So sad to hear that this concept is a bad business model. One of my favorite vegan places is a ghost kitchen. We always go to her to pick up though and hadn’t thought about the delivery apps’ cut. I wonder if there’s enough of them in an area to do like mini food courts. Hairstylist do this - renting a room in a mini-warehouse, combining expenses and some equipment but separate businesses. I hope they find a way.
So with this model you can't see the food being prepared, you don't see what happens to the food when Doordash transports it. And it's difficult to complain to a person if something goes wrong. I dunno if that's for me or my kids.
It seems like reliance on Doordash and other delivery apps is a major problem. There are a number of near-ghost kitchen restaurant models (Chinese, pizza) which are heavily reliant on delivery or takeout, but usually inhouse their delivery. Some of these have minimal or no sitdown restaurant space (my personal preferred Chinese takeout place actually has no tables or chairs at all, only a phone number and a very small order-and-pickup booth in a strip mall. The large majority of their lease is devoted to their kitchen). This business model is pretty close to a "ghost kitchen" IMO.
The industry overvalued itself and went insane with growth, then retrenched after the initial burst of development, oldest story in the book. But it’s not going to die, not even close. The better kitchens and more interesting brands have already started to emerge from the mire, and this is now the next generation of corporate fast food, where convenience and relatively mild pricing gains a bunch of easily satisfied customers who make it past of their lifestyle. Might as well sell weed as the appetizer.
Allot ot valid points in here, but it's not a complete failure yet. There are those of us who are still trying to make it work.
All of those companies failed for one reason only, they failed to develop a business model where the economics made sense for everyone. The cost of delivery factored in and the novelty made it near impossible and allot of companies like Nextbite and Kitchen United never had any revenue ( spoken from a knowledgable point of view) there was no blueprint for how to make them work. Non food entrepreneurs came into the space and thought they could solve it but it's a tough business.
Numbers:
Allot of hype yes, never understand the industry size numbers. It's as id one consulting group way overestimated the market size and ran with it. The true size is 50k virtual brands in the US today probably 1-2Bn in sales right now.
Quality :
It's not really a quality issue, the quality is the same as the core restsuanr business or sometimes better because these are easier to prepare. Truthfully allot of shops just re label their signature dishes so same food.
It's more of a perception and pricing problem. Most of the complaints are portion vs price and value of food. Same item delivery is at a minimum 50% higher most restaurants markup the items then the platforms charge you on the back end. Couple this with the deception theory and you have a bad quality stigma.
No connection :
I don't really agree with this. Saying they should focus on building community is like saying we should all go back to a world without internet. For better or worse the internet is here to stay and delivery is as well. If people wanted connection they would order direct but they don't because it's more convenient to order on an app. Here in lies the rub, too much delivery is very bad for a Restaurant, no delivery is tough
No shortcuts :
A franchise is a shortcut. 70% of restaurants fail in five years, franchises less so. Established procedure, built in marketing.
A virtual brand ( the right virtual brand is a franchise in a box) fraction of cost same benefits.
Here’s a summary of how cloud kitchens (“ghost kitchens,” delivery-only kitchens) are doing economically, along with key challenges and outlook:
What’s Good / Growth Trends
Strong Market Growth & Forecasts
Globally, the cloud kitchen market is growing fast. One report puts market size around US$ 80–82 billion in 2025 and projects it to hit US$ 200+ billion by 2033–2035.
Precedence Research
+2
Precedence Research
+2
The compound annual growth rate (CAGR) is often estimated between ~11–13% over the coming years.
For restaurants in my neighbourhood, I've memorized the good chef's days off so I can avoid them on those days. Also, because delivery is such a ripp off, I'll go pick up my own order. Abit to help me, a lot to help them.
If restaurants build loyalty and community, it makes me wonder about impersonal and purely quantitative "rewards programs" as replacements for the old practices of greeting familiar faces and lagniappe.
I've never seen the point of celebrity brands. You know Gordon Ramsey isn't actually cooking your food. And it makes even less sense with someone famous for something other than cooking. Why should I care if some actor or DJ sells his name to some mediocre company? What does that person even know about food anyway??
Very interesting article and nothing surprising at all about the downward trend and overspend. I was hired by a few of these outfits looking to pre-program the footprint for their vaunted ambitions. In two cases, they went from approx 15,000 to 40,000 ft.² in their planning stage when they got a bucket of money infused. Despite the fact that their business plan never “reality scaled” to merit the enormous increase in capital expenditure. I think the biggest error in judgment comes from the fact that most of those involved in these ventures never came from a true food service background. Very few were chefs much less cooks much less having ever been involved in day-to-day logistics of food handling. They knew how to build warehouses but did they actually know what it takes to put decent food on a plate much less in a takeout bag and make it palatable?
Sadly (at least in the Vancouver BC area) lease rates and food costs are insane. Independent restaurants are vanishing, except for those that are someone's expensive hobby, or bought their property decades ago.
We're left with the chain restaurants taking over as they have buying power.
So sad to hear that this concept is a bad business model. One of my favorite vegan places is a ghost kitchen. We always go to her to pick up though and hadn’t thought about the delivery apps’ cut. I wonder if there’s enough of them in an area to do like mini food courts. Hairstylist do this - renting a room in a mini-warehouse, combining expenses and some equipment but separate businesses. I hope they find a way.
So with this model you can't see the food being prepared, you don't see what happens to the food when Doordash transports it. And it's difficult to complain to a person if something goes wrong. I dunno if that's for me or my kids.
It seems like reliance on Doordash and other delivery apps is a major problem. There are a number of near-ghost kitchen restaurant models (Chinese, pizza) which are heavily reliant on delivery or takeout, but usually inhouse their delivery. Some of these have minimal or no sitdown restaurant space (my personal preferred Chinese takeout place actually has no tables or chairs at all, only a phone number and a very small order-and-pickup booth in a strip mall. The large majority of their lease is devoted to their kitchen). This business model is pretty close to a "ghost kitchen" IMO.
The delivery apps being able to subsidize customers at a loss + covid were one offs and too many people entered the market at once.
The industry overvalued itself and went insane with growth, then retrenched after the initial burst of development, oldest story in the book. But it’s not going to die, not even close. The better kitchens and more interesting brands have already started to emerge from the mire, and this is now the next generation of corporate fast food, where convenience and relatively mild pricing gains a bunch of easily satisfied customers who make it past of their lifestyle. Might as well sell weed as the appetizer.
Allot ot valid points in here, but it's not a complete failure yet. There are those of us who are still trying to make it work.
All of those companies failed for one reason only, they failed to develop a business model where the economics made sense for everyone. The cost of delivery factored in and the novelty made it near impossible and allot of companies like Nextbite and Kitchen United never had any revenue ( spoken from a knowledgable point of view) there was no blueprint for how to make them work. Non food entrepreneurs came into the space and thought they could solve it but it's a tough business.
Numbers:
Allot of hype yes, never understand the industry size numbers. It's as id one consulting group way overestimated the market size and ran with it. The true size is 50k virtual brands in the US today probably 1-2Bn in sales right now.
Quality :
It's not really a quality issue, the quality is the same as the core restsuanr business or sometimes better because these are easier to prepare. Truthfully allot of shops just re label their signature dishes so same food.
It's more of a perception and pricing problem. Most of the complaints are portion vs price and value of food. Same item delivery is at a minimum 50% higher most restaurants markup the items then the platforms charge you on the back end. Couple this with the deception theory and you have a bad quality stigma.
No connection :
I don't really agree with this. Saying they should focus on building community is like saying we should all go back to a world without internet. For better or worse the internet is here to stay and delivery is as well. If people wanted connection they would order direct but they don't because it's more convenient to order on an app. Here in lies the rub, too much delivery is very bad for a Restaurant, no delivery is tough
No shortcuts :
A franchise is a shortcut. 70% of restaurants fail in five years, franchises less so. Established procedure, built in marketing.
A virtual brand ( the right virtual brand is a franchise in a box) fraction of cost same benefits.
It's a tough business, anything helps!
chatGPT predicts massive growth...
how is cloud kitchens doing economically?
ChatGPT said:
Here’s a summary of how cloud kitchens (“ghost kitchens,” delivery-only kitchens) are doing economically, along with key challenges and outlook:
What’s Good / Growth Trends
Strong Market Growth & Forecasts
Globally, the cloud kitchen market is growing fast. One report puts market size around US$ 80–82 billion in 2025 and projects it to hit US$ 200+ billion by 2033–2035.
Precedence Research
+2
Precedence Research
+2
The compound annual growth rate (CAGR) is often estimated between ~11–13% over the coming years.
Persistence Market Research
+2
MarkNtel Advisors
+2
...
Robots not discussed. They are the coming gamechanger.
More and more tech will be adopted by Chefs.
For restaurants in my neighbourhood, I've memorized the good chef's days off so I can avoid them on those days. Also, because delivery is such a ripp off, I'll go pick up my own order. Abit to help me, a lot to help them.
In any restaurant, there can be huge variation between cooks. Even corporate and franchise (in fact it may be worse)
The exception is subway-format (heat n eat), and franchise/corporate pizza joints (simple, one cooking oven)
If restaurants build loyalty and community, it makes me wonder about impersonal and purely quantitative "rewards programs" as replacements for the old practices of greeting familiar faces and lagniappe.
Wait, what?!!!! "Delivery apps charge restaurants up to 30% commission fees..." I had no idea it was that high!
I've never seen the point of celebrity brands. You know Gordon Ramsey isn't actually cooking your food. And it makes even less sense with someone famous for something other than cooking. Why should I care if some actor or DJ sells his name to some mediocre company? What does that person even know about food anyway??
Glad to see them die. Almost all fast food is poison. Learn to cook at home.
Very interesting article and nothing surprising at all about the downward trend and overspend. I was hired by a few of these outfits looking to pre-program the footprint for their vaunted ambitions. In two cases, they went from approx 15,000 to 40,000 ft.² in their planning stage when they got a bucket of money infused. Despite the fact that their business plan never “reality scaled” to merit the enormous increase in capital expenditure. I think the biggest error in judgment comes from the fact that most of those involved in these ventures never came from a true food service background. Very few were chefs much less cooks much less having ever been involved in day-to-day logistics of food handling. They knew how to build warehouses but did they actually know what it takes to put decent food on a plate much less in a takeout bag and make it palatable?
Sadly (at least in the Vancouver BC area) lease rates and food costs are insane. Independent restaurants are vanishing, except for those that are someone's expensive hobby, or bought their property decades ago.
We're left with the chain restaurants taking over as they have buying power.
I thought 2015's $100 million fleet of 4 grilled cheese trucks would have taught the market a lesson. Just cook your own damn food lazy bastards.