Can Cloud Kitchens Save the Restaurant Industry?

Cloud kitchens — also known as ghost kitchens — have existed for a while, but with COVID-19 forcing quarantines and social distancing across the globe, they’re more popular than ever.

What is a cloud kitchen?

With a traditional cloud kitchen, you rent a space to operate your kitchen out of and only hire the staff necessary to run it. These “virtual restaurants” only offer delivery services with no option to dine-in or pick-up at all. They don’t need front of house staff because customers only have the option to order online.

Now that many, many cities around the world have shut down dine-in service in response to the COVID-19 pandemic, a lot of foodservice establishments effectively operate like cloud kitchens anyway. It’s an extremely good balance between social distancing and fulfilling consumers’ increased need for delivery now that they can’t go out to eat and, in some places, even leave the house except to buy necessities.

How can we support this delivery-only service?

With the right point of sale technology, online ordering is actually more efficient than ever. The best systems can send the orders directly to the kitchen’s display screen for immediate attention, no middle man required. Many restaurants implemented this technology before the pandemic, drawn to the benefits of seamless information sharing across their restaurant in real-time. Now with isolation measures in place, this technology is even more crucial to keep up with rising demand for delivery. With a lot of restaurants questioning if they’ll even stay open through the week, reducing labor costs (and human contact as well as the number of employees in one space) can critically boost your bottom line.

However, your menu might require a bit of reworking to fit this model. Some dishes travel better than others, so you might have to create a temporary delivery-only menu (or expand the one you have) to maintain the integrity of your food and reputation. Temporarily integrating delivery pick-up zones, efficient but safe measures for passing orders to drivers, and waiting areas for drivers can all make cloud kitchens faster and more efficient. All of these protocols can be further developed (or tweaked, if you already have some of these systems in place) to reduce human contact and thus reduce the spread of germs. In times like these, every bit counts.

How can my restaurant make the shift?

If you didn’t offer delivery before the COVID-19 pandemic, first you’ll need to develop a method to actually get the food to your customers. Cloud kitchens rely on an internal system but may additionally outsource to a third-party app.

Regardless of whether you use an app, you’ll need to hire drivers and come up with your own delivery pricing, including how you’d like to handle driver tips and how much to charge as a delivery fee.

If you use a third-party app, the added exposure will likely earn you a ton of new customers quickly, but these platforms can take a pretty hefty chunk of the profits per sale. With a plethora of apps to choose from, though, you can shop around to see which suit your business best.

You can also incorporate pick-up options into this cloud kitchen model. For pre-existing brick-and-mortar restaurants now going digital because of the pandemic, it’s especially easy to do so. Just designate a waiting and pick-up area for customers and let them come to you. This way also allows you to offer some of the dishes that you can’t deliver, which might include a signature or popular meal that just doesn’t travel too well so you don’t have to cut these options out completely.

Why isn’t everyone doing this?

Plenty of restaurants never had a need to before. If you’re operating from a brick-and-mortar location, you want to focus on dine-in service and as a result, delivery orders can fall to the wayside, especially during peak hours.

With dine-in services shut down in a lot of places, and social distancing the new norm across the globe, now’s the time to pour all that energy into delivery. People still need to eat, and it might be the only thing keeping your business afloat until restrictions are lifted.

How to run a virtual restaurant:

If you’ve closed the doors to dine-in, and you aren’t offering pickup, then for all intents and purposes you now run a virtual restaurant.

True virtual restaurants, also known as ghost restaurants, often have multiple businesses operating within the same premises, which maximizes the efficiency of the room. Many cloud kitchens also rent space to other brands to help turn a profit, although they already save money on rent because they don’t need floor space for dine-in customers and they don’t need to rent in a prime location; they can operate from wherever they want in their delivery area.

One major upside of a virtual restaurant is that you can optimize it for consumer demand and worry less about alienating customers. Operating without a physical location means higher adaptability, so you can adjust your menu seasonally, decrease food waste and operate at busier hours.

The downsides of cloud kitchens:

Most of the personalized nature so critical to foodservice gets lost in delivery since the staff has no face-to-face time with customers; satisfaction falls entirely on the speed and quality of the order. Aside from the driver, no other cloud kitchen workers get tips, which means restaurants must then pay higher their employees higher wages.

As mentioned above, third-party apps can also cause problems. They have very high fees to start with, not even accounting for the instances where a customer calls a restaurant but doesn’t order anything, but the app bills it as a sale anyway. You’re also handing your food over to an entirely different company, which puts your brand in the hands of workers who you don’t know and who might not care much about your reputation. Although you do still have your own delivery system in place, you’ll have to pay more for marketing if you don’t use a third party service.

Your cloud kitchen also relies entirely on online customers, so you have to pay for visibility to garner good reviews and positive word of mouth; there’s no foot traffic to increase sales.

There’s also food quality and safety to consider. If a dish doesn’t come just as appetizing as it would at a dine-in restaurant, no matter the reason, customers won’t buy from you again and might even post negative reviews which — considering your business relies so heavily on positive reviews online — can cause your reputation serious damage that, in some cases, you just can’t come back from.

With everyone staying inside to avoid spreading COVID-19, learning how to own and operate a cloud kitchen is a great way to keep your restaurant functioning as we all struggle to get through this difficult and confusing time. If you generate even a little bit of business, it can help hold you over until dine-in service is back up and running. You might even find out you’ve got a penchant for delivery and decide to go all-digital from now on!