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Ghost kitchens stick around

As vaccines roll out, ghost kitchens — the brick-and-mortar spaces that sprang up as revenue lifelines during the closed dining-room days of the pandemic — are not silently ceding their turf. Quite the opposite. According to real estate firm CBRE, pre-pandemic, ghost kitchens comprised 10%-15% of the US restaurant market. By 2025, ghost kitchens are expected to account for 21%.

But why? And more importantly, should your restaurant brand follow suit?

For one, they make good financial sense. Ghost kitchens offer a unique way to meet the demand for off-premise dining. With no high-rent location requiring front-of-house staff, these commercial kitchens sans the storefront get food in the hands of diners efficiently and cost-effectively.

Take Wendy’s. The burger chain recently announced it will open 700 ghost kitchens across the US, UK and Canada by 2025. Wendy’s is bullish on the prospect of the concept. In a recent earnings call, CEO Todd Penegor told analysts that the company is forecasting average annual sales of $500,000 to $1 million for a single ghost kitchen.

And Wendy’s isn’t the only major brand jumping in. Launched in June 2020 and operating out of existing Chili’s and Maggiano’s kitchens, “It’s Just Wings” is another ghost kitchen success story. In an April 2021 earnings call, the president of Brinker International (Chili’s and Maggiano’s parent company) said that It’s Just Wings was on track to generate its targeted $150 million in sales for the fiscal year.

Because they are so nimble, ghost kitchens can offer something full-blown restaurants may not: an unprecedented level of proximity. It’s Just Wings who also announced in March that it had integrated with Google to allow guests to order pickup directly on Google Search and Google Maps. The interface is simple. Guests search “It’s Just Wings near me” on Google, then choose from one of more than 1,000 participating kitchens near them, place an order and pay online. The experience is easy, convenient and seamless from start to finish. With guests embracing take-out during the pandemic, this is a smart move. In a recent RMS survey, 66% of respondents stated that they order take-out at least once a week.

Keep your ghost kitchen menu lean

Ghost kitchens, by design, usually take up a small if not shared footprint. “You wouldn’t want to attempt to execute your entire traditional menu in a ghost kitchen,” says  Richard Delvallée, RMS Senior Vice President. “It’s just not feasible.” But they do offer an excellent opportunity to focus on a single item (see It’s Just Wings, above) or test and refine limited menus.

RMS has reported before on the pros and cons of reducing menus. Ghost kitchens provide restaurant owners and operators an ideal venue for experimenting with new concepts. But they also offer welcomed simplicity and opportunity for profitability. According to Delvallée, before creating a limited menu for a new ghost kitchen endeavor (or even limiting existing menus), brands need to know three data points:

  • Product availability
  • Cost of labor components like item complexity (“Can we make this with limited staff?”)
  • Item profitability to determine what, if any, existing items should make the revised menu cut.

Another benefit of a simplified or limited menu is the ability to conduct thorough analyses and testing prior to committing to any large-scale implementation. Delvallée notes that pre-COVID-19 (before change became a necessity), testing was a step brands often neglected — and that they absolutely shouldn’t. “Testing different menus, menu styles and even item deletions can lead to valuable insights before you fully commitment to a change,” he adds.

Ghost kitchens with a side of retail

Ghost kitchens don’t exist only in vacant office parks. They’re also popping up in major retail storefronts — like Walmart. Already found in Canadian Walmarts, Ghost Kitchen Brands recently announced they will open in their first US-based Walmart location in Rochester, New York, with other states coming online soon after. Ghost Kitchen Brands provides Walmart shoppers one-stop meal pickup or delivery from up to 25 brands, including Costa Coffee, Kraft Mac & Cheese, Dickey’s Barbecue Pit and Shaquille O’Neal’s Big Chicken, among others.

The ROI of a reduced menu

The restaurant industry remains in flux and, some may say, is experiencing a renaissance-adjacent upheaval. Whether ghost kitchens become a long-term fixture or not, we know that behaviors developed during the pandemic will likely not disappear anytime soon. People want to eat out, and they also want to eat restaurant-prepared food at home.

A data-driven restaurant menu is a proven way to trim margins and increase profits. Whether it’s analyzing industry data or our clients’ POS transactional data, for more than 25 years, RMS data scientists have been doing just that. On average, the menu engineering and design strategies we’ve completed for clients have delivered an average margin increase of 1%. If you are looking to optimize your menu, reach out to RMS today.

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