‘Ghost’ Kitchens Play Bigger Role In Food Delivery

As restaurants continue to wrestle with the questions that come with food delivery — how to make enough money, whether to work with third-party operators, how to manage customer relationships — a new factor is gaining significance. Kitchens designed to handle only delivery orders are increasing in popularity and could help some restaurants find a delivery process that suits them better than existing options.

The most recent evidence for that comes from Keatz, a company headquartered in Berlin that operates what are called “ghost” or “cloud” kitchens — places where the company makes food for restaurants for delivery, and delivery only, to customers via third-party delivery services such as Uber Eats, DoorDash and others. Keatz reportedly has raised about $13.5 million in fresh capital, a funding round that comes after one in May that brought it about $7.9 million. The money reportedly will go toward kitchen expansion. Keatz already operators ten “ghost” kitchens in Europe.

The concept of a ghost kitchen is pretty simple.

Restaurants can pay someone to make food exclusively for delivery — using delivery-focused food prep tactics that, say, keep food from getting soggy on the car or bike ride to the consumer’s house — without having to invest in the front-of-the-house costs required for in-house dining experiences. Or restaurants can lease commercial kitchen space for the same purpose. Think of those kitchens, as many operators and observers do, as factories for food meant only for delivery. The task of delivery is done by other companies.

The ghost kitchen concept is gaining steam.

In February, for instance, news emerged that Travis Kalanick, the Uber co-founder, is working behind the scenes to create a network of food delivery kitchens around the world. The new venture is called CloudKitchens. The idea is to capitalize on the trend toward food delivery thanks to the likes of Uber Eats, DoorDash and Deliveroo.

Through the venture, CloudKitchens will provide the extra capacity to restaurants that are having a tough time contending with all the demand for food delivery. It will also help them expand their business in a particular city. The venture also includes software to help the restaurants manage their inventory and integrate with food delivery platforms. In Los Angeles there are several delivery-only type restaurants that are using the company’s services, noted the report.

Japan-based SoftBank has also bet on the trend — an investment that shows where the ghost kitchen concept might be headed. As noted by The Wall Street Journal, “SoftBank Vision Fund made a $357 million investment in Zume Pizza Inc., which is developing robotic technology that can prepare and cook pizzas while en route to delivery. The Mountain View, Calif.-based startup was valued at more than $2 billion in the latest funding round.”

The food delivery trend behind the rise of ghost kitchens is massive. According to UBS, the online food market will hit $365 billion globally in 2030, up from about $35 billion last year. These delivery-only kitchens are likely to play a part in that growth.

“There could be a scenario where by 2030 most meals currently cooked at home are instead ordered online and delivered from either restaurants or central kitchens,” the report said. “The ramifications for the food retail, food producer and restaurant industries could be material, as well as the impact on property markets, home appliances and robotics.” More specifically, the report said that those delivery-only kitchens “cut meal preparation costs, and robot chefs (will) industrialize the process further. At scale, unit costs of delivery drop by 50% percent, and even more via drones and droids.”

In fact, the UBS report — in a bit of dramatic flair, no doubt — predicted the end of consumer kitchens thanks to the wider availability and appeal of food delivery services, not restaurants, as some restaurant operators and analysts have started to worry about.

As PYMNTS has reported, the general food delivery space is heating up, but observers of the industry expect consolidation to follow eventually. Not only that, but online food delivery services will eventually have to shift more focus away from consumers and toward restaurant operators in order to thrive in a crowded marketplace. The rise of the ghost kitchen puts another factor in play, and could help restaurants provide a better deliver experience to consumers as the larger industry goes through its transformations.