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Going Behind the Scenes on Ghost Kitchen Economics


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On the third day of the Restaurant Finance & Development Conference in Las Vegas, execs from Kitchen United, Sweetberry Bowls and Dog Haus joined Food On Demand’s Nicholas Upton to go behind the scenes on the economics and other details for restaurants now operating within delivery- and takeout-only kitchens.  

New Jersey-based Sweetberry Bowls CEO Desi Saran said his two-year-old brand is now up to 19 restaurants across 7 states, with delivery adding as much as 15 percent to the brand’s overall topline numbers, with delivery specifically comprising approximately 20 percent of the brand’s sales. The brand has opened its own, standalone ghost kitchen, and has partnered with an outside ghost kitchen operator in Chicago that has 14 concepts under its umbrella for future delivery options in the Windy City. 

Dog Haus partner André Vener has made one of the largest commitments to future ghost kitchen operations, opening at Kitchen United’s Pasadena, California, location, and committing to be part of 25 Kitchen United locations in the coming years. 

Upton asked panelists, including Kitchen United COO Meredith Sandland, to get into the details of operating delivery- and takeout-only locations compared to traditional brick and mortar locations. 

Vener said for a small brand with 50 locations, ghost kitchens allow his company to quickly pivot and both explore new cities and restaurant formats like a much larger brand at a lower cost. 

“We’re not putting our toes in the water, we’re diving into the deep end head first, Vener said. “Everything we’ve done for brick and mortar we now have to change.” He added that opening ghost kitchens in new markets allow the brand to test consumer acceptance in new places, as well as seeding the market for possible future franchisees to enter with some brand awareness compared to going into new cities untested.

“We’re a franchise company, so part of our job description is to sell franchises, as well,” Vener said. “Now we can have our development officer to find a franchisee who wants that territory … with a proven concept, so we’re using that as a tool to do franchise sales as well.” 

Saran echoed that sentiment, noting that starting in a new market with a ghost kitchen allows the company to “reverse engineer” entering a new market with rent and steartup costs that are dramatically lower than opening a full-on restaurant with a customer dining room. “A third method we’re trying out is we are building ghost kitchens within our existing restaurants,” he added, including launching a Sweetberry-branded poke restaurant out of existing locations without needing additional equipment or real estate. 

Kitchen United’s Sandland said the brand can put up to 10 individual restaurants within one of its facilities, and that shared expenses and services create efficiencies and lower the barrier of entry for existing restaurant brands with the side benefit of reducing the amount of time required to reach breakeven profitability. 

Vener said that brand’s business model means that his brand only have to do is “put time and energy on marketing,” which he added still isn’t an easy task. “It’s new, that’s the hard part, but we’re dealing with sales and marketing, and then operationally, it’s pretty simple.”

Delivery-focused facilities have allows Dog Haus to use existing ingredients for its hotdog-focused concept to also offer breakfast burritos for delivery, which can add up to a quarter million dollars in annual sales solely by selling “about 75 breakfast burritos a day out of a location.”

“If you can add that to everybody’s brand, that’s an amazing number,” Vener added. “If we could sell a quarter million dollars just off of a breakfast burrito with two guys, I’ll take that all day long.”

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The latest news, opinions and commentary on what's happening in the franchise arena that could affect your business.

Tom KaiserTom Kaiser is senior editor of Franchise Times. He can be reached at 612.767.3209, or send story ideas to tkaiser@franchisetimes.com.
 
Beth EwenBeth Ewen is senior editor of Franchise Times. She can be reached at 612.767.3212, or send story ideas to bewen@franchisetimes.com.
 
Nicholas UptonNicholas Upton is restaurants editor at Franchise Times. He can be reached at 612.767.3226, or send story ideas to nupton@franchisetimes.com.
 
Laura MichaelsLaura Michaels is editor of Franchise Times. She can be reached at 612.767.3210, or send story ideas to lmichaels@franchisetimes.com.
 
Mary Jo LarsonMary Jo Larson is the publisher of Franchise Times Magazine and the Restaurant Finance Monitor.  You can find her on Twitter at
 twitter.com/mlarson1011.
 

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