The Pros and Cons of Operating A Ghost Kitchen Restaurant: The Secret Behind the Success

A ghost kitchen is where your kitchen services (food prep, cooking etc) are not operated out of an existing restaurant but run out of a rented space and operated by your staff or a third party.

The secret behind operating a successful ghost restaurant lies in identifying what you truly want out of your venture and then working hard to achieve that vision. To operate or not? That is the question.

What is a Ghost Kitchen Restaurant?

The ghost kitchen concept is where you outsource your entire restaurant operation to a third party. The chef and all other kitchen staff are employed by the third party and you use the kitchen space for storage, prep, and serving in locations not connected with a restaurant and are not meant to be dine-in concepts.

Ghost kitchen examples are kitchens that support a restaurant with online ordering or delivery functions – these reduce the time and stress for the actual restaurant by removing these orders from the restaurant. Other examples are a wine bar or any other QSR or restaurant business in the service industry in which all kitchen support is handled by third parties and in locations not connected with the existing location.

The great thing about this model is that, depending on your business, you could largely reduce overhead costs by not paying for many of the things that traditional restaurants usually have to pay for.

The Pros of Operating A Ghost Kitchen Restaurant

• Great Low Overhead Costs – Assuming you choose an operation with low overhead costs, you could enjoy an incredible expense reduction. You could cut your overhead costs by 95-98% and still make a healthy profit.
• Lower Capital Investment – This helps can you invest in other aspects of your business.
• Third Party Employees – You only need to provide your menu items and other supplies. Everything else is taken care of by the third party. This means that you can have fewer employees and thus, be more cost-effective.

The Cons of Operating A Ghost Kitchen Restaurant

• Risky – You would be taking a huge risk by operating a ghost kitchen with brand awareness and less control over the management of employees and product.
• Profit – Even if the third party does an incredible job, you still need to manage cost to deliver a profit.
• Brand Awareness – Depending on your approach, you still need to spend timing building your brand and brand awareness.
• Expense For Management – You would have to spend time managing the business and hiring a chef and other staff.
• Customer Satisfaction – If you choose the wrong third party, or they do a bad job, then you could have customers that are not happy with the service provided.

Why You Should Run A Ghost Restaurant

Ghost restaurants are a way of taking advantage of the business model known as the sharing economy. In this model, you contract out a large portion of your business operations to a third party. You, in turn, provide the menu items and other goods and services that make up your restaurant’s offering. While this could initially seem risky, you must consider the fact that there is a great demand for the type of business that a ghost kitchen provides – a demand that is unlikely to be filled by a traditional restaurant. If you choose the right third party, they could offer an especially attractive service allowing you to charge a much lower price than a traditional restaurant.

How to Start and Operate a Ghost Kitchen Restaurant

Before operating a ghost kitchen, you must first consider the legal factors that could affect your state. These include whether or not you would be operating a food truck, whether or not you are permitted to do so, and what licenses you would need. You must also consult your insurance provider and find out whether they would approve of your operation. If you choose to operate a restaurant through a ghost kitchen, you could start with a test kitchen.

Tips for Successful Ghost Kitchen Restaurant Operations

• No Cost Cutting – This is one of the biggest mistakes that many people make when operating a ghost kitchen restaurant.
• Choose the Right Third Party – This is crucial to the success of your business. You would want to select a third party that provides you with high quality services at a low cost.
• Advertising – Ghost kitchen businesses could be useful for off-peak operations, but they are best-suited for innovative concepts. You must advertise and generate brand awareness to build a customer base.
• Reputation Management – You would need to be careful about how you manage your reputation. You would want to be friendly to your customers when they complain.

Conclusion

Operating a ghost kitchen could be the best way to start a new restaurant venture or augment your existing restaurant with online ordering and delivery services. With these businesses, you outsource your some parts of the operations to a third party or have locations that are dedicated to certain aspects of your business.

EZ-Chow has solutions such as an Online Ordering, Self-Ordering Kiosks and Rewards/Loyalty Solutions that integrate into your existing POS systems. To learn how EZ-Chow can help you with these initiatives and more, get started by contacting us here.

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