QSR January 2023



The dust seems to have settled on the shiny newtoy of the restaurant industry: the ghost kitchen. Benefits to this model were initially touted as lower real estate and operational costs versus traditional restaurants, zero front of the house costs, flexibility of menu, brand, and pricing, and an opportunity to attract a new clientele via third-party delivery apps. And at the outset, those seemed to be very compelling reasons to “startup” a ghost kitchen. Many startups across varying industries, eager to disrupt, often make a lot of mistakes out of the gate. The restaurant space is no different, however, here, the main blunder made by some of these startups was not under standing the business of hospitality from the get-go. Ask any successful restaurant veteran what the secret of success is for any profitable and long-standing brand, and they’ll all say the same thing—consistency, and a focus on the customer. By focusing too much on operational ease and efficiency, many ghost kitchen startups failed to con vert orders into repeat business, misspent capital, under estimated the needs of diners, and cast a dark shadow over partners that dared to risk their brand reputation to unproven operators. I spoke to CEO and cofounder of OOMI Digital Kitchen, Markus Pineyro, about what he’s doing differently with his new ghost kitchen business to ensure success into the future and avoid some of the costly mistakes of his tech predecessors. Pineyro is an example of one operator who has sat back, watched the model launch, and took copious notes. He attributes his patience and good timing to what he believes will be the winning ghost kitchen strategy. “I’m a firm believer that there is success to be found in sitting back, watching and analyzing what works and what doesn’t before proceeding with anything new in hospital ity,” Pineyro says. This kind of patience shown by next-wave ghost kitchen operators just may turn out to be the key reason that they become successful versus the initial rush of waders into the pool. Brands like OOMI Digital Kitchen are banking on their wait- and-watch approach and believe this patience will be the virtue in virtual. OOMI Digital Kitchen is a digital food hall that launched October in Dallas. It offers items from a roster of well-estab lished brick-and-mortar brands along with craveable items from their chef crafted virtual concepts. With a menu cre ated expressly for takeout and delivery, all OOMI’s brands purport to focus on providing both the culinary excitement The Next Wave of On-Demand Delivery Successful ghost kitchen models are learning from the successes, and pitfalls, of predecessors. / BY LIZ MOSKOW

customers. Their guests can pick up groceries for the week and dinner tonight.” It also aligned with one Ralphs supermarket in Los Angeles. Sam Nazarian, founder and CEO of C3, started virtual kitchens in 2019 because, “We saw an opportunity to bring added revenue to underutilized restaurant kitchens and real estate space.” He describes his goal as “reimaging the food service industry.” Nazarian’s virtual kitchens yield “added efficiency. Staff are cross-trained to prepare menus from all C3’s brands, and our menus feature shared ingredients between brands.” He says his partners can generate $1 million per kitchen. The pandemic taught C3 that “ordering is here to stay. We found that when brick-and-mortar restaurants re-opened, delivery orders were only impacted for a short period of a week or so,” Nazarian says. “The pandemic helped make ordering common place.” Always thinking out of the box, Nazarian sees growth in the future working in partnerships with top digital creators, You Tubers and gamers, such as Matt Stonie with Stonie Bowls, a collection of poke, salad, and rice bowls. He’s also licensing C3’s brands in airports across the country. He projected to have more than 1,000 digital brand locations by end of 2022. Also in the vanguard was REEF Kitchens, which started out as a Miami-based parking lot company focused on ways to “making parking lots more efficient in their neighborhoods,” says spokesperson Mason Harrison. And that came to include developing ghost kitchens on their land. As far back as 2016, it launched a ghost kitchen in a carpark in London, which then developed into REEF’s operating the kitchen and restaurants of many startup chefs and operators. Knowing how real-estate costs usually constitute about a third of operating a restaurant, REEF recognized curtailing those fees gave eateries a much higher chance of succeeding, Harrison says. So DJ Khaled, well-known record executive and producer, could inaugurate 150 branches of Another Wing, which special izes in wings, jerk chicken, and fried snapper, through REEF; all of which were digital ghost kitchens, opened at a cut-rate cost compared to brick-and-mortar units. REEF operates its restaurants and functions like a fran chisee, paying royalty fees. It began with in-house brands and then created its own concepts such as Rebel Wings and Amer ican Eclectic Burger. Despite the fact that the pandemic is subsiding, REEF’s ghost kitchen business continues to have a place in the industry’s tra jectory, Harrison says. “Delivery became a need to have, not a nice to have,” he says. “Ordering in has replaced going to the grocery store and making your own food. It hasn’t replaced dining out or its quality of food and added service,” adds Rishi Nigam, CEO of Atlanta-based Franklin Junction. Franklin Junction calls its product “host kitchens”—versus ghost—which work with existing brands, restaurants or hotels, and helps them create a secondary brand for delivery only, add ing incremental revenue. They already have CONTINUED ON PAGE 48


JANUARY 2023 | QSR | www.qsrmagazine.com

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