How to Open a Ghost Restaurant

Ghost restaurants are a relatively new concept, especially in Canada. You may have heard of restaurant owners in your community considering this option or you may already be considering this for yourself. Simply put, they are food businesses that rely on online delivery and takeout to bring meals to customers. But how are they so different than a traditional brick and mortar restaurant? At a glance, a ghost restaurant does not serve dine-in customers, but that’s not the only differentiator.

Small business owner showing employee new plan on tablet computer

The Main Differences of the Ghost Restaurant World

To become the owner of a ghost brand, you can choose to operate as part of a ghost kitchen facility or from a brick and mortar restaurant’s commercial kitchen. In both formats, this means that:

  • Your operating costs will be lower.
  • You will save on upfront capital.
  • You will have to get creative to bring experiences to customers enjoying your food from home.
  • Digital marketing will be your best friend.
  • You will have to work with third-party delivery apps to be successful.
  • You will have to standout from the digital crowd.

Many restaurateurs, new and experienced, often ask themselves how to open their own ghost restaurant to shift from their traditional brick and mortar model. There is more to it than creating a new brand, adding it to delivery platforms and expecting orders to flood in. In fact, this may be quite far from the truth. Especially since the pandemic, more and more restaurants have signed up on third-party delivery platforms to compensate for the loss of dine-in customers. For instance, UberEats grew its restaurant partner roster by 50% in 2020. The battle to be visible on these platforms is only going to get tougher.

We believe that it is fundamental to have a strategic plan when heading into this innovative branch of the food industry. From creating a plan to getting you ghost restaurant noticed, we have put together this guide for you to succeed. Let’s get started with our tips on how to start your own virtual restaurant and thrive in the off-premise world.

Create a Thorough Business Plan

Start from the ground work: build a solid foundation for your ghost restaurant with a thorough business plan. This is the first step that you should consider before pursuing this venture. To get started, you can use an online free tool such as liveplan. This business plan software will provide you with a framework to write a comprehensive document. It will prompt you with questions and examples that will highlight aspects that you may have not considered yet. Another bonus is that it will help you with calculating your margins and estimating your sales.

A fundamental component that you will have to incorporate when calculating your profit margins are third-party platform commissions. These can range between 25% to 30% depending on the service provider. As this is a notable amount, it is fundamental that you consider them early on, in particular when setting your menu’ pricing.

This may feel like a tedious process, but it will encourage you to create a blueprint to refer back to when making crucial decisions about your business.

Identify the Food Your Ghost Restaurant Will Offer

The first important steps of building a successful brand is choosing the right food. Ask yourself the following questions:

  • How does the food you make stand out from similar alternatives available in the area?
  • What is the estimated size of the market you intend to serve?

To answer this, you have to make an important consideration: you have the potential to reach people that are as far as 15-minutes away from your kitchen! Especially in densely populated areas, this is a fantastic window of opportunity. At the same time, this also means that you are not just competing with the restaurant down the street. Take this into consideration when conducting a competitors analysis in your business plan. Working on this early on will help you with designing a menu that will stand out!

Tip: study the demographics of neighbourhoods within a 3-km radius from where you intend to operate.

Find the Right Kitchen

Determining your menu is fundamental to establish where exactly you will be cooking from. This is because the choice of equipment can help determine what options you have to open your ghost restaurant. If you don’t own a commercial kitchen or cannot accommodate an additional brand, you can rent space within a brick and mortar restaurant or join a ghost kitchen facility.

Operate From Your Existing Restaurant

If you are currently the owner of a restaurant, you could operate your virtual brand from the same kitchen.

There are multiple benefits to choosing this path. First of all, you will be able to use your existing resources and maximize their efficiency. This means that your ghost brand’s only expense will be the cost of goods sold, commission on third-party delivery platforms, and marketing. Even if you start small by selling a few meals per week, your ghost restaurant will be an additional revenue stream that you can grow at your own pace, in proportion to your marketing efforts.

However, there are some challenges that you may encounter when working with this format. First of all, you may struggle with storage. Bringing in additional produce might require adding a cooler to your operation, or reducing the supply for your brick and mortar brand. Additionally, you may need some additional cooking equipment, you may not have enough space for.

If you are able to make these adjustments, create a kitchen configuration that streamlines operations for both brands. By doing so, you will minimize the room for error for your employees. Adding a brand can feel confusing for them, so make sure to provide proper training prior to launching. Once orders start coming in in larger volumes continue to monitor quality and customer satisfaction. One of the possible problems you may encounter could be employees prioritizing dine-in customers and off-premise orders of your established brand. This may result in poor performance for your ghost restaurant. If you are not consistently getting good reviews on third-party delivery platforms, it may jeopardize your visibility and order volume.

Tip 1: reduce the need for additional storage by designing a menu that relies mostly on ingredients that you already have in your kitchen.

Tip 2: gradually implement new menu items and continuously monitor staff, especially as order volume for the new brand grows.

Operate from Another Restaurant’s Kitchen

To find a restaurant that it is willing to share space with you, you may rely on a personal connection. However, it may be tough to create a proper sub-lease agreement ad you would have to find a space that has exactly the equipment that you need or that an owner that is willing to accommodate additional equipment. Make sure to have a proper contract, rather than just a word of mouth agreement to avoid unpleasant surprises.

Tip: NextGen Kitchens can connect you with a commercial kitchen that matches your needs and provide you with the security of a contract and terms.

Operate from a Ghost Kitchen Facility

Ghost kitchen facilities are specifically designed to launch your virtual restaurant. We work with local brand owners and franchisees who are looking to expand their current business or size down to reduce operating costs. Whether you are bringing an existing brand, or you are a food entrepreneur developing a new concept, we have created the turn-key solution for you. We do not simply rent you a space, but we equip you with a comprehensive package of what we believe are essential services that you will need to succeed in the virtual world.

Tip: schedule an informational call with NextGen Kitchens to learn more about our services.

Find a Supplier

You have finalized what you want to be cooking and you are trying to decide on a pricing point for your menu items so that you can be profitable. This is the time to start requesting quotes from potential suppliers. If you already own a restaurant, you may want to search your current suppliers’ offerings and check their pricing. If you intend to operate your ghost kitchen from the same facility, it might be convenient to add the new ingredients to your existing delivery schedule. However, it might still be wise to take a look at what their competitors are offering, especially if you are venturing in a completely different cuisine.

Tip: NextGen Kitchens can connect you to the right supplier for your business.

Avoid Tablet Overload

A common problem when joining multiple third-party delivery platforms is tablet overload. You may already be struggling with this with your existing restaurant. Consider adding an integration to your POS system such as Deliverect or Cuboh to keep all of your online orders on one hardware device. Keeping things tidy will help with running operations smoothly and benefit you in the long-run. Not to mention how many tablets and printers you would need otherwise.

Develop Your Ghost Restaurant’s Brand Identity

Young woman preparing food delivery inside ghost kitchen during quarantine isolation time - Take away meal for online order - Sustainable and healthy food concept - Focus on hands.

Test How Your Food Travels:

It may seem odd to include this as part of your branding, but how your food travels is fundamental to develop a successful ghost restaurant brand. The expression “you eat with your eyes first” holds even more true in the delivery world. In fact, the expectations that customers have of your food are set at least half an hour before receiving it, when they browse through the photos of your online menu and your social media prior to ordering. What they see there, has to resemble as much as possible to what they will get at home.

Packaging plays two crucial roles, keeping your food at the right temperature and making a statement about your brand. Get started by sampling different packaging and identify the most suitable for your you. No one likes cold or soggy food, but some meals are simply not meant for off-premise consumption. When crafting your menu, stay away from these items, as they will likely lead to unhappy customers and negative reviews.

As a ghost restaurant, the interactions that you will have with customers are limited. This is why the details stand out. Are you a convenience brand? Are you an eco-friendly brand? Either way, make sure your logo stands out and that placing your food on the table creates excitement. If it looks appetizing, you will likely get some mentions on Instagram Stories and good Google Reviews. Showing off your customers’ feedback will add to growing trust with your audience across your channels.

Tip: Cook your meals from your home or restaurant’s kitchen and analyze how they look after letting them sit for 15 minutes. Maybe even take them for a drive before tasting them.

Prepare a Thorough Marketing Strategy

As we mentioned at the beginning, digital marketing will become your new best friend. An effective way of understanding this is to think of how location affects a brick and mortar restaurant. In this model, your success strongly correlates to what street your store is on, and whether you have high-foot traffic. Your restaurant’s location is a marketing investment, and a pricey one. With a ghost restaurant, you are saving on high-fixed costs such as rent. Therefore, you are foregoing the importance of location and its inherent marketing impacts. This is why you have to actively engage in digital marketing: to stay at top of mind and remain visible online without a dining area and street sign representing you.

The competition on third-party platforms to get noticed is tough. However, you can opt-in for a variety of promotions to get sales with a pre-determined return on investment. For instance, Ubereats allows you to offer in-app free delivery, discounts, and joining their buy-one-get-one-free campaigns. While these can be effective, they can also get expensive so they cannot be the only ace up your sleeve. Before opening your ghost restaurant, you should prepare a marketing strategy that includes, but is not limited to, paid campaigns, optimizing your website, and social media.

When Millennials and Gen Zs see you on a delivery platform, they are likely going to check your Google Reviews, website or social media for beautiful photos of your food. This is why you should start working on your Facebook and Instagram accounts before launching. Begin posting regularly about your brand’s progress and share recipes you will be adding to your menu to showcase your delicious food and engage with the community in advance.

FaceBook Ads is a particularly useful tool that you should familiarize yourself with. It will allow you to target customers based on geography, demographics, website visits, interests, and more. The ads you create can be displayed on Facebook and Instagram, but also on other apps on potential customers’ phones. By creating a well-structured campaign, you will be able to drive customers from learning about your restaurant to making their first purchase and coming back again.

Nowadays, influencer marketing has particularly gained traction. People often trust local foodies or get inspired from them to choose their next eats. However, choosing the right influencer and tracking the effectiveness of giveaways or other promotions can be tough. Make sure to start observing influencer foodies in your community, and continue to monitor if they would align with your brand and could be a good potential partner for the future.

If you are uncertain about how to build a strategic paid campaign, need help with your website or have any other marketing-related queries, NextGen Kitchens has a Marketing and Consulting Team ready to assist you and bring your brand to the next level!

Tip: keep an eye on marketing efforts of other restaurants in your community and learn from them.

Your Ghost Restaurant’s Way to Success

The demand for food delivery and takeout is continuing to grow and there are great reasons to assume that ghost kitchens are the future. NextGen Kitchens’ mission is to accompany you towards success and support you along the way to capture this opportunity together.

How We Help You Succeed

First of all, we provide you with a short-term lease. Typically, a commercial space would require a commitment of 3-5 years. Additionally, you would need capital to renovate it and make sure that it is up to standard to operate a food business. In our facility, you will have peace of mind knowing that you are not signing a lengthy contract and you will be able to start your ghost restaurant in a capital-light way. You can choose the equipment you want to rent or lease-to-own for your operation, so that your kitchen can be specifically tailored to your needs and the menu that you have designed.

We distinguish ourselves by providing on-site support to our partners to simplify their daily operations. We hire an expeditor who hands over orders to drivers and customers, so that you and your staff can focus exclusively on the cooking. As rush hours will be keeping you busy, we have included a dishwasher service as part of our offering. With our support, you will take advantage of additional savings, by lowering the number of employees you would otherwise need.

We know that third-party platform commissions can get pricey. This is why you will be able to join our very own delivery platform and benefit from an additional source of revenue.

Are you ready to join us in revolutionizing the restaurant industry?

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