Ever since COVID-19 shut down typical dine-in restaurants, there has been an explosion of virtual restaurant and ghost kitchen companies to cater to the online food demand.
But what exactly is a virtual brand? And what makes it such a fascinating business model? Let’s take a look.
What's A Virtual Brand?
A virtual restaurant is a "restaurant" that doesn't offer dine-in service.
They rely on apps and integrations to deliver meals straight to the customer's doorsteps. Ghost kitchen startups can rent meal preparation facilities or invest in a food truck with preparation and packaging equipment.
One common type of virtual brand is where a brick-and-mortar restaurant uses its existing space and equipment to spin up one or more virtual brands. Perhaps they have a virtual burger brand called “Bill’s Burgers” and a virtual chicken wing brand called “Wendy’s Wings”. These brands would only exist online and in delivery apps, but the food would be prepared in the brick-and-mortar location.
But you don’t need an existing restaurant to capitalize on the advantages of starting a virtual brand.
The Advantages of a Virtual Dining Concepts
Initially seen as a threat to conventional models, ghost kitchens have become essential during the pandemic. And there are a few main reasons for this:
1. Low Startup and Operation Cost
The virtual dining concept eliminates dine-in space areas from the business model, one of the core elements of traditional restaurants. It's a profitable business idea if you're looking to start a restaurant business.
With no need for a walk-in facility, there's no need for forefront personnel. Labor and maintenance costs are also remarkably reduced when no guests are coming to the facility. You might need to invest in a ghost kitchen food truck, packaging and digital marketing. However, launching ghost kitchen companies require fewer infrastructures than brick-and-mortar restaurants.
2. Shifting Customer Behavior
More and more people are ordering takeout than ever before. The rise in food delivery, which is in part due to the COVID-19 pandemic, has led experts to predict that the global food industry will reach about $200 billion by 2025. While some restaurants choose to supply their own delivery staff, most turn to the services of third-party delivery applications.
Virtual restaurant brands aren't brand new. They have existed since long before Covid-19.
However, the pandemic has increased demand for delivery meals, and there’s no sign of it slowing down.
GrubHub and DoorDash are also popular. The model is quite similar and involves online ordering systems (website, payment processing), third-party apps and delivery services. With the fear of catching the new virus, most people choose to stay indoors, naturally increasing the demand for delivery meals. More people are also working from home and have less time to prepare their meals.
More and more people are ordering takeout than ever before. The rise in food delivery, which is in part due to the COVID-19 pandemic, has led experts to predict that the global food industry will reach about $200 billion by 2025. While some restaurants choose to supply their own delivery staff, most turn to the services of third-party delivery applications.
3. Concept Experimentation
The traditional restaurant model isn't easy to pivot and there's little room to experiment. It takes several years to adopt new concepts once a facility is set up. For a ghost kitchen, ideas and menus can be tested on different platforms to gauge reception. There's more room for trial and error until the brand finds a perfect fit for their customers.
Another way to take advantage of restaurant analytics is by creating multiple menus, which lets you cater to different types of customers. For instance, if you notice that two specific dishes are extremely popular with your customers, you may choose to place those dishes on a separate, more expensive menu. Alternatively, you can use multiple menus to push your creative boundaries (such as by offering different cuisines on each menu). Some owners even have several virtual brands that they operate from a single location.
Is a Virtual Brand the Same as a Ghost Kitchen?
While ghost kitchens and brands share many commonalities, they are actually different.
Let's take a closer look at the two.
Virtual Brand
A virtual brand is a food or beverage business that utilizes a ghost kitchen to prepare its offerings. These goods are then delivered to customers, who never step into a dining room or traditional brick-and-mortar building.
While some virtual brands operate out of existing restaurants, other operate out of ghost kitchens...
Ghost Kitchen
The concept of using a ghost kitchen is not new, but they currently allow for aspiring chefs to share their food with a wider audience at a fraction of the cost.
However, the ability to reach customers and deliver one-of-a-kind experiences has never been easier. Although restaurants can replace their revenue by having only delivery service, it helps alleviate some costs. Also, because of additional space in the restaurant, more meals can be prepared, allowing restaurants to take on more orders.
We can only make predictions about what dining will look like in the future, but many restaurants will likely keep growing their virtual brand, even if they no longer have a ghost kitchen.
Is Virtual Dining the Future of Restaurants?
The current challenges make off-premise ghost kitchens valuable and in line with efforts to prevent new infections.
However, humans are social and dining with friends and family isn't about to change any time soon. With news of a possible vaccine, walk-in restaurants will be back once there's a solution for the pandemic. Nonetheless, virtual brands existed before the virus threatened the world and are projected to continue growing.
There are several merits to starting a ghost kitchen facility or restaurant, both for customers and startups. As a ghost restaurant, the challenge is to reduce meal production cost and time, and guarantee food quality.
This means fewer headaches than a typical brick-and-mortar restaurant that needs food spreading, ambiance, front-of-the-house experiences, training and servicing. However, while cloud kitchens and virtual brands are set for the long-haul, they present unique challenges and call for comprehensive research before investing.
The right marketing and pricing strategies are still essential for success.
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