Ghost kitchens cook and deliver

As demand for delivery grows, the restaurant industry is also seeing growth of a new kind of kitchen.

They are often called ghost or cloud kitchens, facilities where restaurant operators can prepare meals for delivery only. There is no storefront branding and no front of the house. Often, these kitchens are shared spaces.

They are similar to catering or commissary kitchens, but this new breed is more than just a permitted place to cook. Today’s ghost kitchen facilities are optimized for off-premise business, offering shared infrastructure and services, a design compatible with the comings and goings of drivers, as well as built-in relationships with third-party delivery specialists.

Kitchen United, for example, is preparing to launch its first such venture in Pasadena, Calif., this spring. The 12,000-square-foot commercial kitchen space — with room for as many as 12 different restaurant operators — will include services such as laundry and dishwashing, and will be available at hourly or monthly rates.

The tech-enabled facility will use an integrated point-of-sale system, back-of-the-house automation and ordering efficiencies that are compatible with various delivery platforms in aggregate.

It will offer kitchen-share memberships that start as low as $25 per hour, according to a spokeswoman. Monthly rates vary based on the requirements for space and equipment, she said. About eight to 12 restaurants are expected to use the space, with another eight to 12 individual shared spaces that might be used by entrepreneurs or food truck operators.

The goal is to build a chain of Kitchen United facilities across the country through which restaurants can grow as a delivery-only concept, without necessarily having to invest in a brick-and-mortar location.

“Kitchen United provides restaurants and entrepreneurs with the off-premise space to meet customer demand in an efficient and cost-effective way,” said Atul Sood, chief business officer at Kitchen United. “For restaurants looking to expand their business without the overhead costs associated with opening a new location, we’re able to provide immense value through the use of off-premise kitchen space.”

Sood said Kitchen United has taken into account the equipment needs, layout, geographic location and other factors to optimize the site for delivery. For example, the Pasadena location includes parking for drivers, a waiting area with screens that let drivers know when the order will be ready and also provides them with access to water, snacks, coffee and restrooms.

Other benefits for operators using the space will include technologies that allow central monitoring of performance metrics and point-of-sale and back-of-house technologies that combine inbound orders into a single device in the kitchen.

“These restaurants are looking to us for licensed, accessible, well-placed locations that are optimized for delivery,” he said.”

Two more Kitchen United locations are scheduled to open before the end of 2018 — possibly in Atlanta and another in Southern California — and the company expects to have as many as 50 locations open by the end of 2019.

Navigating the clouds

Another similar facility is Cloud Kitchens, which has kitchen space in Los Angeles, with expansion planned to San Francisco, Chicago and New York, according to its website.

John Kolaski (left), founder, CEO and curator of K2 Restaurants in Los Angeles, this spring is scheduled to open an Italian sandwich shop by Miami chef Michael Pirolo in LA’s mid-city area.

Pirolo’s Panino will have a strong delivery component, Kolaski said. But rather than use the restaurant kitchen to deliver sandwiches and baked ziti across town, Kolaski said the group will lease space at the Cloud Kitchen facility to prepare food for delivery to downtown Los Angeles, as well as the USC campus.

“It will give us the ability to test the area and see the response to Pirolo’s, and to collect data,” Kolaski said. “We’ll see if it’s feasible to put a brick-and-mortar there to better serve our guests in that neighborhood.”

A key benefit is the built-in connection with multiple delivery providers, eliminating the need for Pirolo’s kitchen staff to juggle delivery orders coming in from multiple third-party platforms, he said.

“So all our team will have to do is just focus on preparing the food,” Kolaski said.

Kitchen partnerships

Delivery companies such as DoorDash, Postmates and Caviar have also been at the leading edge of these delivery-only efforts, helping to find kitchen space to allow restaurants to offer their menus in new markets.

Nick Adler, head of market operations at San Francisco-based delivery service Caviar, said the company has had success securing delivery-only kitchens that have allowed the San Francisco concept Souvla to offer its menu for delivery only in New York; and for Chicago’s Honey Butter Fried Chicken to bring its menu to Oakland, Calif., for delivery only.

“There’s an opportunity to bring well-known brands and chefs to new locations across the country, where we know there will be demand for their food,” Adler said.

To do this, Caviar has either leased space in third-party kitchens or found existing restaurant partners who are willing to lease out their kitchens when the business is closed — such as for dinner at lunch-only concepts.

Caviar recently partnered with Mister Jiu chef Brandon Jew to test a delivery-only concept in San Francisco called Mamahuhu. The test ran for only a single weekend and garnered such high volume — about 400 orders in the first 10 minutes — that Caviar had to make it temporarily unavailable and push out delivery times, Adler said.

The financial terms of Caviar’s delivery-only partnerships vary. In general, the restaurants pay Caviar a percent of revenues, and a higher percentage if Caviar is paying the rent on the space

“Some restaurants might be worried about the upfront cost and the risk associated, and we’re willing to take on that risk and pay the rent,” Adler said.

Bumpy clouds

While Adler described the Caviar ventures as successful, the delivery-only business has seen its share of missteps as well.

Earlier this year, chef David Chang closed his delivery-only concept in New York, Ando, which has been absorbed by Uber Eats, according to a report in the New York Times. Last year, another delivery-only concept in which Chang was a partner, Maple, also closed down.

The Maple operations were reportedly absorbed by U.K.-based delivery service Deliveroo, according to the New York Times. Deliveroo, meanwhile, has been battling local authorities in London over its pop-up kitchens there, which have been the subject of complaints from local residents about the delivery traffic they generate, and have also in some cases lacked the proper planning permits, according to a report in The Guardian.

Similarly, DoorDash ran into a permitting problem when it tried to open a delivery kitchen in San Jose, Calif., according to Ben Seabury, president of 1100 Group, the Berkeley, Calif.-based operator of the Little Star Pizza, The Star Pizza, Boss Burgers and Cantina del Sol concepts.

1100 Group had opened a delivery-only pizza kitchen in the DoorDash space last October, only to have it shut down within weeks when it was found to lack the proper municipal permitting, Seabury said.

DoorDash declined to comment on its delivery kitchen operations.

Seabury described the short-lived venture as “very successful,” at least while it lasted. He said his company remains committed to the concept of a delivery-only facility, however, and is seeking to reopen the 900-square-foot space that DoorDash had leased and potentially expand it into the 2,500-square-foot kitchen space alongside it that is currently not being used.

He said he expected to be able to generate even higher volumes using multiple delivery services, and perhaps to execute delivery of other concepts’ menu items using his own staff on a “white-label” basis.

“I expect to triple the volume that I did recently with DoorDash alone in the coming months,” Seabury said.

1100 Group has also been in talks with Caviar about opening a delivery-only outlet, he said.

A win-win

One partnership that has enjoyed a win-win relationship has been between Los Angeles-based operator Tatsu Ramen and San Francisco-based delivery service Postmates, according to William Khoe, president of Tatsu Ramen.

Postmates had been seeking to expand the delivery radius for Tatsu Ramen, and approached the two-unit operator with the idea for a delivery-only partnership, Khoe explained.

Postmates secured a location just west of downtown Los Angeles in an existing commissary space and agreed to cover the costs of the rent and the equipment in exchange for a percentage of Tatsu Ramen’s sales.

Postmates said it hopes to partner with more restaurant brands in other markets.

“We leased the kitchen to prove that this model works, and are planning to roll it out to more cities in the future,” said April Conyers, a spokeswoman for Postmates.

Khoe said the arrangement helped the operator solve a couple of challenges — first, it allowed the company to expand delivery without putting a strain on its existing facilities, and second, it allowed the company to expand its brand to a new neighborhood.

He said Tatsu Ramen has been generating $40,000 per month in sales from the kitchen, and it has been profitable overall, particularly in the first weeks when Postmates was promoting Tatsu Ramen heavily on its app. He runs the kitchen with a single worker, he said.

Now Khoe said he’s on the lookout for a commissary kitchen that can handle both prep and delivery.