Will ghost kitchens define the restaurant industry’s future?

While investor interest booms and sales have the potential to outpace traditional models, questions linger about how much this emerging market could disrupt business in the long term.

Part 6 of a 6-part series by Emma Liem Beckett, originally published in Restaurant Dive, November 9, 2020

When rumors swirled this summer that a second dining room shutdown was on the horizon for Las Vegas, local restaurateur team Alexandra Lourdes and Lin Jerome knew they needed a big delivery idea — and fast — to survive.

The owners of Saint Honoré, a pastry shop specializing in doughnuts and beignets, had already laid off half of their employees during the pandemic. The eatery could only serve in-store guests at 50% capacity per Nevada’s COVID-19 restrictions, and the cost of rent was a growing stressor, especially since the business was only open through 3 p.m. But that cost burden sparked an idea.

“We’re paying rent 24/7, so why not utilize that space for extra revenue?” Lourdes said.

In just days, Lourdes and Jerome developed plans to use Saint Honoré as a ghost kitchen for a new virtual pizza brand, Pizza Anonymous, during its off-hours. The brand didn’t require supply chain changes because it uses Saint Honoré dough materials and topping ingredients like meat and cheese from Lourdes’ and Jerome’s cafe concept, Café Lola. The extension into a new daypart also allowed Saint Honoré to bring back out-of-work employees, and required little cross-training since staff were already experts at making dough from scratch.

The team used Italian family recipes passed down to Jerome’s husband to create four staple pizza offerings and a cheese bread, and sold leftover beignets from Saint Honoré’s morning operations as dessert — squeezing extra revenue from its existing business.

The virtual brand gained traction immediately, selling out of allotted pizza orders on delivery platform Slice three hours before the shop even went live on July 31. Now, Pizza Anonymous operates out of both Saint Honoré and Café Lola, and Lourdes and Jerome said all of their future brick-and-mortar concepts will serve as ghost kitchens for the virtual brand. The restaurateurs are even speaking with realtors to look into new kitchen space for Pizza Anonymous during the pandemic.

“It’s been performing very, very well. [Pizza Anonymous] definitely has the potential to do [as much in sales] as we’re doing at our other locations, if not more, to be quite honest,” Jerome said. “We could have been utilizing [a virtual brand] in the evening this entire time… I wish we would have jumped on this train a lot sooner than we did.”

This sentiment reflects the U.S. restaurant market’s growing awareness of ghost kitchen business opportunities. Interest in the segment is proliferating as casual dining profits continue to wilt under dining room restrictions —with some municipalities completely reclosing indoor operations amid skyrocketing COVID-19 cases. The full-service restaurant segment isn’t predicted to recover from the pandemic until 2025, according to Technomic data shared at a virtual FSTEC Community event last week, Restaurant Business reports.

“We’re going to see a different industry,” Joe Pawlak, Technomic’s managing principal, said at the event.