Ghost Kitchens Took over America's Restaurants

For a small town of 4,000 people in New York’s Hudson Valley, Highland Falls punches well above its cultural weight. In more normal years, tens of thousands of tourists would descend upon the town to tour the U.S. Military Academy at West Point and nearby Revolutionary War sites. Billy Joel, a onetime resident, wrote a beloved B-side about the place. And late last year, Highland Falls became the chosen host of another national institution: Chipotle’s very first ghost kitchen, a new store model with no in-person ordering and no in-store dining.

On a recent winter afternoon, I trekked an hour north of New York City to see it for myself. From the outset, it was more or less what you’d expect at a Chipotle. Those familiar concrete floors and that minimalist steel-and-plywood design aesthetic, plus pop music overhead and the smell of grilled onions and peppers. One major difference, of course, is that it was eerily devoid of actual customers jamming themselves into small communal tables and lurking near seats that might open up. That this newfangled, online-only Chipotle didn’t even have a bathroom truly drove home the grab-and-go motif a little more forcefully than I would have liked, especially after a long drive. Still, the fact that this store debuted after a quarter in which Chipotle saw its digital sales triple from the previous year clearly demonstrates that something fundamental has changed.

By one industry estimate, there are now about 100,000 virtual restaurants in the United States alone, with many bearing suspiciously search engine optimized names like the Omelette Farm and Pizza of New York.

As I downed a chicken burrito bowl in my car, I considered the unintentional irony of Chipotle opening its first ghost kitchen just outside the gates of West Point. After all, the burrito bowl is practically the civilian equivalent of an MRE field ration, and the kitchen assembly line that produces Chipotle’s offerings has a martial drill quality to the operation. And just as the military continues to invest in drones, futuristic robot pilots, and even cyborg warriors to reduce the human footprint, so too are restaurants deploying tech to operate more efficiently and with fewer labor costs. One consequence of this lurch toward digital is that dining as we’ve known it may never look the same again. If that was the trajectory before the pandemic, then Covid-19 has since dramatically accelerated that shift — pushing it from fringe and experimental to the future of restaurants. It’s a new kind of underground culinary warfare not based on ambiance and real estate, but on crude, efficient optimization.

The rise of ghost kitchens and digital restaurants — also known as digital kitchens, cloud kitchens, and virtual restaurants, depending on how deep inside restaurant industry parlance you venture — is perhaps the defining dining trend of the past few years. By one industry estimate, there are now about 100,000 virtual restaurants in the United States alone, with many bearing suspiciously search engine optimized names like the Omelette Farm and Pizza of New York. Research firm EuroMonitor predicts that ghost kitchens will be a $1 trillion industry in the next 10 years.

In the meantime, the ghost kitchen boom has already drawn in players as wide and varied as local family-run joints armed with nothing but grit and sweat equity to Uber founder Travis Kalanick’s ghost kitchen startup armed with $400 million from Saudi Arabia’s sovereign-wealth fund. For some, this expansion into the digital realm represents a lifeline in a shaky industry at a time when restaurants are struggling to stay alive and dining habits may be changing permanently; for others, it’s a lucrative new way to feast on consumer appetites and open infinite new restaurant concepts without ever having to scout out a new location or worry about foot traffic.

The emergence of ghost kitchens in recent years has been steady and subtle, with a fair share of false starts. Prior to the pandemic, the ghost kitchen model had been propelled in large part by growing online orders, delivery, and catering, generally lumped together as “off-premise dining.” Another related dynamic pushing ghost kitchens to fore have been rising rents, particularly in urban areas, which have forced some restaurants to operate from spaces strictly reserved for food preparation and delivery to offload demand from their traditional stores. Even fast-food chains like Chick-fil-A and Arby’s, which launched new outposts in several major cities in the past few years, did so with built-in kitchens designed for catering to supplement income lost by a lack of drive-thru windows. Altogether, the Netflix-and-chill era has been unkind for in-person traffic, especially in the casual restaurant sector.

Suddenly, legacy restaurants were chopping themselves up into crude, multiconcept SEO-driven commissaries through a diverse and shadowy bumper crop of new digital players.

According to pre-pandemic research by Darren Tristano, a longtime restaurant industry analyst and CEO of Foodservice Results, food consumed away from restaurants has been the only area of growth in the restaurant industry in recent years. “The forecast, based on consumer attitudes and usage, was that the dining experience wasn’t going to grow; that the same number of people will have the same number of dining experiences,” he explained. “All of the growth would come from off-premise delivery and takeout, including catering for business and for social occasions.”

Then, as we all know, Covid-19 hit, bringing in-person dining (and most restaurant revenue) to a near-total halt. As a result, the number of consumers using online food delivery services globally surged from 1.17 billion in 2019 to 1.46 billion in 2020, a jump of nearly 25% year over year. In other words, the equivalent of 90% of the U.S. population started ordering dinner online last year. Among the biggest beneficiaries were pizza chains and third-party delivery platforms like Grubhub, DoorDash, and Uber Eats, which in the past year alone have collectively found themselves getting acquired by huge conglomerates, going public in multibillion-dollar blockbuster IPOs, and creating celebrity-studded Super Bowl ads.

Another pandemic-related outcome is that countless restaurants — from chains like Chili’s and Ruby Tuesday to independent mom-and-pop bistros — suddenly needed to change their business models. With rents to pay, labor costs, and a surplus of underutilized space, many ceded their fine-tuned operations to a sprawling digital ecosystem of third-party delivery apps armed with troves of consumer data, software developers, kitchen logistics startups, and strangely named online-only restaurant concepts. Suddenly, legacy restaurants were chopping themselves up into multiconcept SEO-driven commissaries while empty hotels were renting their spare kitchen spaces and outsourcing room service, all through a diverse and shadowy bumper crop of new digital players. As 2021 gets underway, the U.S. restaurant scene is a jumble of old techniques and new tech, uneasily coexisting through a global tempest.

from Hacker News https://ift.tt/3jINjrR