Ghost Kitchens Are Proving To Be a Messy Business (wsj.com) 37
Seeking to leverage a boom in food-delivery apps, Reef and competitors build restaurant kitchens in warehouses or trailers, which are meant to be cheaper and nimbler than traditional storefronts. From a report: Business models vary, but Reef generally acts as a franchisee, preparing and selling food with its own workers and paying a restaurant brand a percentage of each order. The concept has become particularly popular during the pandemic, as food delivery became clutch for many consumers and restaurants looked for cheaper places to prepare food they were delivering, not serving. Investors have poured more than $3.5 billion into ghost-kitchen startups in the past three years, according to data tracker PitchBook Data, a large slug of funding for a fledgling sector. Much of that funding has come from tech-focused investors who want the rapid growth often seen in software companies -- and delivery apps, such as DoorDash.
Reef's operational strains illustrate the challenges of meeting investors' high expectations in the food business, a sector typically defined by low profit margins and modest growth and one that depends on executing daily in the nondigital economy with workers, supplies and logistics. Reef, backed by investors including SoftBank Group, has said it plans to add thousands of mobile kitchens in parking lots around the world. The company says it currently has about 350. Big brands have begun to warm to the concept. Chick-fil-A and Yum Brands' KFC have been experimenting with their own versions of ghost kitchens, seeing them as a potential area for growth. Wendy's has joined with Reef in a deal that calls for Reef to open and operate up to 700 locations in North America, and the U.K. Reef's rivals include CloudKitchens, founded by Travis Kalanick, who co-founded Uber Technologies.
Reef's operational strains illustrate the challenges of meeting investors' high expectations in the food business, a sector typically defined by low profit margins and modest growth and one that depends on executing daily in the nondigital economy with workers, supplies and logistics. Reef, backed by investors including SoftBank Group, has said it plans to add thousands of mobile kitchens in parking lots around the world. The company says it currently has about 350. Big brands have begun to warm to the concept. Chick-fil-A and Yum Brands' KFC have been experimenting with their own versions of ghost kitchens, seeing them as a potential area for growth. Wendy's has joined with Reef in a deal that calls for Reef to open and operate up to 700 locations in North America, and the U.K. Reef's rivals include CloudKitchens, founded by Travis Kalanick, who co-founded Uber Technologies.
A friend of a friend bought a fancy burger (Score:2)
G-g-g-ghost kitchens? (Score:1)
Zoinks!!!
Re: A friend of a friend bought a fancy burger (Score:2)
Re: (Score:2)
Re:A friend of a friend bought a fancy burger (Score:5, Informative)
Actually, it's the other way around.
Sysco is not just a food provider, they actually prepare food. And each customer gives Sysco their recipe book and Sysco prepares food for their restaurant.
Each customer is separated - you will not find A&W food at another place - because Sysco prepares A&W food exclusively for A&W.
The benefit here is that Sysco has the logistics mapped out - if you need a batch of say, Apple Pies delivered to your restaurant, Sysco can provide it as they have an extensive network of prep kitchens to prepare the items and distribute it to your restaurants.
Sysco can also provide groceries, provide minor preparation (e.g., if you demand "chopped lettuce", they will chop lettuce for you, or if you want them halved so you have "in store cut veggies", they can do that too).
Sysco's basically the logistics partner for most restaurants because running your own fleet of trucks and warehouses is quite hard. You worry about your food quality and recipes, while Sysco worries about getting that food to the restaurants.
Sysco is basically the food version of a contract manufacturer like Foxconn
Re: (Score:2)
Sure, but doesn't Sysco also just provide stuff off a list? Like if you are too small to dictate what they cook, don't they still have stuff to sell you?
Re: (Score:2)
Yep. What the above poster described is how it works with large chain restaurants (Applebee's, Friday's, etc). Small and medium sized restaurants just buy from the Sysco catalog of foods.
Re: (Score:2)
Clearly, this seller has a higher opinion of Denny's burgers than I do!
STFH (Score:3)
Learn to cook.
Re: (Score:2)
Learn to cook.
But how will we know how hard they're working or how busy they are or how they're always on the verge of being broke if they can't whine about having to wait for someone to bring their food to them?
Re: (Score:3)
Learn to cook.
Have TIME to Cook.
Have time to SHOP for ingredients.
Have the storage space for the ingredients.
Have time to wash all the pots and pans after cooking.
Let me guess... (Score:3)
"Reef, backed by investors including SoftBank Group, has said it plans to add thousands of mobile kitchens in parking lots around the world."
How much you want to bet part of their operational plan is to just pick some random large parking lot in an area - e.g. a local Walmart or Ikea - and park their truck there for free without bothering to check with the business who owns the lot?
Re: (Score:3, Insightful)
"Reef, backed by investors including SoftBank Group, has said it plans to add thousands of mobile kitchens in parking lots around the world."
How much you want to bet part of their operational plan is to just pick some random large parking lot in an area - e.g. a local Walmart or Ikea - and park their truck there for free without bothering to check with the business who owns the lot?
Or following city ordinances for commercial kitchens - or even paying living wages... That seems to be the par for course
Re: (Score:3)
Yeah it seems like the problem is that implementing the "ignore the law" model is harder to do. Last time I checked health departments actually inspect commercial kitchens because if they don't people get sick and die. The usual current model for internet startups is to find a way to move the liable party out of the reach of those who enforce regulations and then race to the bottom with no regard for health or safety. But it seems like food delivery doesn't fit this mold because the person making the foo
Re: Let me guess... (Score:2)
As for the article, I suspect in a year or two we'll start hearing about a bunch of code violations, people running kitchens out of places they aren't supposed to, and a ton of properties that have been ruined because of improper setups (gre
Re: (Score:2)
The plan will be to not ask questions about where these mobile operations set up, nor ask questions about employees, or anything else really.
Re: (Score:2)
If only the article addressed that concern...
`Robots (Score:2)
Automate it. Humans aren't cut out to do manual repetitive labor.
Re: (Score:2)
MrBeast Burgers (Score:1)
I haven't had a MrBeast burger myself but from what I have heard they are pretty good about keeping it consistent across all their various ghost kitchens....
Re: (Score:2)
Excuse my cynicism, but... (Score:2)
I wouldn't be surprised if public health standards for ghost kitchens were maintained mostly by ghost inspectors.
Re: (Score:2)
just send the bribe to my ghost bank account
At least a step up from... (Score:4, Informative)
...waiting in a mini traffic jam, shouting the brand names of food items at a small electronic monolith by the side of a car park, driving by a window, being handed a bag of said food items, & then sitting alone in your car, in a car park, eating them under the sickly yellow glow of car park street lighting. At least you can be miserable in the comfort of your own home.
I never even get coffee to take out. Always sit in a bar, café or restaurant among interesting, kind, friendly people while I enjoy my drink &/or food. No rush. I do that every day.
Low Profit Margins (Score:2)
I have forever read "food service" and "low profit margins" in the same sentence together and just think, "you have a finite amount of money, in most cases you want top return for your investment, why on earth would you invest in a hyper local business that is known to be high risk with low profit margins?"
Seems like your odds of making back your investment are roughly that of investing on black at the roulette table. But yet, people keep pouring years of their lives and their family's entire life s
Re: (Score:3)
Re: (Score:2)
Some of their spots are operating for about $1500/day and pulling in $2500/day in revenue. That's missing some costs, but the takeaway here is that these people actually figured out how to create profitable restaurants.
Clearly dodgy businesses (Score:2)
I had a friend who's a high-powered exec (ex consultant, many years in senior roles at various hospitality businesses, now on ExCo for a huge global business), who was seduced into joining one of these ghost kitchen businesses for all of about four months before he got out quick. It was a complete mess operationally. It was bollocks all the way down, with no path to profitability. The only dud move in his career to date.
Dark Kitchens in the UK (Score:2)
In the UK they are called Dark Kitchens.
There's an art school in an industrial place amongst them. Everytime I go there to practice drawing, before entering the place - the air is vaguely saturated with different cooking smells. Then you enter the Atelier .... the smell quickly turns to turpentine.
Big business in the UK. Done in small cramped hired spaces. Even top niche restaurants uses them.
Yo (Score:2)
Reef's operational strains illustrate the challenges of meeting investors' high expectations in the food business, a sector typically defined by low profit margins and modest growth
Isn't that the issue here? Gigabucks dumping into it precisely because the pandemic made it not just modest growth
Re: (Score:2)
Isn't the modest growth the Salmonella and fungi on the product?
Re: (Score:2)
Yeah, I don't see a problem with investors dropping money into an industry that just now figured out how to make big profits.
white labelling (Score:2)
This is just white labelled food. I don't see what the big deal is. The white labelling has moved a bit, but it's been going on for years. Do you think every burger joint has a herd of cattle?
The bigger story is that consumers have become so stupid that they can be duped into eating food from a restaurant they wouldn't step foot in just by smacking a new label on the package.
I'm guessing this is a reaction to "elite" consumers who won't eat at Applebee's because their friends make fun of it, but they rea
Does the Travis Kalanick Ghose Kitchen (Score:2)