How to Start a Ghost Kitchen
It’s kind of a misnomer. Ghost Kitchens aren’t spooky figments of the imagination. They are real.
Ghost kitchens are places where food is prepped, cooked, and packaged for delivery. Orders are accomplished digitally.
There are several ways you can start ghost kitchens:
Within a restaurant that you already own or lease.
Within a restaurant that you don’t own or lease.
From your home.
Ghost kitchens grew hugely as a response to Covid restrictions. That’s when “ordering in” became even more popular. In fact, according to stats the average person in the US orders food at least once a week.
The big restaurant operators are already taking advantage of the ghost restaurants trend. For more information, you can look at Big Brands Posing as Ghost Restaurants on Delivery Apps – Small Business Trends (smallbiztrends.com).
What is a Ghost Kitchen?
Ghost kitchens, or virtual kitchens, use licensed commercial kitchen facilities to prepare, cook and package food. They operate on a delivery-only concept, most often using delivery apps to pick up and deliver the food.
How Much Does It Cost to Start a Ghost Kitchen?
Let’s go back to the places where you can start virtual restaurants. Obviously, the cost will vary.
Within a restaurant that you already own or lease – Your additional overhead costs for this will be labor. You’ll need additional staff members who will only work on take-out orders.
Within a restaurant that you don’t own or lease – You’ll lease space in an existing restaurant. On an annual lease, you may be able to get in for $20,000 to $30,000. But in a major metro area, you may pay as much as $100,000 to lease kitchen space.
From your home – The equipment you’ll need depends on your menu items. As a minimum you’ll need food storage areas, including refrigeration. You’ll be inspected to ensure you meet food quality and safety requirements.
How to Start a Ghost Kitchen in 17 Simple Steps
No matter which type of physical space you’ll need for your commissary kitchen, you’ll need to take similar steps. Whether you own, lease or operate from your home, here are the steps you need to start your ghost kitchen.
1. Research Nearby Ghost Kitchens
Since the market share for this type of restaurant is driven by digital technology, that’s where your research will be. You can start by checking with food delivery services, such as UberEats and others. Those who are running a ghost kitchen operation are linked to food delivery partner apps.
2. Choose a Niche
If you’re going to start a ghost kitchen within your own dine in restaurant, choose items from your menu that lend themselves to delivery. You already know what’s most popular with your existing customer base.
There may be more than one ghost operation in commercial kitchens in brick and mortar restaurants. The space is chosen to be leased by its fit to your menu. Your meals should be easy to make using existing equipment at a restaurant.
If you’re ghosting from home, consider equipment costs and the best fit for your menu.
No matter where food is prepped and prepared, the ghost menu should be a specialty. It should fill a niche that is not already taken in the local market.
3. Name and Brand Your Business
Experts recommend that there are no more than three words in your business name. It should define your menu and be easy to search. Names for virtual brands or a virtual restaurant must be catchy and definitive.
4. Write a Ghost Kitchen Business Plan
Remember, you are optimizing to be delivery only. Your business plan is similar to any restaurant business place, but you are locked to the delivery-only concept.
Here are key elements you’ll add to a routine restaurant business plan: Packaging essentials, point of sale and delivery apps, delivery-friendly menu, and separate staff.
5. Form a Legal Entity and Register
You’ll register your business with your secretary of state, to obtain a business license.
The limited liability company, or LLC, is most often chosen as the business entity. That’s because your personal assets will be protected.
Other choices are Partnerships and Corporations (c-corp and s-corp)
6. Open a Business Bank Account
You’ll need a separate bank account for your business and also a separate business credit card.
7. Choose a Location
Here are critical components of your choice of location: average delivery distances, and availability of delivery subcontractors. As a minimum, the facility must be licensed to legally sell food.
When people order food, they have an expectation that it will arrive ready to eat. If distances are great, it will be challenging for drivers to keep the food warm or cold (whichever is required).
If you’re in a rural area, your delivery only concepts may be challenged by a lack of delivery services. If you hire your own delivery team, your overhead cost will be much higher.
8. Make Sure You Have the Licenses and Permits Required in Your State
Restaurants are much more regulated than other, low risk businesses. The potential for food borne illnesses exists and you’ll be regularly inspected.
You’ll need kitchen liability insurance.
Every person who handles food must have ServSafe Food Handler certification.
9. Design Your Menu
You’re a new restaurant with a new concept – prepping and preparing food that is specifically for takeout customers. Those customers, hungry people all, need a menu with catchy names and accurate descriptions.
For aspiring restaurateurs, this is a new food concept. Remember that because you’re poking into new markets, start with limited ingredients to keep costs low. Choose dishes that are easy to make and transport.
10. Design Your Packaging
Many states have adopted new legislation regarding packaging, such as eliminating the use of styro-foam containers. Before you order packaging for cold or hot foods, make sure you’ll meet state and local requirements.
Should you put your ghost kitchen name on the packaging? Some say that customers will throw the packaging away. Instead, provide a business card that customers can keep handy.
11. Set Your Menu Prices
In addition to your food price, you’ll have to add the price of packaging and also the cost of third-party delivery. There are commission fees paid to delivery services.
12. Get Your Taxes in Order
You’ll need an Employer Identification Number (EIN) so that you can pay employees and also state sales taxes. If you’re an LLC, you’ll be taxed on net income at the individual level.
Tax requirements vary by state.
13. Purchase Business Insurance
Standard insurance needed for a commercial kitchen are general liability and property insurance.
Since your profits are dependent on digital technology, you should also purchase cyber insurance and business interruption insurance.
14. Choose Delivery Partners
Your main delivery partners may be GrubHub, UberEats, DoorDash and Postmates. You may also have a local food delivery service.
Create a Website and Market Your New Business
You’ll be found through an internet search, a food delivery companies search and/or via social media. In order to thrive, you’ll need a strong social media presence and affiliation with food delivery companies.
You won’t see customers face-to-face. A top marketing tool for the ghost kitchen is the handwritten note, tucked inside the packaging. It’s a personal touch that will separate you from the competition.
16. Hire Staff
You’ll need a separate chef, food prepping and cooking professionals, and packaging professionals. If you want to handle delivery yourself, you’ll need additional staff.
17. Launch Your Ghost Kitchen Business
Announce your opening on social media and get ready for those online orders.
Ghost Kitchen Vs. Brick and Mortar Restaurant
A Brick and Mortar restaurant requires additional staff. You’ll need front of house staff in the waiting areas, such as a greeter. You’ll need wait staff.
With the ghost operation, there’s a total focus on preparing food for a delivery only restaurant.
The main drawback is that there is no interaction with the customers, as there is in brick and mortar locations.
Can you start a ghost kitchen from a house?
Yes. You’ll need storage, preparation, cooking and packaging areas which meet the standards for commercial food preparation. You must register as a food business and pass inspection by state and local authorities.