What are your thoughts on ghost kitchens?

Question

Anybody have any thoughts on ghost kitchens (or micro kitchens, virtual kitchens...etc)?

I've been looking into opening a space with 6-8 ghost kitchens (300-400 sf kitchens built for takeout/delivery only). They were trending strong before Covid and now the market seems to have even more demand. Thoughts on the long-term Outlook?

Thanks.

Jason Turgeon · Answer

I'm by no means an expert at this, but in my metro (Boston) I did a search a few months ago and only found a couple of locations that were true for profit kitchen rental spaces.  Seems odd to me that there isn't more demand for this kind of thing. I found out about this from a coworker at my day job who quit our company to start a full time baking business (wedding cakes, mostly). She was able to find a small kitchen space at a price that allowed her to make the jump.

At least here in Boston, there seem to be a fair number of nonprofits geared at trying to help struggling young entrepreneurs in the restaurant space get started. Hard to compete with a nonprofit, but they often have all sorts of restrictions that might make them unappealing to certain clients. There are also a lot of struggling restaurants right now offering use of their kitchens at odd hours or slow days just to get some extra cash in. For someone who isn't doing takeout (like my baker friend), this might be a better deal. But I still think a true ghost kitchen space in the right location could do well.

Here are some market research starters:

There's this place with a slick website but no info about their locations (not even a state!: https://www.cloudkitchens.com/

Then there is this website that lists kitchens for rent, including lots of the struggling restaurants offering "dark space" I mentioned: https://www.thekitchendoor.com...

Here's the one true kitchen landlord I found in my metro: https://www.gatehousekitchen.c...

As far as logistics: Startup costs seem high, and I think you would really need to know what a startup restaurateur needs in a kitchen, especially in covid where things like shared storage and shared bathrooms aren't as appealing as they were a year ago. But on the other hand, it's dirt cheap to buy used kitchen equipment from closed restaurants right now. Some of these places seem to be offering much more of a full service offering with tech platforms and even staff who help in the kitchen. Sounds more like a job than a passive investment to me. And you will have loads of permitting to deal with since you are talking about food, so be prepared for delays and unexpected costs.

If you have the capital and RE experience, you could try finding a few people who want this kind of space in your area and getting them to sign some sort of LOI or nonbinding agreement that you could then take to a lender when you go looking for a space. But I would want to be sure that if the ghost kitchen thing disappears after we all have vaccines next year that you have some kind of fallback plan for the space. You could probably do a master lease and then sublet the space, but I think I would prefer to own the space so I could sell if the business model doesn't pan out.

Let me know if you pursue it. I think it could work out for the right person in the right market.

Adam Lacey · Answer

@Jason Turgeon, @Bill Brandt, @Lynnette E., @Nicholas Valente, @Blaine Alger Thank you all for the great responses. There is definitely a lot to consider. Our concept would be to supply the hood, sink, counter and the tenants bring their own equipment. We would help with marketing, online ordering and possibly our own delivery service if the demand is there. I'll let you all know if we decide to pursue.

Blaine Alger · Answer

https://www.wsj.com/articles/u...

Here is an interesting article by WSJ.

I like the idea but I think you have to really know the market and ensure that there is a need.

Nicholas Valente · Answer

I don’t know the code in your state but here in mass to be code complaint on that many kitchens would require a massive cost in mechanicals. Each kitchen fixture is assigned a fixture value and your existing plumbing must be able to meet the new demand of the new drain valve of the commercial sinks/washer/walkins. Each kitchen group is required to have its own grease interceptor or if the inspector allows it one massive massive one ($$$$). The underground plumbing would most likely have to be torn out and replaced. Adding duct work to the space to be able to properly ventilate each hood and bring in return air is way up there. The cost of walk in fridges and food grade storage equipment is extremely pricey as well. Not to mention the most likely upgraded electrical service to run everything. Hope this helps. Best of luck to you

Lynnette E. · Answer

If you do it consider making some of the kitchens into specialty kitchens, pizza oven, BBQ/smoker, micro brewery, bakery ovens and cooking racks, donut fryers.  That was they will not all compete with each other.

Bill B. · Answer

I would bet it’s rare because it’s so expensive. In vegas every “small” restaurant tries to lease a failed restaurant space. Even though someone else already failed in that exact spot at what they want to do because if the money saved.

A little BBQ joint owner a couple miles from me said he was quoted over $100,000 to build a code and health department compliant commercial kitchen for a place that sat MAYBE 10 tables. The place he chose to rent came with it. Not ovens and such mind you. This was all food storage and cleaning equipment related.

What are your thoughts on ghost kitchens?

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