Food Delivery Kitchens Pop Up in Empty Malls

Developers look to solve two problems simultaneously. 

February 04, 2020

ALEXANDRIA, Va.—Food delivery kitchens are turning up in empty mall space where there is plenty of parking for delivery vehicles, according to a story in the Wall Street Journal.

Cooking restaurant food for delivery in vacant retail space melds two industries that have been upset by e-commerce. Restaurants are struggling to find a way to meet the growing demand for food delivery, while developers say “ghost” kitchens will generate new interest in vacant retail space.

Simon Property Group, a retail developer, has teamed with SBE Entertainment, a hospitality group, to develop 200 commissary kitchens to whip up restaurant-quality food for customers in malls and hotels and to provide delivery to customers in the neighborhood. The first of those are planned for New York, Chicago, San Francisco, Los Angeles and Miami, said Sam Nazarian, CEO of SBE.

The group aims to open 85 kitchens this year and at least 100 more by the end of 2021. The kitchens will rely on established delivery companies to carry food to customers, such as Uber Technologies’ Uber Eats, DoorDash and Postmates. The venture-capital firms have invested nearly $5 billion in companies operating virtual kitchens since 2018, according to an analysis by data firm PitchBook.

Delivery now makes up for roughly 9% of the $282 billion U.S. fast-food sector and is growing faster than dine-in and drive-through sales, according to a recent Bernstein analysis. Restaurants are expanding delivery offerings to boost sales despite the impact those orders often have on operational efficiency and profits. But remote kitchens can reduce their real-estate costs while expanding their reach. Wendy’s, Chick-fil-A Inc. and Sweetgreen are among chains turning to remote kitchens that don’t serve customers in order to move delivery orders outside their existing kitchens.

Some in the restaurant industry are skeptical of ghost kitchens. Kitchen Fund, a restaurant investor group, predicted recently that the model will only be profitable for big brands that can generate high-order volumes at more than one mealtime.