Bottom Line: Should You Use a Ghost Kitchen to Start a Virtual Brand?
This is probably the question most of our readers have. We’ve broken it down by where in your food business journey you are:
Chef or Entrepreneur Just Starting Out
If you have no experience in the food industry, ghost kitchens may seem like a great way to test out your food concepts. With lower upfront costs and no need for marketing, putting up a virtual brand on delivery apps and seeing what happens seems like the lowest risk option.
After talking to Greenspan, however, it’s not clear that you have a better chance at success, even if the entry costs are lower than other options. Not only are you restricted to the location of the kitchen, but you’re competing against sophisticated players who may be trying to dominate your entire category. On top of that, even the sophisticated players are still trying to figure out an effective marketing strategy.
Of course, as a first time entrepreneur in the food business, the chances of success are not high no matter what you end up doing. It will be critical to learn how to limit your risk, what your options are, and how to get help in the areas where you have the least amount of experience.
Owner of a Small Brick and Mortar Restaurant (With Limited Resources)
If you don’t have experience with virtual brands, launching them out of a separate ghost kitchen wouldn’t make much sense. You could, however, easily use your existing kitchen as a virtual restaurant to work on a profitable delivery model. Assuming you have excess capacity with unused labor and kitchen space, there’s no reason you can’t create new virtual brands. Take the ingredients you’re already using to create new menu items (or existing menu items) and brand them towards delivery customers.
As Greenspan says: “The virtual brand is to get more eyeballs and make more sales for the operator. So, he’s got his brick and mortar, right, that does X amount of sales. But he’s already got cooks, he’s already paying the real estate on the kitchen, and he’s already got excess product. So, he’s just creating another line to maximize the use of that sunk cost by getting more sales.”
If you’re able to successfully launch a virtual brand out of your own kitchen, then a ghost kitchen could be a great next move to expand your location footprint.
Food Truck Owner
According to Greenspan, you probably have everything you need in a kitchen right inside your food truck. And because you’re mobile, you can go anywhere in town and try to set up (delivery) shop. Along with the foot traffic you’ll generate, you can sell virtual brands to whoever you think is your target customer, from college students to busy working parents.
To succeed long-term, you will need to find a specific location that works for you so that delivery apps know where to pick up.
Once you have virtual brands that are profitable, a ghost kitchen could be a good way to scale inside of that neighborhood, especially if you’re limited by your food trucks capacity.
Large Restaurant, Chain, or Well Funded Chef
If you’re like Eric Greenspan, Cassia or Canter’s, ghost kitchens could be a great way to scale your brand. Whether you’re trying to dominate a food category (like pizza) or trying to be the best in your own niche, the opportunities are real.
We recommend trying understand what other brands are doing, or finding a good consultant (like Greenspan) that has experience with virtual brands and ghost kitchens. And when you hit on something that truly works, you’ll be in a position to quickly grow within the kitchen’s location.
Large Brands or Companies
We asked Eric if ghost kitchens and delivery was something a large non-restaurant brand could use. He emphatically said yes. Think of a famous tv show or a large company like American Express creating a virtual food brand to extend its footprint with new customers. Because the cost of the project would actually fall under experiential marketing, the economics change.
Large brands can also partner up with successful chefs and restaurants to increase their reach and tap into a wider audience. According to Greenspan, the possibilities for using ghost kitchens and delivery as a marketing tool are endless. And if you are a brand that’s interested in these types of opportunities, check out RMNG, our experiential marketing agency.