Dark Kitchens (EN)
Towards a new era of virtual catering
Each year, food delivery services multiply. As restaurants scramble to retain or capture customers who constantly raise the bar for both timeliness and quality, startups are now offering these establishments a new alternative: dark kitchens. Also known as “ghost” or “cloud” kitchens, these spaces are delivery-only concepts that process and prepare orders — offering restaurants to serve stay-at-home (or office) eaters while doing away with servers, storefronts and hefty location rents. This novel concept has carved out its own space in the food economy, and as digitization increasingly becomes the norm, several “dark” models are now competing for the attention of restaurant owners. So what are the different models, their benefits, and — most importantly — which ones are here to stay?
Let’s start with how dark kitchens came about in the first place.
Culinary enthusiasts no doubt still have a soft spot for elegant restaurant parlors. But they too are part of an increasingly overworked population for whom time has become a scarce resource. This development has not been lost on digital entrepreneurs, with ordering platforms broadening their offering and finding new ways of facilitating logistics. As a result, in 2017, Deliveroo, Uber Eats, Glovo & Co had some 37 million users, and are expected to reach 86 million by 2024, according to Statista.
So has this been good news for restaurants? Well, yes and no. Some establishments already offered online ordering or takeaway before digital platforms emerged, while others saw delivery apps as a convenient gateway into the digital space. For them, adding takeaway to the menu “simply ramped up the activities,” says Rui Bento and Nuno Rodriguez, founders of the virtual restaurant platform KITCH. But Bento and Rodriguez also point out that more sales aren’t always good news if the proper infrastructure is lacking. “The food might not be designed or packaged to travel on the back of a scooter, and the sometimes complicated restaurant logistics can extend delivery times. As for in-house customers, their dining experience could be spoiled by couriers running in and out.”
Indeed, there is a backside of online expansion that can work contrary to the initial expectations of restaurants and consumers and ultimately harm both parties. In addition to the inconvenience to in-house diners, another hurdle is that kitchens don’t necessarily have the capacity for expansion. The capacity of a restaurateur to grow and expand is a long process and requires significant capital. There are many obstacles to launching a new point of sale, including administrative authorizations, recruitments, leasing of new premises and investment into new equipment.
Needless to say, these challenges are not easily overcome and have prompted players to question the very principles of the traditional restaurant. And against that backdrop, dark kitchens have emerged.
No tables, no servers… so then what?
In the last few years, thousands of ghost establishments have sprouted in cities around the world; from San Francisco, Berlin and London, to Paris, Madrid and Lisbon. While these spaces all fly under the banner “dark kitchen,” it’s an umbrella term incorporating several models.
“First the model of Kitchn’ Box, which leases kitchen space to food businesses,” writes the authors of Sifted’s 2020 report on the future of food delivery. “Second, there are delivery platforms such as Glovo, which leases kitchen space from the likes of Cooccio (a kitchen space in Barcelona), and then sub-rents that to food businesses on its platform. Finally, the coolest kids on the block are the virtual restaurant startups designing delivery-only food brands — including Taster, Keatz and Honest Food.”
The first is therefore a kind of “WeWork for kitchens,” where startups buy or rent a space to develop a kitchen with the latest and often online-adapted equipment. They can then offer a restaurant owner to rent the kitchen — either for a few hours to, for example, respond to an exceptional order — or for a longer period of time. The startup can coordinate preparation with the delivery service, but also offer additional services such as order processing, data analysis and waste reduction technologies.
As a new player in the Lisbon market, KITCH aims to create “the city’s digital kitchen,” which is a network of kitchens housing the most popular restaurants and creative chefs in the city — all for delivery. “We do this by providing restaurants with the infrastructure, tools and technology for a smooth delivery experience that doesn’t intervene with their regular operations,” Bento and Rodriguez explain. “It means creating great working environments by tailoring location and design to the customer’s needs. Partnerships with leading food-delivery applications such as Uber Eats, with large customer bases and well-oiled logistical operations, are helping us to better reach our goals.”
While Uber Eats has chosen to work directly with restaurants or by connection to dark kitchens, other platforms have launched their own ghost entities. This is the case with both Glovo, or the delivery giant Deliveroo with its concept “Editions.” The latter had 21 sites by the end of 2019, including 16 in the United Kingdom, serving a whopping 140 restaurants. There’s only one (major) caveat: In exchange for using Deliveroo’s logistics, such as fitted kitchen, ordering software, couriers and delivery, local users are forced to sell online via Deliveroo. Unsurprisingly, the commission is rather salty: up to 40% of total income.
No doubt, dark Kitchens have ushered in a new food era and pushed the frontiers of culinary innovation. More and more people are now imagining a network of completely virtual restaurants while shadow cooking has become a way of devising new recipes and new gastronomic models. But as explained in the Sifted report by Paul Gebhardt, co-founder of Keatz, who designed six take-out brands specifically for delivery, “Building brands is a challenge; it’s more an art than purely science,” he says. Unlike restaurants, these delivery-only brands can’t rely on customers wandering past and taking a peak at a menu, or catching a whiff of something tasty and heading inside. “The storefront is the biggest advertising space. We need to invest much more into social media, word-of-mouth and digital marketing than just a nice interior and service.”
Between high rents and the client base: finding the right property
Gebhardt’s comments also highlight an unintended double-meaning of the prefix “dark,” namely that reduced human interaction can negatively affect working conditions. This reality has already caught up with some establishments, where personnel have complained about working in murky, poorly insulated, and narrow spaces suffering from lack of maintenance.
“This is also the reason why we don’t like the term dark kitchen,” say the founders of KITCH. “No one wishes to work in uncomfortable or poorly maintained places, and the restaurant industry is no exception. We work hard to create pleasant work environments with a strict code of conduct, where chefs and other staff can produce the best dishes. Yes, vacant parking lots or basements might lower the rent, but for us, such spaces are a bad long-term bet.”
In addition to maintaining a healthy work environment, there are other prerequisites that dark kitchens can’t escape. Certainly, unlike restaurants that welcome customers at the counter or at the table, a dark kitchen doesn’t need to be located in a pedestrian street or a busy tourist district. But location is still crucial for optimizing delivery time as well as to raise visibility. “Delivery kitchens usually serve people in the office or at home. Therefore, they need to strike a balance between being located close to target customers while avoiding premium rents on the main streets,” say Bento and Rodriguez.
In that sense, Alexandre Dewez, VC Analyst at Idinvest Partners, thinks that “the management of ghost kitchens remains a city-by-city business. It takes time and capital to open in a new city and it’s difficult to build the supply chain to get exactly the same taste in many different cities. Franchising seems to be the best way to grow quickly around the world, but could start-ups do it while maintaining high quality?”
Moreover, the authors of the Sifted report wonder: “Delivery companies are logistics experts, but can they also compete in specialist areas like real estate and is it an efficient use of their capital to do so?” Thus, for them, “It’s not yet clear who will be the big winners in the still-young sector; the complex world of real estate makes it hard to build dark kitchen networks quickly, while there’s still some work to be done educating customers — both restaurants and eaters — about the benefits of dark kitchens.”
And no doubt, real estate investors — still barely present on the market — could bring valuable expertise to the table. Even more so as the most enlightened have already understood that urban production, whatever it may be, requires thorough planning to reduce logistics flows from the large peripheries to the centers, and to make more resilient cities for tomorrow.
Case to be continued…
Dark Kitchen: The way we receive our meals is changing, are the places for preparation changing too?
Will the delivery boom boost shadow kitchens?
“The rise of dark kitchens is great as managing a brick-and-mortar restaurant is very challenging. New restaurants have high failure rates: 15% after 1 year, 38% after 3 years and 53% after 5 years. Moreover, it’s a low-margin, cyclical business (both throughout the week and year, as well as during different economic cycles).” — Alexandre Dewez, VC Analyst at Idinvest Partners
