June 15, 2022

The Ghost Kitchen Has Risen: How Do You Feel?

Research>MS Program
Written by Ruogu Wang — Contributor

Have you ever ordered food delivery from a new restaurant that was so delicious, it made you want to go there to dine in? Sadly, these days that might be impossible — because that restaurant may actually be a "ghost kitchen."

What is a ghost kitchen?

Ghost kitchen refers to food preparation and cooking facilities that provide meals by delivery only instead of offering dine-in experiences like traditional restaurants. They make their sales via online orders, phone orders or third-party food delivery platforms such as Uber Eats or Door Dash. A ghost kitchen is different from the concept of ghost restaurant because a ghost kitchen is merely for meal preparation. Several ghost restaurants can share the same ghost kitchen. This innovative business model emerged prior to the COVID-19 pandemic. The development of Internet mobile apps gave the food delivery industry a significant boost, which has revealed the development space potential of this market.

For business operations, this model lowers input and operation costs. It is more flexible, requiring less space and fewer employees. Launching a ghost restaurant on Uber Eats is significantly cheaper than opening a traditional restaurant. Meanwhile, customers can expect to enjoy food effortlessly on their sofa whenever they want. China is the biggest market for food delivery, where it produces over $51.5 billion in revenue annually. Its largest food delivery service provider Meituan delivers 24 million meals each day. As for the United States, there were over 1,500 ghost kitchens in 2020. Famous restaurant brands such as Denny’s, The Halal Guys and TGI Friday are trying out this new model and have achieved great business success. For large restaurant chains, ghost kitchens also provide a new way to reduce food waste. For example, when several restaurants share the same ghost kitchen, it allows those restaurants to adjust their menu strategically and share the inventory of ingredients.

The rise of COVID-19

The COVID-19 pandemic eternally changed the food and beverage industry. Customers became afraid to dine in a restaurant at the same time governments announced dine-in restrictions to control the pandemic. Traditional restaurants are struggling to survive while ghost kitchens are thriving. In fact, many brick-and-mortar restaurants use ghost kitchens to pull themselves through this difficult time. Shutting down the front area and focusing on the kitchen can minimize employee layoffs. Through food delivery, restaurants can generate necessary cash flow in order to survive. Although before the COVID-19 pandemic, ghost kitchens were already considered a challenge for traditional restaurants, their development has accelerated greatly during this period.

How do customers feel about ghost kitchen?

Ghost kitchen is still a relatively new concept. Recent research shows that customers lack understanding of ghost kitchens, and they do not trust ghost kitchens. Seventy-two percent of customers prefer to order food delivery from brick-and-mortar restaurants more so than ghost kitchens. Although ghost kitchens have the same food-safety standards as brick-and-mortar restaurants, customers might not be able to realize that. There are also criticisms about ghost kitchens eliminating the fun of onsite dining experiences. However, the benefits of ghost kitchens have also been noted. Customers can enjoy a variety of menu options and convenience. They also care about the positive impact of ghost kitchens such as reducing food waste and contributing to the economy. For the future development of ghost kitchens, public awareness of this concept needs to be woken up. Business operators should market the benefits of ghost kitchens, establishing a positive image to raise public goodwill.

Reference List:

  • Ma, Webb, T., & Schwartz, Z. (2021). A blended model of restaurant deliveries, dine-in demand and capacity constraints. International Journal of Hospitality Management, 96, 102981–. https://doi.org/10.1016/j.ijhm.2021.102981

  • Cai, Leung, X. Y., & Chi, C. G.-Q. (2022). Ghost kitchens on the rise: Effects of knowledge and perceived benefit-risk on customers’ behavioral intentions. International Journal of Hospitality Management, 101, 103110–. https://doi.org/10.1016/j.ijhm.2021.103110

This blog post tied for First Place in the Spring 2022 HFTP/MS Global Hospitality Business Graduate Student Blog Competition presented by the HFTP Foundation. Participants are students participating in the Master of Science in Global Hospitality Business, a partnership between the Conrad N. Hilton College of Global Hospitality Leadership at the University of Houston, the School of Hotel and Tourism Management at Hong Kong Polytechnic University and EHL. The blog posts that received the top scores will be published on HFTP Connect through July 2022. Learn more at HFTP News.

Ruogu Wang is a graduate student currently pursuing the Master of Science in Global Hospitality Business program, which is in partnership of three schools: EHL, the Hong Kong Polytechnic University, and University of Houston.

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