TL;DR — This blog post explains what a ghost kitchen is and how to start one.
After researching and working with a local catering to launch a ghost kitchen within a restaurant they manage, I decided to write this guide. As they manage a restaurant within a private location that is membership-based, their growth in the internal restaurant operations was limited. A ghost kitchen allows them to augment the internal restaurant’s demand by adding delivery for non-members through third-party delivery services.
In this guide, we’ll discuss:
What a ghost kitchen is and how it works
What you need to consider when starting a ghost kitchen
The benefits of starting your ghost kitchen
How to get started with your new ghost kitchen
What is a ghost kitchen?
A ghost kitchen is a commercial kitchen with no customer-facing area used to prepare food exclusively for delivery. Ghost kitchens are not new – they’ve been around since the early 2000s. However, they are now an increasingly popular way for savvy restaurant owners to reach new customers.
A ghost kitchen is a restaurant that only offers delivery or pickup through third-party delivery apps such as DoorDash, Uber Eats, and Grubhub. They have no physical storefront, tables, or wait staff. If a diner wants to try your food, they’ll have to order it online.
A ghost kitchen can be an excellent option for launching your restaurant concept as it has lower startup costs and less risk than opening a brick-and-mortar restaurant. Renting a commercial kitchen space ranges from $1,000 to $5,000 per month, depending on location and square footage. This is much less expensive than the average cost of opening a traditional restaurant, which can range from $100,000 to $750,000.
What you need to consider when starting your kitchen:
Do some market research. You don’t want to go into the ghost-kitchen business without first understanding what the market looks like. For example, some areas have a large population of working professionals who may prefer to order takeout or delivery, while others have more residents who prefer a dine-in experience. You should also consider the area’s demographics and if it economically supports a ghost kitchen. You’ll also want to confirm the availability of delivery services in the area and if they have enough drivers to deliver your food to diners promptly.
Do you have a business plan? If not, come up with one. A good business plan will include your target market, mission statement, financials, and other information that can help define your idea and get the ball rolling. Whenever I have started a business, I create a plan using software called Liveplan. This intuitive platform walked me through every aspect of creating a realistic and professional business plan. I can’t stress enough how important it is to have a plan to ensure everything stays organized.
What kind of food will you serve? When considering launching a ghost kitchen, review the options people have on the various delivery platforms so that you can develop a unique offering that they can’t find from other restaurants. One helpful guide that can help you determine what you’ll offer is the National Restaurant Association’s culinary forecast. You can download a copy here. Once you decide what you’ll offer, put together a menu and ask some family/friends to review it for you. I would also recommend looking into local Facebook groups to gather feedback to ensure what you are offering people would be interested in. It’s also a great way to start marketing your concept before spending money buying ingredients for your menu.
What’s your budget? While starting a ghost kitchen is significantly less than opening up a full restaurant, you’ll still need capital to spend in order to make it successful. Specifically, you’ll need to invest in equipment (if you don’t have it or the kitchen is not outfitted for your concept), invest in order management hardware, packaging, and marketing.
Do you have the space? You could lease a commercial kitchen space or set up shop in an existing restaurant that doesn’t have a delivery service. If that’s the case, make sure there’s enough space for all of your equipment and staff. If there isn’t enough room in an existing restaurant, there are several websites where you can find space, including The Kitchen Door, Loopnet, and Kitch.
Familiarize yourself with local regulations. Even if you are only operating a ghost kitchen, you still need to comply with all applicable regulations. Many jurisdictions require new businesses to obtain regulatory approval before they can begin operating, so check with your local municipal health department before opening your ghost kitchen. To find what food service regulations your state has, you can visit the FDA website, which will provide you with the guidelines for your state. In addition to the FDA website, the National Restaurant Association has a directory that includes information about your local state’s association, which will also be a valuable resource when researching regulations that you’ll need to comply with.
Benefits of Starting a Ghost Kitchen:
Low capital investment. Starting a restaurant from scratch is expensive — you need a place where people can dine, employees, tables and chairs, decor, operational equipment, and more. By contrast, a ghost kitchen needs limited equipment because you don’t need to serve customers directly. You don’t even need to lease an actual retail/restaurant space; space in an industrial park or warehouse can be less expensive than building out a commercial retail space. Additionally, you can reach out to existing restaurants about operating from within their kitchen. Think of a local breakfast-only place; could they benefit by allowing you to run your lunch/dinner concept out of their kitchen during their “closed hours”?
High-profit potential. By cutting out expenses of labor, utilities of operating a space where people can dine, or renting out a dining area, you’re reducing what it costs to run your restaurant. The main expense outside of food cost and the kitchen space you’re renting that you’ll be paying is the fee that the third-party delivery platforms charge. While food delivery service fees can be high, they’re worth it because they can drive a high volume of sales. Even if your margins are small on individual orders, you’ll see a high volume of sales if your menu is appealing and if you’re listed on multiple delivery services’ apps (you should try to get listed on as many as possible). Now you can reduce this cost by building your own website that is Search Engine Optimized (SEO), as you won’t have to pay the commission fee associated with third-party delivery marketplaces.
Operational efficiency. The ghost kitchen model provides significant efficiency benefits over dine-in restaurants. Without the need to serve customers on-site, you can reduce the space and number of resources required to operate. As you are not serving diners, you’re able to reduce your labor costs by hiring fewer employees.
Multiple Concepts under one roof. If you own a brick-and-mortar restaurant, typically, you’ll cater to one type of food offering. However, you can have multiple “restaurants” under one location by operating a ghost kitchen. This allows you to cater to people who have different tastes, preferences, diets, or allergy restrictions. For example, you could operate concepts to cater to people that are gluten-free, vegan, and vegetarian. You could also have a traditional menu that is served, as well. By having a variety of concepts, you are able to appeal to a broader array of customers.
How to get started with your ghost kitchen
The first few steps are intended for entirely new restaurants without their own space or without an existing business registered.
Choose your name and concept.
You should choose a short and easily pronounceable name so people can remember it while ordering food. Make sure the domain name is available so you can create a website for your ghost kitchen. Then choose your concept based on what foods people like to order online. Popular ideas include pizza, burgers, ramen, tacos, or planted-based foods.
Brand Your Concept
Once you determine a name for your business, it’s crucial to create a strong brand. I use tools like Canva and Coolors to help develop my brand when creating my companies. If you’re looking for someone to help build a brand, I suggest contacting local branding agencies or visiting marketplaces like Fiverr.
Plan your business
You’ll want to have a business plan in place that outlines your new restaurant concept. If you don’t already have a business plan in place, you can use the tool LivePlan, which will guide you through creating a plan.
Connect with a SCORE mentor
Whenever I’ve started my businesses, I’ve reached out to SCORE, which provides free business consulting services to entrepreneurs. In addition to providing you with mentoring, they also offer training that can be valuable for a new business. To find a mentor, click here.
Register your business and determine insurance needs
You should have a company registered to legitimize your business and limit your liability. When launching my business, I used Incfile to register my LLC. If you aren’t familiar with what structure would suit your business structure the best, it is best to consult an attorney who is experienced in incorporating businesses.
As you operate a business that serves food to the general public, it is essential to have insurance in place. There are hundreds of companies that provide business liability insurance. A single internet will reveal many different options. While searching myself, I found several options, including The Food Liability Insurance Program, biBERK (a Berkshire Hathaway Company), and NEXT Insurance.
Register for a business bank account
It’s essential to have a business banking account when you operate a business. For my business, I registered an account with Novo.co. The platform is easy to navigate, helps you track/plan your expenses, and allows you to access many perks that help cut down costs as a new business.
Renting space for your ghost kitchen
Location is one of the most critical pieces of real estate for any restaurant or food business. For a ghost kitchen, though, it isn’t necessarily as important as it is for dine-in restaurants because you don’t need to be in a high-traffic area or an area where your customers work or live. However, you want it close enough to where they are to ensure you have low delivery times.
If you already have a restaurant, you want to ensure that your operations for both concepts work well together. Ensure that you’re able to keep up with the demand for both (there are options to throttle online orders to prevent being overwhelmed) concepts.
If you do not currently have a space in mind, consider approaching a restaurant nearby that may partner with you to allow you to use their kitchen for your concept. If you are unable to find a restaurant to partner with, consider looking online for space. Some good places to find space include The Kitchen Door, Loopnet, and Kitch.
Get licensed for your location.
The exact licensing requirements you need will vary by state and city, so check with your local municipality to ensure you have everything you need. You’ll probably need at least one of these licenses: general business license, liquor license if your food involves alcohol, health department permit, sales tax permit, and worker’s compensation
Set up your digital channels
You know how vital a solid social presence is for any business, but it’s even more critical for ghost kitchens. The kitchen itself may not be open to the public, but you need to get the word out about your new concept. Make sure that you add in all of your contact and location information so that people can easily find how to order from you.
First, start by creating Facebook, Instagram, TikTok, and Twitter accounts. I recommend when creating these accounts that you ensure all of your branding and bios are consistent. I use Canva to create designs that are easily modified for the different platforms I am posting on.
In addition to setting up your social media channels, you’ll also want to be listed in local directories. Google My Business and Yelp are two that you must register for when launching your ghost kitchen. Ensure the information in both of these directories makes it easy for people to order from you and quickly see your hours. These profiles will also serve as primary places where people can leave reviews about what you provide.
Get the word out online
Once you have your social media accounts set up, you’ll want to make sure that they’re promoted effectively. It isn’t enough to post an “opening soon” message and hope people will see it. You need to be actively engaging with your followers so that they’ll share your information with their friends and family members.
Configure your point of sale and order management platform
You’ll need an effective platform to manage your orders, inventory, transactions, and reporting for ghost kitchen operations. I use and recommend Square For Restaurants. Their platform is comprehensive and allows you to efficiently manage your operations from one platform.
The four products from Square that I recommend using as part of your ghost kitchen include:
- Square For Restaurants POS, to manage your orders, control your inventory, handle your transactions, and provide you with powerful reports
- Square Online to manage your website and online ordering
- Square Loyalty, to build strong relationships with diners and encourage return visits
- Square Marketing, to help promote your kitchen through email and SMS marketing channels
As part of your operations, you’ll need the following hardware to operate:
- An iPad running Square For Restaurants
- A receipt printer to print out orders
- Optionally, an iPad running a Kitchen Display system that displays your orders and allows you to modify inventory quickly
How Boldly Forge Helps
We understand that getting started with your ghost kitchen is a lot of work. As business consultants, we’ll work with you to help you navigate through this process. Specifically, we’ll work with you to build out your ordering system, digital channels, and design workflows that help ensure your success. As all ghost kitchen needs are different, we start the process by offering a complimentary 30-minute discovery call where we can explore your needs. To schedule a discovery call, click here, or to learn more about our restaurant services, click here.
We hope that you found this article to be informative and valuable. Please reach out to us with any questions or comments!