How to Start a Food Service Business with a Ghost Kitchen

The best types of startup businesses are those with low upfront costs and consistent, high customer demand. Depending on the area, traditional restaurants often have great potential—since we all have to eat—but can also have costs that prevent average business people from taking the entrepreneurial leap.

Until recently, running a sit-down restaurant seemed to offer the greatest profit potential in the foodservice domain. Now, however, as customers are staying in more and regularly relying on takeout and delivery services, ghost kitchens are becoming a popular way for entrepreneurs to get into the foodservice business.

Advantages of a ghost kitchen

A ghost kitchen is known by a number of other names, including shared kitchen, delivery kitchen, virtual kitchen, and kitchen as a service (KaaS), among others.

"A ghost kitchen is a commercial kitchen designed for delivery only, or delivery and takeout," explains Tim Spiegelglass, owner of Spiegelglass Construction Company, who has built such spaces.

Spiegelglass likens ghost kitchens to full-service restaurants, minus the dining room. They contain all of the food storage, preparation, serving spaces, and equipment, but without room for customers to sit down and eat.

Ghost kitchens are excellent starting points for new food service entrepreneurs, says Spiegelglass, because renting such space allows you to test out a potential concept. "The startup costs are affordable, the commitment is minimal, and if you need to change course, you can do so easily," he says.

Startup advice

If you're considering establishing a new food service business using a ghost kitchen, here are some tips to improve your odds of success:

• Choose your location wisely. Although curb appeal or a beautiful storefront are irrelevant to ghost kitchens, Alex Blum, CEO of Relay—an online platform that connects restaurants with delivery couriers—says that location is important in order to ensure you can reach a large enough potential market. You'll want to be situated close to your target customers to reduce service and delivery times.
• Partner with a reliable delivery service. According to Blum, "A successful ghost kitchen runs off of good management, good food, and good delivery. A reliable delivery partner is essential, as it is one of the sole representations of the kitchen's brand." The best food delivered poorly or slowly is less likely to win repeat business.
• Keep your menu simple. "Make sure you create a menu that is targeted at delivery customers," says Marcin Muras, CEO and founder of online food-ordering system UpMenu. A menu targeted at delivery customers should be different from that of a sit-down restaurant in a couple of important ways, he says. "First, the actual menu design has to be very simple and not too 'busy,' with straightforward names. Second, for each dish, a list of ingredients needs to be made available," he notes. "In a sit-down restaurant, you would be able to quiz your server on ingredients … but this is not possible with an online menu."
• Know your local health and safety requirements. Nothing can shut down a food service business faster than a health or safety violation, so take the time to research local requirements to ensure you meet or exceed them, Muras recommends. Likewise, advises Spiegelglass, confirm the space you've chosen is zoned for commercial use.
• Hire skilled staff members. "When hiring kitchen staff for a ghost kitchen, you do, of course, want to ensure the same high quality that you would in a regular dine-in restaurant," Muras says. He tends to look for staff with foodservice experience so that they're "experienced in expediting orders and presenting food well in containers rather than on a plate."
• Make sure parking is available. Customers who elect to pick up their orders themselves will need a temporary parking space to pull into, so be sure to factor that into your kitchen choice, Spiegelglass says. If parking is problematic, customers may go elsewhere.

Now may be a good time to enter the food service business since many consumers are reluctant to dine inside restaurants during a pandemic but still want to enjoy having someone else cook for them. If you can combine great food with speedy delivery, your odds of success may be high.