The Best Location for a Ghost Kitchen is Not Where You Think

There is some debate about ghost kitchens.

Some think they are mostly a product of the pandemic and have an uncertain future. To others, they’re the wave of the future. 

Technomic, a management consulting firm for the foodservice business, projects that sales from ghost kitchens will rise by a projected 25% each year for the next five years in the US, according to Restaurant Business Online. Eventually, they’ll hit an estimated $300 million in yearly sales.

In its “Post Pandemic Playbook,” Technomic sees an acceleration in ghost kitchens. “Today, nearly every restaurant is a ‘ghost kitchen’ that provides only off-premise product. As the industry resets, more companies may decide to eliminate the dining room altogether to capitalize on longer-term, off-premise trends,” it says in the report.

Jonathan Needell, president and chief investment officer of KIMC, is also among those who think ghost kitchens are here to stay.

“I know a lot of restaurant owners,” Needell tells GlobeSt.com. “These are people that have 100 locations and even more. We’ve done a lot of deals with tenants like that, and we know them really well.”

Conversations with these people lead Needell to one conclusion. “The economics of the ghost kitchens work,” he says.

But Needell doesn’t think their current locations work as well as the economics.

Typically, ghost kitchens are in industrial locations because of issues like the smell of the food, according to Needell. “You might have a couple of different concepts co-locating for pickup and delivery online, like UberEats and things like that,” Needell says. “They’re in real industrial, commercial kitchens right now versus a food hall, which is more like these 800-foot kiosks that are a little bit more fly by night.”

Needell thinks it makes a lot of sense to replace those kiosks with a ghost kitchen in food halls. “You put in 2,000 square foot or 1,500 square foot commercial kitchens in a shared space, which can serve sit down and walk-up traffic or delivery services,” he says.

From a cost perspective, Needell says it also makes sense to put ghost kitchens in these retail locations. “The issue is that there’s no reason why it shouldn’t be in a retail location when rents are similar,” he says. “The rents at a retail location are definitely competitive with the ghost kitchen rents, particularly with the TI [tenant improvements],” he says. “At retail locations, you’ve also got a better location for drive-up and walk-in traffic once the COVID nightmare ends.”

Needell also thinks a ghost kitchen can help chains reduce their number of locations in an area. Combining operations into a ghost kitchen can be especially useful later at night when more things are delivered.

“That may be concept specific as well,” Needed says. “There certainly is more demand late-night for maybe pizza and Jack in the Box than something else. Ghost kitchens seem to be a logical solution to the problem.”