No Tables, Chairs or Store Front

Ghost eateries rely solely on food delivery to serve customers.

August 16, 2019

NEW YORK—Food delivery apps such as DoorDash, Uber Eats and Grubhub are impacting the way American’s $863 billion restaurant industry operates, according to The New York Times.

Today, food delivery is becoming faster, more convenient and changing the very essence of what it means to run a restaurant. As a result, kitchens that rely partially or totally on delivery are popping up around the country.

No longer must restaurateurs rent space for a dining room. All they need is a kitchen—or even part of one. Then, they can sign up to provide meals through a meal-delivery app and market their food to the app’s customers, without the expense of hiring waiters or buying furniture and tablecloths. This separation of chefs and diners has resulted in many diners ordering off the online menu, not having any idea that the restaurant doesn’t physically exist.

There are two types of digital culinary establishments. One is the “virtual restaurant,” which is attached to a bricks-and-mortar restaurant, but also creates food for the delivery apps. The other is the “ghost kitchen,” which has no retail presence and essentially serves as a meal preparation hub for delivery orders.

“Online ordering is not a necessary evil. It’s the most exciting opportunity in the restaurant industry today,” said Alex Canter of Canter’s Deli in Los Angles. “If you don’t use delivery apps, you don’t exist.”

The impact of delivery-only operations can be far-reaching, potentially accelerating people’s turn toward order-in food over restaurant visits and home-cooked meals.

Since 2017, the ride-hailing Uber has helped launch 4,000 virtual restaurants, which are exclusive to its Uber Eats app. According to Janelle Sallenave, who leads Uber Eats in North America, the company analyzes neighborhood sales data to identify unmet demands for particular cuisines. Then it approaches restaurants that sell those cuisines and urges them to create a virtual restaurant to meet the demand.

Other companies are also jumping in. Travis Kalanick, the former Uber chief executive, has formed CloudKitchens, a start-up that incubates ghost kitchens.

As expected, the delivery apps are hurting some traditional eateries, which already contend with high operating expenses and tough competition. Restaurants that use delivery apps like Uber Eats and Grubhub pay commissions of 15-30% on every order. While digital establishments save on overhead, small independent eateries with narrow profit margins can ill afford those high fees.

“There’s a concern that it could be a system where restaurant owners are trapped in an unstable, unsuitable business model,” said Mark Gjonaj, chairman of the New York City Council’s small-business committee, at a four-hour hearing on third-party food delivery in June.

Delivery apps may also erode the connection between diner and chef. “A chef can occasionally walk out of the dining room and observe a diner enjoying his or her food,” said Shawn Quaid, a chef who oversaw a ghost kitchen in Chicago. Delivery-only operations “take away the emotional connection and the creative redemption.”