Is a ghost operation right for your pizza concept?
In the past six months, the term ghost restaurant has popped up frequently. They’re also called virtual restaurant and cloud kitchens. But, what in the world are they? A ghost restaurant is basically a back of house operation focused on delivery or takeout only and uses digital transactions only. Think of it as a restaurant without a storefront.
Many pizzerias unknowingly have operated as a ghost restaurant during the depths of the COVID-19 shutdown with dining areas closed.
Ghost restaurants are positioned to have a big economic impact. Euromonitor estimated the ghost kitchens could be a $1 trillion market globally by 2030, according to a Financial News Media release.
There are already several competitors in the pizza space in some markets with even more in the works. Third-party companies like UberEats, DoorDash and Ordermark have invested hundreds of millions of dollars into developing kitchen concepts.
But is a cloud kitchen right for your concept. The answer to this question will require you dive deep into your business plan and overall concept goals. Let’s s take a quick look at the benefits and drawbacks of ghost restaurants.
- Potential for lower overhead costs than a traditional restaurant.
- An avenue to test a concept.
- Less required labor without a front of house staff.
- No customer-facing financial investment such as interior/exterior signage, costs associated with a front-of-house buildout and dine-in supplies.
- Option to outsource all ordering and delivery operations.
- Opportunity for less expensive real estate investment.
- The capability to have a larger kitchen space.
- A ghost restaurant can be added to/and operate within an existing conventional restaurant.
- Ability to have multiple concept types within one ghost kitchen.
- Ability to expand beyond current restaurant’s market reach.
- No face-to-face interactions with your customers.
- More difficult to build relations with customer base.
- More challenging and less control over managing reputation, complaints and reviews.
- May put virtual concept in direct competition with your existing restaurant.
- Added markup fees on the customer side when using third-party apps.
- Added service fees for operators.
- Less control over customer data with third-party ordering and delivery.
- More challenging to generate PR buzz about the restaurant and its menu items.
- Marketing limitations as an online-only operation.
- Potential for complicated order fulfillment with varying tablets and POS integration.
- Failure rates are still just as high as brick-and-mortar locations.
It’s difficult to predict what kind of impact virtual restaurants will have on traditional pizzeria models. The momentum of off-premise sales continues to skyrocket with all indications that virtual restaurant will continue to rise even after the COVID pandemic subsides.
Check out a quick conversation with Alex Geiger who launched WingSpotAZ as a virtual restaurant operating within Classic Crust Pizza in Phoenix, Arizona.