During the pandemic, a variety of disruption-driven trends emerged, and one of those trends is ghost kitchens. Due to the restrictions placed on in-person dining, the world has adapted to a new normal with food delivery, and ghost kitchens have taken this opportunity to shine. Ghost kitchens are delivery-only restaurants that do not offer face-to-face service. They offer a low-overheard opportunity to extend an existing brand or create an entirely virtual brand.
Those creating ghost kitchens are saving the costs of a physical storefront and in-person dining amenities while being able to operate with fewer employees. Given the virtual nature of these eateries, these virtual brands market heavily through online social media platforms. An example of this service is the Mr. Beast Burger, founded by Jimmy Donaldson in partnership with Virtual Dining Concepts. This American fast-food chain has over a thousand volunteer kitchens without an actual location, which generates $32 million per year in revenue. While difficult to track, Datassential estimates that there are over 13,000 ghost kitchens in the US. The market is expected to reach a valuation of over $71B by 2027 as interest in food delivery remains strong even after a COVID-19 vaccine.
Since the onset of the pandemic, delivery apps are becoming more prevalent as consumers find ways to adapt traditionally in-person experiences. These apps like DoorDash and UberEats act as a search engine for companies to vie for consumers’ attention and business. However, while this may be a way to get noticed by delivery regulars, the apps carry high fees that discourage potential customers from even using these apps. With so many competitors in the food delivery industry, it is also highly important to convert these customers into first-party channel customers. In response, the company Zuul produces apps customized for ghost kitchens so that the brand can build loyalty and acquire customers directly instead of being reliant on a middleman third-party app. The brand can draw users to these platforms by offering them exclusive deals and their streamlined online experience will help to create loyal customers.
A unique feature of ghost kitchens is the lack of a physical storefront to communicate the brand. In turn, many use the product packaging as a way to engage consumers and grow brand awareness by appearing easily shareable on social media. This reflects a general shift towards focusing on digital real estate rather than physical real estate. Ghost kitchens are able to function because consumers are comfortable enough with a virtual business when they understand the brand’s attributes and origins.
There does exist some consumer hesitation with ghost kitchens that are unclear about the brand’s origins. Due to the cheap overhead and flexibility of ghost kitchens, established brands have used digital storefronts and these kitchens to repurpose existing products for more niche markets. Similar to how direct-to-consumer business models center around a specific product, ghost kitchens can segment out a specific aspect of an existing brand. However, these brand extensions should clarify the brand’s origins as the majority of consumers do still find it deceitful to sell the same food under a different name.
Overall, the pandemic accelerated consumer’s comfortability with virtual experiences to the point that ghost kitchens will likely stick around, if not expand in popularity. While food delivery is not expected to grow as fast as it did during the pandemic, demand for the service existed before the pandemic and is still projected to grow.
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