The Rise of Ghost Kitchens. Foodstars impact on takeout.
What is Foodstars?
When I was a student, I started a small business selling chocolate truffles for friends, local companies and the odd wedding. I did it mostly for fun, but one year I decided to give it a real go and make some fancy easter eggs. They proved to be more successful than I had anticipated, and before long, I was overwhelmed with orders.
I got so caught up with selling; I overestimated my ability actually to make the eggs — there was no way just me and my student kitchen was going to cope.
If I had access to an on-demand commercial kitchen like Foodstars, things might have turned out more successfully.
The Lean Canvas Takedown
Problem
- Finding high-quality catering facilities in strategic locations when you need them
- Comparing prices of catering facilities
I’ve tried looking for commercial kitchens to hire in my area (East London), and it’s not easy. That’s not to say listings websites don’t exist, it’s I can’t seem to compare facilities, location and price quickly. Getting the price is explicitly usually the hardest part.
If I am a newcomer to the industry looking to start a business, it can be quite challenging to get started. On the other hand, if I have a restaurant and am looking to expand my business in a different part of town or try to cater to a growing market of customers ordering online, it can be time-consuming to find a suitable kitchen to meet that need.
Customer Segments
- Restaurants
- ‘Dark Kitchens’ — The restaurant kitchen without the bricks and mortar restaurant part
- Food entrepreneurs
With the rise of the online food home delivery economy, I can see a growing market for entrepreneurs who want to sell great food without the overhead of a commercial restaurant (the so-called ‘Dark Kitchen’ economy). Finding commercial food premises near your online customers which you can hire for short amounts of time, allowing you to focus on making your product sounds ideal.
Similarly, restaurants may be looking for ways to grow their revenue in the online economy and get food to customers in more locations.
Unique Value Proposition
- Service providing flexible access to commercial-grade kitchens facilities in high-density population areas with a transparent pricing model
- All facilities meet health and safety requirements
- Provide solutions to help kitchens to communicate with customers, deliver food and maximise revenue
We want to create a network of kitchens in high-density populated areas with a mid-high socioeconomic demographic. These kitchens need good transport connections and the ability to host multiple occupants 24 hours a day.
All kitchen facilities must be built to meet health and safety requirements and contain facilities to prepare a variety of dishes and communicate effectively with customers and delivery services.
Strategically placed kitchens designed to meet the delivery speed needs of most customers
Solution
- Build commercial-grade kitchens in strategic areas within urban areas
- Create a service allowing people to hire out kitchens for a minimum of one month
- Provide food storage facilities (fridges and freezers), security and cleaners (for communal) areas
- Provide internet access and office facilities
- Access to a dedicated community manager
- Delivery and dispatch solutions
The Foodstars story began in East London in 2015. The founders built a small commercial kitchen selling Sushi, but soon realised they could rent out their additional space to help pay the bills. They saw an opportunity and decided to expand their operations by building, managing and leasing out commercial kitchens. The story here is similar to that of WeWork, where the founders looking at the building they were in and saw it was partially vacant.
Apart from building, managing, leasing and marketing commercial kitchens, it’s interesting to see a focus on ensuring functional internet connectivity, office space, access to a community manager and delivery/dispatch solutions.
Foodstars know their customers are primarily selling into the online food delivery economy, and are providing specific services to help them succeed, which may help them differentiate from their competitors. This is probably also self-serving as a successful, happy customer is more likely to be retained.
Unfair Advantage
- Capital to build brick and mortar facilities in strategic locations
- Contacts within the restaurant and catering world
There does not seem to be any proprietary knowledge or technology which sets Foodstars apart. Having enough capital to identify ideal locations and convert them into commercial kitchens can certainly help with a first-mover advantage.
Revenue
- Monthly subscriptions from kitchen hire (can be hired day, night or full time)
- Monthly subscriptions from food storage solutions
It’s interesting to note that compared to other rental kitchens, Foodstars require its customers to commit to at least a month of hire. If you were hoping to get some space for one-off catering like a wedding banquet or Sunday food-stall, this is not for you.
Foodstars seem to be focusing on customers who are committed to running a full-time food business which in turn hopefully means long term, reliable revenue streams.
Cost Structure
- Property rental/purchase
- Converting property into space suitable for a commercial kitchen
- Building kitchens
- Building food storage solutions
- Buying/renting industrial kitchen equipment
- Security team
- Management staff
- Cleaning staff
- Waste management solutions
- Property and equipment maintenance and repair
- Marketing
I can image the highest upfront cost here is going to be property, development and catering equipment before you even start thinking about how to generate revenue. Hopefully, the demand for this commercial space means there are low customer acquisition costs.
Key Metrics
- % of kitchens fully hired per month
- % of existing customers who continue to utilise kitchen space
- Number of new customer acquisitions
The Foodstars kitchens can be hired 24 hours a day or just during the day or night time. Because of this, it’s within their interest to ensure all their kitchens are occupied as much as possible to maximise revenue.
Keeping down new customer acquisition costs means there is also a vested interested in trying to retain existing tenants by providing services to help them be successful.
Channels
- Pay per click adverts (online advertising)
- Google search (content marketing)
- Word of mouth (referrals)
Final Thoughts
From Adrian
In case you could not tell, I like the Foodstars business model a lot.
There is a definite growing customer need for quality food home delivery. Time poor, urban professions with disposable income are increasingly looking for variety and adventure in their food. This creates an opportunity for entrepreneurs to meet this need, and in turn, they need a way they can test the market without breaking their bank accounts. The ‘Dark Kitchen’ concept seems like a great way to achieve this, and Foodstars are poised to take advantage of it.
I’m not sure if Foodstars are focusing on the B2B market, but it could be interesting if they teamed up food chain outlets like ‘McDonalds’ or ‘Nandos’ to increase revenue opportunities.
From Jenny
Foodstars is an exciting mix of food, entrepreneurship and co-working. It can be viewed as co-working turning into a mature market as more and more professions have to build co-working spaces designed for their needs.
With Foodstars describing themselves as a community I will be interested to see how well they develop if they will do the WeWork thing and raise a bag of VC cash and expand into every railway arch in the UK. Or will they take the route of TechHub, DogPatch Labs, TQ and a few others and focus on nurturing talent and helping chefs learn business skills. Only time will tell for now as they are all I can say is ‘I wish I thought of this.’
