Ghost Kitchens Are Not Scary
Insight from Darren Gibadlo, originally published on March 2nd, 2021.
After battling the harsh realities of the pandemic for almost a year, there have been significant increases in restaurant closures, a growth in contactless delivery services, and an overall rise in disruptions within the food industry. In the Accommodation and Food Service industry, 2015–2020 experienced an 8.4% decline year over year in revenue with a total revenue of roughly $599b. Then in 2020, there was a 42.6% decline in revenue due to the coronavirus pandemic, illustrating just how hard the industry was hit.
Another aspect that was affected within the industry, consumer preference, changed significantly over the year and has introduced a completely new wave of ideas. A new concept called ghost kitchens is an emerging market that more and more companies are capitalizing on. Ghost Kitchens, often referred to as dark, virtual, or cloud kitchens, are commercial kitchens with no dine-in or takeout option. The kitchens can have an extremely low overhead and avoid major expenses by only offering delivery. The logistics and technology involved are also very precise due to the fact that nearly all ghost kitchens entering the market use high tech solutions to streamline the food service and delivery process.
Ghost Kitchens are disrupting the market by capitalizing on newly available real estate and by offering restaurants as a service. Rebel Foods, one of the largest cloud kitchen restaurant companies located in Mumbai, India, has opened 1,000 restaurants over the past year and have already expanded to 3 countries. In the few years leading up to 2021, there have been 199 deals made within the industry, from seed funding to M&A, made by 507 private equity investors. With a median deal size of roughly $20mm, there is over $50b in capital invested across the companies in the accommodation and food service industry. DoorDash, Rebel Foods, and Deliveroo are the leaders in this market and have seen the most growth, adoption, and funding due to their high demand.
The low capital required to operate a ghost kitchen and the effects of the pandemic has opened the doors for new startups in the industry who are trying to get their foot in the door. More and more startups with innovative ideas must take advantage of this situation which may change the restaurant experience forever.
Darren Gibadlo is a Senior from Hampton, NH pursuing a degree in Finance and Entrepreneurial Studies from the Peter T. Paul College of Business and Economics. He is currently the Vice President of Administration for UNH’s Co-Ed Professional Business Fraternity, Alpha Kappa Psi and a Brand Ambassador for NOCA Beverages.