people use the terms ghost kitchen and ghost restaurant interchangeably, since ghost restaurants often operate out of ghost kitchens.
Ghost Restaurants vs. Traditional Restaurants
If you’re thinking about opening a ghost restaurant, it’s helpful to weigh the pros and cons of this concept.
Pros of a Ghost Restaurant
Lower Startup Costs
With the increase in the online ordering market, entrepreneurs are exploring this option to reduce startup and operating costs. Since the space and equipment are rented instead of purchased, there is naturally a lower risk in the ghost restaurant model.
Less Staff
Ghost restaurants also reduce the need for staff, since there isn’t a need for hosts and servers. Additionally, food delivery can be outsourced to companies such as Uber Eats and Grubhub.
More Flexibility
Another major benefit of a ghost restaurant is flexibility. Since there is no physical location, no signage, and no printed menus, operators can easily change branding, logos, restaurant names, menu items, and photography. This lets operators test their concepts and menu items and pivot quickly if something isn’t working.
Cons of a Ghost Restaurant
Less Visibility
While online marketing can have a big impact on a restaurant’s visibility, it can’t replace a physical location. When you operate a ghost restaurant, you won’t be able to capture diners who are strolling through an area looking for a bite to eat.
All Meals Must Be Packaged
When you’re operating a ghost restaurant, all of your meals will be packaged for delivery or pickup. Not only does this mean that you can have increased packaging costs, but you may also be limited in the type of food you can serve as well as how you can plate it.
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How to Start a Ghost Kitchen
While the concepts of ghost kitchen and ghost restaurant are two distinct terms, people often use the two interchangeably. With that in mind, let’s explore how to open a ghost restaurant.
Develop a Concrete Concept
Although you won’t have to worry about designing the interior of a dining room or choosing paint colors, a ghost restaurant will still need a detailed and cohesive concept.
Think about what type of food you’d like to serve. Along with considering your culinary interests and strengths, you’ll also need to choose food that holds up well during delivery or takeout.
After you decide what type of food you want to serve, it’s time to come up with a name for your business. Since customers will primarily be searching and ordering online, it’s a good idea to choose something unique but also easy to remember.
Create a Business Plan
Once you’ve figured out your concept, it’s time to create a business plan. This document can help you flesh out the details of your business and present your ideas to potential investors.
“The thing that makes me most proud of our students is their willingness to understand that the business management side of their degree is just as important as the kitchen side of their degree.”*
Susan Yurish, Lead Chef Instructor
A business plan should include details like startup costs, ongoing operating expenses, and monthly revenue. While you probably won’t know every detail of your ghost restaurant, creating a business plan will spur you to complete the research necessary to come up with realistic numbers.
Find a Location
Once you’ve developed your concept and figured out the number of dishes you’ll likely serve each week, it’s time to find a space where you can cook your food. In general, there are three main options where you can open your ghost restaurant.
If you’re already operating a brick-and-mortar restaurant, you can use your existing restaurant’s kitchen as your ghost kitchen. By creating a new digital brand and menu, you may be able to reach new customers as well as provide a new option to existing diners. However, beware that incorporating two businesses into one kitchen can sometimes lead to crowding and confusion.
Another option is to find a remote commercial kitchen space to rent. While you’ll likely need to outfit this space with the necessary equipment, it can remove the hassle of working in an already busy kitchen.
Finally, you can choose to operate your ghost restaurant out of a shared ghost kitchen. Many of these kitchens operate on a membership model—some kitchens charge a monthly fee, some charge an hourly rate, and others combine the two types of payment structures. To find a shared kitchen space in your area, try searching on The Kitchen Door.
Before you decide to operate out of a commissary kitchen, ask questions such as when you’ll have access to the kitchen, what specific pieces of equipment will be available, and what happens if you need to use the kitchen more or less than you originally anticipated.
Investigate and Secure Funding
Ghost restaurants cost less to open than their brick-and-mortar equivalents, but start-up costs can still be upwards of $10,000. If you plan on sourcing your own equipment, costs can creep towards $30,000. Therefore, you may need outside funding to start your new venture.
Some possible sources of funding include traditional business loans, SBA loans, merchant cash advances, and crowdfunding.
The Cost of Opening a Ghost Kitchen
The costs associated with opening a ghost kitchen will largely depend on what type of location you choose, but these numbers provide an estimate.
Renting a commercial kitchen: $15-$40/hour, cost depends on location as well as contract length
Leasing a commercial kitchen: $1.95/square foot per month
Equipment: upwards of $40,000
Permits, licenses, and fees: $175-$8,000 excluding liquor licenses
POS system: $79-150/month for software, plus one time hardware costs
Develop a Marketing Plan
Since your business won’t be serving diners in-house, potential customers won’t be able to simply stumble upon your restaurant and decide to come in for a meal. That means you’ll need to create a marketing plan.
Some must-haves include a company website, social media presence, and excellent discoverability on food-delivery apps. And don’t forget professional photos!
It’s a good idea to begin marketing at least a few weeks before you open for business, so customers can learn about your food and get excited about your restaurant’s opening.
Obtain All Necessary Licenses
Before you open for business, you also need to make sure you’ve taken care of any and all legal requirements.
Some licenses you may need include a business license, state tax license, sales tax license, and food handler’s license.
Since requirements vary between states and cities, check with your local small business center or consult a lawyer to ensure you’re complying with local requirements.
Hire a Team
Even though ghost kitchens are smaller than brick-and-mortar restaurants, you may still need to hire staff to help you accomplish your goals. Since you won’t be serving customers, the majority of the staff may be working in the kitchen.
If you’re completing delivery in-house rather than outsourcing it to a food delivery company like Uber Eats, you’ll also need to hire delivery drivers.
“Anybody can say they are a chef. As far as the management portion, that is where Escoffier is really helping me actually run a restaurant, run a café, or run a business.”*
Tiffany Moore, Escoffier Culinary Arts Graduate, Co-Founder/Chef, Event Hall @ Cascade
Select an Ordering System
Since customers will be ordering and paying online rather than in person, it’s imperative you have an excellent point of sale system. A proper system should sync inventory and menu availability so you never receive an order you can’t fulfill.
You’ll also want to look for a system that syncs with your kitchen’s hours, so customers can only order when your kitchen is open. Some systems to check out include Toast, Lightspeed, and TouchBistro.
Open for Business
After you’ve developed your concept, found a kitchen space, hired a team, and done a few test runs, it’s time to open for business!
When you first start out, consider running some additional ads or promotions. This may help bring new customers in and create buzz. Not only will these new customers provide business, but they can also help market via word of mouth.
“Never let anyone stop you from achieving your goals, dreams, and aspirations, even if that anyone is yourself. I became head chef two weeks ago.”*
Christine Miller, Online Culinary Arts Graduate
Explore Your Entrepreneurial Goals
Whether you dream of opening a ghost kitchen or want to pursue starting your own food truck, it can be very helpful to have a background in both culinary and business skills.
Escoffier’s culinary school can introduce students to a wide range of topics, including business planning, cost control, menu planning, and inventory management.
And with both in-person and online options, you may find that attending culinary school is more attainable than you imagined. Contact us to learn more about how our programs can work for you and your goals.
To learn more about culinary entrepreneurship, read these next:
- Positioning Statements for Restaurant Marketing
- The Complete Guide to Starting a Home-Based Catering Business
- 4 Roadmaps to Becoming a Food Entrepreneur
*Information may not reflect every student’s experience. Results and outcomes may be based on several factors, such as geographical region or previous experience.
This article was originally published on October 5, 2020, and has since been updated.