ChainMail | Ghost Kitchens

The restaurant industry reinvents delivery.

ChainMail | Ghost Kitchens

One supply chain innovation may be new to you because it doesn’t look (or taste or smell) like traditional product distribution. So put aside your interest in cargo vessels and driverless trucks for a hot second. Let’s talk food deliveries from ghost kitchens. 

Restaurant delivery got a huge boost from the introduction of app-based ordering services like DoorDash and Uber Eats. When COVID shut down dining rooms, many restaurants reconfigured their businesses to focus on takeout and delivery. The success of delivery opened eyes to a more specialized concept: commissary-style kitchens that operate out of public view, preparing restaurant food exclusively for delivery. 

These so-called ghost kitchens are now trendy. Operators build and manage locations, leasing space to individual restaurants or training a single kitchen crew to prepare meals from an array of restaurant menus. The ghost kitchen concept is a creative twist on supply chain management because it’s an alternative to traditional food distribution. Why open a full-service restaurant when you can create a brand, develop a menu, and then cook to order from an efficiently designed, cheaper shared space that most customers never see?

Investors, restaurant chains, and small business owners have piled in. Since 2018 former Uber CEO Travis Kalanick, with $400 million in Saudi money, has built up CloudKitchens, which now operates 60 locations in more than 40 cities, according to Restaurant Business. Last year, Wendy’s said it planned to open 700 ghost kitchens in the U.S., United Kingdom, and Canada through a partnership with Reef Technology. Wendy’s figured it could open more urban locations with lower labor and real estate expenses. And since this is a delivery-only concept, customers would never know their burgers and fries came from an industrial kitchen space.

Some clever ideas fail, especially in hyper-competitive businesses like restaurants and technology. Wendy’s already has pulled back, saying sales were below expectations and its partner wants to have multiple brands in the kitchens, while Wendy’s prefers to be the sole operator. CloudKitchens, meanwhile, had an average turnover rate of 65 percent for the restaurant concepts at 20 locations, Restaurant Business reported. It’s tough to launch an online brand and deliver on the promise of quality food that gets boxed up and driven to the customer. 

The ghost kitchen strategy got a boost in July when Kitchen United said it secured $100 million in funding for expansion from investors including Burger King parent Restaurant Brands International, supermarket company Kroger, and supply chain manager the HAVI Group. The company has about 20 sites currently and hopes to grow to 500 within five years. Kitchen United has added a few twists to the concept, including its own online ordering system that allows customers to choose menu items from an array of restaurants and have all food delivered together with one bill.

If a customer in Chicago, for example, wants delivery of an Italian beef sandwich from Portillo’s, they can order direct from Portillo’s, or via a third-party app. But if they order direct through Kitchen United they can simultaneously select from Panera Bread, Moonbowls (Korean cuisine), and other concepts. The company’s ordering technology coordinates cooking times so if a chicken sandwich takes five minutes to prep and a rack of ribs takes 20 minutes, the chicken order will be held back 15 minutes, allowing everything to go out the door together. 

Brands using Kitchen United include Jersey Mike’s Subs, Wingstop, and Chili’s. “Restaurants have to adapt,” Atul Sood, Kitchen United’s chief business officer, told me. “I think you’d be hard pressed to find any boardroom in America at major brands that was not either already working with a ghost kitchen or actively considering it.”

Read the complete Issue 18 of ChainMail here.

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