Dark kitchen. Cloud kitchen. Virtual kitchen. Ghost kitchen. They sound like settings within a sci-fi novel, right? Who would have thought in 1990 when Michael Crichton wrote Jurassic Park that these other-worldly kitchens would become a reality? Fast forward to the 2020s and this model of food preparation has arrived with an explosion. The dark kitchen concept was on the rise prior to the COVID-19 – the term first used in New York in 2015 – however the massive surge of food delivery during lockdowns fast-tracked its astronomical growth.
So, what does a dark kitchen business model look like? Minimalist and economical. Its sole focus is on preparing food for delivery, in a low-cost, quick-turnover manner. The template is simple: 1) food order in via the Cloud; 2) food prepared; 3) packaged foods delivered to customer. There is no seating, diners, (minimal) take-away, or customer interaction. And they are usually located in warehouses within industrial or outer suburbs. Dark kitchens exclusively use on-demand food apps like Uber Eats, Deliveroo and Menulog. Hence their moniker: ‘dark’ or ‘ghost’ because they operate out of sight; ‘cloud’ or ‘virtual’ because they use online ordering technology.
Interestingly, the acceleration of dark kitchens has had a knock-on-effect of growing both the food delivery and online ordering sectors. The ($) numbers show us this escalating story. According to Euromonitor, global delivery sales doubled between 2014 and 2019, and ghost kitchens are predicted to become a $1 trillion global industry by 2030. Franchise Direct confirm this trend, noting digital food orders and delivery have gone up 30 per cent in the past few years, even before the pandemic. In Australia, online meal delivery has grown 76 per cent over the past five years, with revenue of delivery and dark kitchens totalling over AUD$1 billion by 2021, according to the Australian Online Meal Delivery & Dark Kitchens report by CBRE Group.
How do dark kitchens work?
Original dark kitchen
One franchise or restaurant owns or rents a single kitchen location, without a dining space. They mostly focus on a single type of cuisine, relying on third-party delivery channels or their own employees to handle orders and deliveries. Or they use the site to prepare all their products (stock, braised meats, vegetables) such as Factory One the production hub of the Lucas Group.
Multi-brand dark kitchen
Multiple brands or franchises operate under one parent kitchen. Each brand offers different cuisines and dishes while sharing the kitchen, equipment, and resources to maximise efficiency and keep operational costs down.
Aggregator-owned dark kitchen
Third-party delivery aggregators such Deliveroo and Uber Eats offer kitchen space for restaurant businesses to rent. Or the delivery aggregator sets up its own network of dark kitchens – such as Deliveroo Editions – to extend food offerings to new locations.
Outsourced dark kitchen
This newest iteration allows a restaurant to outsource almost every process, except the finishing touches. This is done in partnership with other businesses who specialise in elements such as food preparation, order processing and delivery.
Takeaway dark kitchen
Similar to the ‘original’ dark kitchen, except it allows customers to collect their food, and see the kitchen and staff in action. This require some décor and parking.
The past 18 months have given the F&B industry a moment to reflect. Does their current business model complement consumer habits? How has the evolving digital landscape – delivery apps and streaming in, not eating out – affected street-side restaurant businesses? Is their current business model future proof?
To capitalise on the increasing eat-at-home/delivery landscape, the dark kitchen sector cites many advantages for restaurants:
- the physical kitchen does not need to be on a main street, therefore cheaper real estate
- no customer dining space needed, saves sq metre costs
- no need to hire front-of-house staff, buy furnishings, or produce menus
- it can deliver up to three-times more orders per hour with far less employees
- you can start up a new restaurant in as little as a month
- the reduced space and operational costs allow higher profit margins without reducing the food charge
- the direct operating costs can be under AUD $40K, rather than AUD $50–600K for a physical dine-in restaurant
- full-service restaurants that include a dark kitchen system may be better prepared to weather the storm in lean economic times.
There are some in the F&B industry that warn about the impact of dark kitchens on dine-in restaurants. Their reservations include:
- the model principally suits take-away style foods
- the inclusion of an executive chef/high-end dining within a multi-brand dark kitchen is unchartered territory
- the dining experience doesn’t compare to going out, sitting down, interacting with others, and being served
- there are long hours, endless work, and no customer interaction (as stated by those working within)
- local councils rely on third-party delivery aggregators to monitor their businesses to ensure they have proper food licences, environmental standards (noise, pollution, deliveries), and wastage.
Adaptation is needed to survive and thrive in the ever-changing world of hospitality. It is fortunate that resilience, adaptability, and versatility, of chefs and restaurateurs, are three of the sectors many strengths. And these strengths are now apparent, more than ever, in the face of present challenges: COVID-19, evolving consumer habits and the digital landscape. Many predict dark kitchens will grow in popularity as consumers demand variation in their ‘new normal’ and for some in the hospitality sector the dark kitchen will be a feasible way of maintaining their market and growth.