Restaurants share many similarities with retail, yet lower in-store foot traffic was an issue that mainly afflicted the latter. There used to be no reason to suspect that restaurants wouldn’t be able to get guests through the door, however the world has changed a lot in the last year. Many restaurants were exploring how third-party delivery systems and alluring ghost kitchens would enhance current offerings, though they were never intended as a replacement for dining rooms. Suddenly, these enhancements had to do some heavy lifting as most dining rooms were closed or reduced to a fraction of their capacity due to COVID-19. Since that time restaurants have learned to make third party delivery and ghost kitchens into vital elements of their revenue stream, although things may be changing again. Many parts of the U.S. have lifted or are beginning to lift COVID-19 restrictions and guests are being welcomed back into restaurants. It will take some time, but restaurants will return to the packed bustling social hubs they were in 2019. When that happens, where will ghost kitchens and third-party delivery services be?

The commercial real estate market went through some significant changes during the pandemic and ghost kitchens helped mitigate some of the costs associated with operations. The idea has been even easier to execute since kitchens have extra space due to restaurants not operating at full capacity. When restaurants do welcome back dining guests, there could be a shortage of kitchen space when it is allocated to secondary brands. Restaurants will have to prioritize orders and unless kitchens are improved or expanded, virtual brands could be pushed out. Virtual brands sharing kitchens with brick-and-mortar restaurants often offer significantly different menu items and the addition of guests could disrupt the production process, slowing down order fulfillment. Consumers have been more forgiving during the pandemic, however long wait times can hurt repeat business. This may force businesses to open more off-site kitchens in order to fulfill demand.

The issue plaguing ghost kitchens could also carry over to third party delivery. Many of the restaurants that were initially reluctant to join services like DoorDash and Uber Eats due to their high service fees were left with few alternatives when the pandemic hit. Delivery orders have been relatively easy to fill with dining rooms closed, however that will change when guests return. Restaurants will likely prioritize someone sitting in their restaurant over a delivery order that they are making less profit on. There could be a mass exodus from these delivery services, especially for restaurants that are able will develop their own fleets.

As we move closer to the end of the COVID-19 restaurants will have to blend their current operations with those that existed before shutdowns. They will have to iterate on their innovations and some ghost kitchens and delivery services will fall by the wayside. We will likely see more restaurants purchasing smaller locations to house their virtual brands and delivery service which could operate without dine-in services. They could also look to expanding existing dine-in locations or split locations between off-premise and physical like we have already started to see. Ghost kitchens will not suddenly disappear, but they will have to transform to survive just like restaurants did a year ago.

For restaurants moving towards expansion, Chain Store Guide provides precise location & demographic data which our clients use for site selection (both ghost and dine-in) and proximity analyses. We are unique in our ability to deliver snapshots of the market and location mapping at any point in time for the last decade and beyond. Contact our data specialists for more information.