Every company within the food and beverage industry has undoubtedly felt the effects lockdown has had on our businesses. With an unforeseen drop in demand — not only during lockdown, but throughout the pandemic as a whole — our industry has no choice but to focus in on what our customers need to feel safe as we adapt to the new normal. For many, this has meant working with dark kitchens; thereby enabling or extending online delivery services while simultaneously increasing online marketing to capture new audiences.
A large proportion of businesses without an online delivery outlet have faced greater challenges than most; the inability to generate revenue coupled with the high cost of fixed cost has meant that many outlets had to close as a result of the pandemic. While we prize the freshness of food and comfortable ambience of our dine-in experiences, deliveries have become an incredibly important and lucrative service. As customers continue to shelter from the risk of the virus, online solutions pop up constantly to keep life running as near to normal as it can, and one such solution has been dark kitchens.
What is a Dark Kitchen?
While not a new concept, the dark kitchen has grown in popularity over the past few years and has become even more important during the pandemic. Also known as a cloud, ghost, or smart kitchen, dark kitchens are delivery-only kitchens that work exclusively through food aggregator apps and related delivery channels. There is no physical option to dine-in and these additional kitchens serve to increase the delivery radius in areas where footfall is too low to open a fully-fledged restaurant. It comes as no surprise that this trend has seen a vast increase in popularity throughout the pandemic as it has given customers access to prepared food without the associated risks of a dine-in setting.
In the current economy, deliveries have been relied upon to keep many in the F&B industry in operation and with no end in sight, they are here to stay. This means that dark kitchens may be an idea worth considering. However, every new venture has both positives and negatives, so we will explore both within this article.
Pros of Dark Kitchens
The modern food delivery concept of dark kitchens offers great opportunities for expansion of food deliveries without the hefty costs involved in opening a traditional restaurant. Provided an aggressive online marketing campaign is in effect, dark kitchens could enable many more in the F&B industry to successfully expand into the online world.
1. Increased Delivery Radius
By placing dark kitchens in areas that your current delivery radius does not cover, you can increase your customer base. This also decreases your delivery times for the surrounding area, or enables you to deliver to new areas that you could not previously cater to.
2. Economies of Scale
As footfall is not needed, you can place your ghost kitchen anywhere. This means rents or purchase costs will be significantly lower as popularity and footfall need not factor into the price. In addition to lower rents, you also require less labour as no front-facing staff are needed, so you are reducing the costs of the two most expensive overheads, while increasing both your production and customer base.
In addition, you won’t need to light or air-condition an additional restaurant front with a dark kitchen; nor will you need to kit it out with fancy furniture, unique interior design, or train front-facing staff to enhance the diner’s experience. Everything becomes technology-centric instead of requiring face-to-face interaction.
3. Quicker Launches
Dark kitchens can be up and running within a matter of weeks instead of several months. As everything focuses on the kitchen alone, there is little to no renovation required and once the kitchen is fitted out and the staff know their dishes, you are ready to deliver.
4. Robust – Even in the Pandemic
Busy working groups tend to rely on deliveries to increase their productivity and work around their schedule, while more vulnerable groups use them to keep themselves safe during the pandemic.
As millennials use these internet-based tools so often in their day-to-day lives, your demographic aged 19-37 are likely to continue using these services even after all restrictions are lift.
5. Accumulate App Customers
Opting to deliver your cuisine through aggregator apps — such as UberEats and GrubHub — opens you up to their extensive customer base. With millions of active users worldwide, there is an intriguing new opportunity for local and worldwide expansion through dark kitchens.
Cons of Dark Kitchens
While the pros show an incredible potential and appeal to the current market and beyond, there are some downsides to this trend that must be observed and weighed up for each business considering the dark kitchen.
1. No Shop Front
Without a shop front, you will not receive any footfall, and most F&B businesses are used to relying at least partly if not completely, on the revenue generated from in-house customers. That means the onus of keeping the dark kitchen profitable falls solely on your online and offline marketing campaigns.
It also means that you are far more reliant on visual marketing and online technology to create your customer experience. User experience is vital to ensure order completions and to encourage returning customers, however, aggregator apps such as Zomato and Deliveroo already have this system in place so using these applications creates an easier experience for you and your eat-out diners, and opens you up to their established customer database.
2. Impulse Buys Reduce
As a captive audience, people dining in-house are more inclined to add things on to their meals — such as desserts and extra drinks — in order to extend their dining experience. As customers pay for deliveries and have to wait to receive them, this impulse-buying is significantly reduced unless upselling is worked into your marketing campaign through your app, website or special offers. In addition, special offers and promotions may, in turn, cause your spend-per-head to drop, at least temporarily.
Some cuisines travel well during delivery, but this cannot be said for all. Gourmet food, for example, must travel in such a way that it not only arrives tasting fresh and delicious, but also looking perfectly arranged; on the other hand, Italian food such as pizza and pastas can accept a little more movement during transport. Considerations such as these make dark kitchens a very individual choice for each business to make.
4. Marketing is Vital
In order to increase demand for your dark kitchen services — which rely solely on delivery — online marketing is the very least that is required. You could entirely bank on 3rd-party online ordering platforms, however, investing in your own marketing can without doubt help you get a much higher response.
Without informing a vast amount of potential customers that you now deliver to their area, they may not be aware and you may not secure their custom. Online marketing takes a while to gain momentum without a significant investment into your campaigns, so a large portion of the money saved from reduced staffing and rent may need to be funnelled into marketing as well the aggregators extremely high fees
While the investment is undoubtedly lower for a dark kitchen, the marketing spend needs to compensate for the lack of a physical location as footfall cannot be taken into the equation. Dark kitchens are undoubtedly excellent for extending your delivery radius or even launching a brand, but marketing is the key ingredient that cannot be ignored if success is to be made of this venture.
Provided marketing can be adequately addressed, dark kitchens show a great deal of promise for those who need to extend their reach or who are looking to deliver further afield. Many companies have experienced a high level of success with dark kitchens and aggregator applications which allow the kitchens to be connected to a multitude of popular online ordering applications. Now is a great time to consider such options as many F&B businesses are relying so heavily on deliveries to make up for the shortfall resulting from the dine-in restrictions.
Each business will need to address their own internal model to see if dark kitchens are indeed a venture worth pursuing for them, but it is certain that dark kitchens are here to stay and the trend is set to continue. Delivery-only facilitators such as Kitopi, Ikcon, Sweetheart Kitchen and Food To Go are all actively running and expanding; the delivery-only business model is not a new concept, but one that has been rapidly gaining in popularity since its inception.
To discuss your business and how dark kitchens might help you in the pandemic and beyond, contact Glee Hospitality for expert advice specific to your company.