With restaurant deliveries soaring, an entirely new delivery and takeout business model emerged. Enter dark kitchens - highly efficient production units without a storefront that are optimized for delivery.
Author: Naji Haddad, Middle East General Manager, Deliverect
Food delivery has been reshaping the restaurant industry since the late 2000s. As more and more people started ordering food online, a significant portion of their orders was facilitated through third-party delivery apps.
With restaurant deliveries soaring, an entirely new delivery and takeout business model emerged. Take a look at dark kitchens, also known as ghost kitchens or cloud kitchens.
What are dark kitchens?
Dark kitchens are highly efficient production units without a storefront that sell meals exclusively through delivery.
They have no sitting capacity for in-house diners or walk-ins, preparing food once an order comes in through a delivery app or an online ordering system.
Once the meal is ready, delivery drivers then collect it for delivery. Some dark kitchens also offer takeout, letting customers pick up their food themselves.
How did Covid-19 impact dark kitchens?
Dark kitchens are increasing in number, with mounds of VC money pouring into startups that serve the industry and major delivery platforms setting up their own facilities. At the start of 2020, dark kitchens were already being talked about widely as the hot new trend in food delivery.
Then COVID-19 struck and suddenly brick-and-mortar restaurants up and down the country were forced into adopting a dark kitchen-style business model, offering limited menus, grocery boxes, meal kits, and whatever else they could for delivery or curbside pick-up. And turning their empty dining rooms into packaging and storage space.
With restaurants starting to open back up for dine-in guests amid new restrictions and stringent hygiene and distancing requirements, don’t expect the dark kitchen model to go away. The lockdown has demonstrated to those restaurateurs that weren’t already enjoying the benefits, that moving onto a digital platform and offering a more convenient option for diners is a very lucrative model. It has also brought many more consumers onto delivery platforms and shown them the convenience of online ordering.
Dark kitchens are more relevant than ever, and we should expect to see a lot more growth in this already exploding segment of the food business – the dark kitchen market is forecast to reach $2.63 billion by 2026, four times larger than it was in 2018.
What are the advantages of dark kitchens?
That’s the big picture. Now let’s dive into the advantages and drawbacks of dark kitchens and look at the practical considerations that you need to know before opening your own digital-age delivery-only kitchen.
There's a reason why they suddenly seem to be popping up everywhere. Not having to provide customer seating and waiting areas significantly lowers the cost of rent and additionally, there's no need to hire serving staff either. Therefore, it’s a great way for restaurants to reduce overheads, while increasing their capacity to cater to the increased food delivery market.
Dark kitchens also enable restaurants to easily experiment with new brands, menus and concepts. There are no physical premises to take into account when consumer food trends change, so delivery kitchens can quickly move on to a whole different menu or concept in no time. If a brand isn't landing, they can quite simply create a new one and try again.
Multiple virtual brands can be prepared in the same kitchen. That's why it's easy to target multiple segments and serve multiple different demographics at the same time.
Where did the dark kitchen come from?
Technology has changed the consumer market incredibly in the past couple of years. Today, you can order a product or service from the other side of the world, personalize it, and pay for it online within seconds.
The food industry eagerly adopted this e-commerce success story. It's the success of online ordering players like Uber Eats, Talabat, Zomato, Deliveroo, and many more that paved the way for dark kitchens. These third-party delivery channels enable food businesses to easily connect with customers and quickly deliver meals to their doorstep.
Getting food to customers has become easier - even for small, independently owned restaurants - a change which has led to an increased offer to match the ever-growing demand.
What do you need to know before opening?
There are a number of ways to approach opening a dark kitchen. First, you must choose which business model to go with. Whether you have your own kitchen with multiple brands, share the space with other virtual restaurants, or add a virtual delivery-only offering to your existing kitchen, you need to be aware of the following fundamentals.
1. Location is key
To take advantage of the benefits of dark kitchens, you need to be busy. You need that data coming in. Without the regular footfall of a brick-and-mortar location, you are relying entirely on your online presence to generate orders. And all of your customers must be within the delivery zone of around three miles.
So, you need to do thorough research on the competition, the demographics in the area, and find out which cuisines are likely to be popular.
2. Get the right tech
Dark kitchens rely on the amazing technology platforms available to power their operations and offer the advantages we’ve talked about. So, choosing the right solutions is a key decision.
Firstly, choose whether to offer your own delivery service or use third-party providers. There are pros and cons on both sides in terms of the convenience and reach of delivery partners versus the damage done to your margins. If you choose to go with your own system, you’ll need to invest more in marketing your brand and creating your own ordering and fulfillment systems.
If you choose to work with multiple delivery partners, as many cloud kitchen operators do, you will improve the efficiency of your processes immensely. Rather than having multiple tablets constantly bleeping at your frazzled staff as they re-punch orders into your POS from several different partners, you can invest in one system to consolidate all the orders and deliver them in a clear and consistent format straight to the kitchen.
This way, you save on staff costs (and reduce anxiety for existing staff) while speeding up delivery times. And with dark kitchens, faster delivery means happier customers and more repeat orders.
Don’t be afraid of dark kitchens
Dark kitchens are here to stay. As long as you take the time to plan effectively, get the right tech in place, and properly market your business, there’s a huge amount of opportunity in the marketplace. In a fast-changing, increasingly digital world, the low risk, adaptable nature of dark kitchens could make them the restaurants of the future. So, don’t be scared to jump in or the missed opportunity might just haunt you.