Ghost Kitchens Are Dying

The emergence of ghost kitchens, more than anything else, is what got me to stop using food delivery services. They made it impossible for me to have enough trust, so I switched back to ordering from real restaurants that I physically go to.

When I worked for Dominos in the late 80s, it was a lot like this sounds. No dining room, though customers could walk in and order in a small vestibule. The place was as efficient as possible, just ringing phones, an assembly line, cooler and ovens, storage and cleaners in the back, and delivery drivers running in and out.

There seems to be something special about pizza that sets it apart from everything else, that made it seem reasonable to order it delivered from a non-restaurant even back then.

The points the article make come close to my gripe with ghost kitchens but don't quite cover it:

they feel like scams and when I've accidentally ordered from a ghost kitchen it was by design a terrible experience.

I'm talking like, you order a 15$ main that is called "creamy pasta with prosicutto" and when it shows up its buttered spaghetti with a couple stamp-sized bits of ham. Ordering from actual restaurants come with some of the downsides the article assigns to ghost kitchens, like cold food and weird presentation, but ghost kitchens never seemed to reach the bar of "food someone would actually order, even if it was teleported to them instantly".

The main issue was that they relied on food delivery to sustain its model. I’m not going to pay $50 in food and $20 in tips and fees. Like anyone sane, I call in my order and pick it up myself. This idea died because of this missing link. I would entertain it if you have a pickup booth in a lobby.

I believe all of this but:

Food that travels well requires different recipes, different ingredients, different packaging.

This doesn't ring true, given the popularity of DoorDash and the fact that most of those restaurant menus are in no way optimized for delivery.

Having lower-quality multitasking staff serving multiple restaurants from the same prep and equipment seems like an obvious way to lose quality. But simply streamlining the process of getting a menu onto delivery? That seems like a solved problem.

It would be really nice to have a tag on HN to filter out LLM-generated, or at least partly AI-generated content like this.

If an article makes it to the front page despite being AI-generated it probably has some interesting points or ideas, but it's unfortunate that people seeem to choose the speed and style of LLM writing over the individual style and choice that made the writing of yesteryear more interesting and unique.

> The company then announced it would sell or close every remaining physical location and pivot to "software only".

What does that even mean? Sell an NFT image of a burger?

Asimov was fond of the trope that the future was starved of protein, and even america had become a land where people had to eat communally, and eat significant amounts of manufactured "zymoveal" protein, because real meat was scarce under population/land pressure. It was clear that "people didn't like it"

Oddly, "cafeteria" cooking has sometimes been the best food I've eaten at the time. It very much depends on the circumstances and budget and your expectations. I've eaten like this in Leeds, London, Rome, France, Beijing. And not always in universities, the experience extends to factories, railways and even just the streetscape.

The FSU had a preference for ground meat and sausages at a state level because it was easier to ensure as much as possible of the meat inputs became food outputs. [This is wrong: they didn't] The Khrushchev flats had communal kitchens. They were universally hated I believe.

Ghost kitchens failed on lack of regulation and motivation to be the best they could be. There was never an intention to be "Jamie Oliver's ghost kitchen"

Re-intermediating consumers away from direct food carries on. Uber eats and Panda are delivering food from restaurants all around me, and one of them is a chinese take-away eponymously called "A Chinese Take Away" -I think it's a hack on the search engine carried forward. I've eaten their floating market soup in the shop, it's fine. Most of their trade is carry-out.

> Quality control became impossible. Shared kitchen facilities meant that one staff member prepared food for multiple brands simultaneously. No ownership. No accountability. Just assembly-line cooking with zero connection to customers. When food arrived cold or wrong, customers had no relationship with the brand to forgive mistakes. No loyal regulars. No servers to smooth over problems. Just angry reviews that destroyed virtual brands forever. No reason for repeat business.

That's a straight quality control problem. It ought to be solveable.

But that's hard to do.

The trouble is, the whole food app industry is based on someone else dealing with the hard problems. The drivers aren't employees, and the restaurants aren't employees. If an app company gets into ghost kitchens, they are now in a business where they are clueless. Some try to avoid being responsible for the food by just being landlords for people who buy a station in the kitchen

Bulk food prep is a solved problem. Every major hotel has it solved. There will be some senior people who went to a serious culinary academy. They look at food prep as a manufacturing problem, with batch quantity optimization, holding time limits, error tolerances on temperatures and quantities, and quality control points. It's factory planning.

The first "Doordash Kitchen", in Silicon Valley, is near me. It's still operating, but I don't see many drivers there.

> When food travels twenty minutes in a bag, quality suffers.

You'd think that would be a solved problem in packaging and prep by now. Insulated containers are not rocket science.

Anecdotal: Due to lifestyle factors, in my family we use Ubereats often, probably 4-5 orders per week on average.

I have never placed an order from a restaurant that I don't actually know beforehand. Maybe I haven't been there in person, but I know the name of the restaurant and I remember where is it and maybe someone I know ate there.

The only time I go completely blind is if I'm traveling. But that's like 1-2% of my total orders. And, in that case I usually stick to known chains or maybe I ask what's a good restaurant around here, then find it in the app.

I suspect it's not so uncommon to order from restaurants one already knows, rather than taking risks?

If that's the case, then ghost kitchens are going to have a very hard time getting their slice of the market

Eating out in US or any developed western civilization is so expensive that everyone in those civilizations think cooking is a basic skill.

I don't understand why there is no good cheap option. In Japan, I could go to a low-tier shop. It would cost $1-3; the food is decent with taste, and it fills my stomach. In US, $1-3 would be the min amount of tips.

A business trading on a name without some kind of sunk cost that incentivizes them to protect that name should be a red flag for consumers. It's the same thing that's made Amazon a surreal morass of brands like DYBOOP and BIPLOZA. If a ghost kitchen can shut down and reopen with a different name just by clicking a few buttons and not actually have to move their kitchen or anything, the whole concept is totally untrustworthy.

There was an interesting local example of a place that started out trying to be more or less a ghost kitchen but wound up being forced by success to become a real eatery. It had the endearingly utilitarian name "Pizza Online Company". They had no phone nor any in-house delivery system. You could order online or in-person to pick up, or via GrubHub/Doordash/etc., and that was it. Initially they had no eating area, just a tiny space big enough for three or four people to stand and wait for their orders.

But the pizza wasn't bad and it was (at least at first) remarkably cheap. It undercut Domino's prices by at least 25% while being much better quality. The place became popular. And sure enough when a place becomes popular people start wanting to go there. They added a small counter with stools to the waiting area. They didn't have space for more than that inside, but when it wasn't enough they took over some of the strip-mall walkway outside the front door and made it into a patio with seating for 8-10 people.

Unfortunately it closed abruptly a couple years ago, apparently due to some kind of family emergency.

Pretty low quality article. In plenty of countries ghost kitchens are thriving. Yet it provides no US-specific reasons for why they're dying there.

I don't know if "ghost kitchens are dying" means much. The commercial model of a ghost kitchen as an assembly line for low quality low price high throughput food delivered by expensive couriers on demand is dying, yes, and good riddance.

However, when you think about it, a big chunk of the catering industry operates as a ghost kitchen. It's well known that caterers go bankrupt at lower rates than restaurants. We had a local success story called 1800 LASAGNA where a man cooked and delivered exactly one item to customers and met with a lot of success. He then opened a restaurant, which is now in voluntary administration because it was losing so much money. Catering works.

I can't help but feel this is one of those "tech industry reinvents the bus" stories, where ghost kitchens lost because catering (and low-seating restaurants like pizza joints) already existed and had a massive head start. It's not that the core idea was bad: the core idea was great, it was just already out there.

It drives me insane that the VC industry threw so much money towards delivery in so many ways (restaurant delivery, meal kits, ghost kitchens, etc), when that’s the part that matters the least.

If I were to do a startup, it would be a food company that leverages drive thru. Optimize everything to maximize throughput on the drive thru by only accepting orders ahead of time (maybe even days ahead of time so that the establishment knows exactly how much food to order and prepare). The food is ready and can be dropped right into the person’s car as soon as they pull up.

People are fine with driving around, especially if it’s on the way home from work or close to where they live. What they don’t like is going to the grocery story, cooking the same three basic meals they know how to cook, cleaning, and eating the same leftovers for five nights in a row.

I can’t believe VCs and startup founders failed to realize the driving part was not the thing people were willing to pay a premium for at scale. They want cheap, tasty, diverse, that’s more convenient than cooking, but doesn’t need to be dropped off at their doorstep.

@dang can we please stop changing titles that are originally informative and match the original post? I understand for cases where the submission titles are substantially different than the original. But it doesn't make sense when the original title is more informative than the altered one that mysteriously gets moderated into existence some time after the link is submitted.

I feel the author could do more to separate “restaurants” from “takeout”. These are surely two very different market sectors. Johnny’s Pizza might have a couple of bar stools and chilli flake shakers but they’ve always been 90% focused on delivery. Chez Johnny on the other hand has always been about an in-house bistro dining experience. Ghost kitchens were always about the former.

The author touches on margins being eaten up by the delivery hegemony which feels like a much more important point. The handful of online ordering marketplaces are the app/play stores of this part of the economy and I can believe that they are far too greedy and powerful. Yet would the economy tolerate a much more diverse marketplace for connecting cooks, drivers, and customers? One of the only things holding the whole system together is shitty drivers and crappy kitchens being weeded out by the major marketplaces. If drivers could just hop between apps there would be no way to filter out the rogues?

They also bring up quality issues with packaging and delivery. To that extent, food delivery feels like healthcare where one cannot reasonably be expected to shop around for a surgeon to see your legs back on. When you order a meal you can’t just hope for the best knowing that if the food arrives cold and demolished then you’ll be able to get a refund and try somewhere else! Regulation here would help: your municipal certificate could not only rate food hygiene but also your ability to hit a reasonable p99 turnaround from order to order-up!.

Drop shipping, but for food - what did we expect?

> Ghost kitchens promised lower costs. The math never worked. Delivery apps charge restaurants up to 30% commission fees5. Ghost kitchen operators add rent plus percentage fees on top. Equipment repairs and maintenance create constant expenses. Marketing costs multiply when you have no storefront presence.

> Layering these costs together, restaurants discovered a devastating truth: there wasn't enough money left for anyone to make a profit.

So is that true of working with delivery apps, generally? All of those points are also are true of regular restaurants with a storefront, except the last one about marketing expenses. Are the delivery apps just surviving parasitically on restaurants that would be better off without them?

Isn't the main problem that the kitchens are shared and the restaurants are just popup brands with no loyalty built up?

I don't think you need an actual sit-down location to succeed, but you do need full control over what you produce and to spend time building trust and loyalty.

Gohst kitchens just sound like a big corporate version of the usual story where someone without much knowledge decides that they're going to open a restaurant ... and discover that the restaurant business is REALLY HARD.

They seemed to think they cut out a lot of costs, they were mistaken ... and then they partner with delivery companies who jack up the costs.

>Ghost kitchens promised lower costs. The math never worked. Delivery apps charge restaurants up to 30% commission fees5. Ghost kitchen operators add rent plus percentage fees on top. Equipment repairs and maintenance create constant expenses. Marketing costs multiply when you have no storefront presence.

Meanwhile there's no loyalty from customers because what is there to be loyal to? Nobody in the chain here cares about quality ... I get the wrong order or bad food, there's nobody to fix it, and I probably never do it again.

It would be interesting to know what these companies had for a business plan / where they thought the numbers were going to pan out.

1. Did any of them insource their own delivery? This seems like where they lost most of their money.

2. Did they adopt checklists and double-checking supervision to ensure food-safety, uniformity, and correctness?

3. Did they use quality ingredients rather than the cheapest shit Sysco sold that day?

4. Did they right-hire enough competent, sufficiently-paid staff so that churn wasn't 100% per 4 months?

5. Did anyone there ever run a successful restaurant storefront to multiple-location chain before? (Restaurants of any sort are the hardest, most grueling, tending to be risky businesses around. My grandfather became a mechanic rather than take over his father's French restaurant after going through the trouble of training to become a chef.)

I'm going to make a giant leap and assume most of these were "no" and they failed horribly on execution by focusing on the wrong things.

Did anybody actually open a ghost kitchen that served great food or are they just trying to scam?

The problem seems to be the product,so it's essentially a scam. If the product was good,I don't see a problem with a place that's just a kitchen.

The restaurants in north america seems to be all in parking lots anyway,might as well be home instead

A lot of folks took the bet on CloudKitchens because of Travis. Even after raising $850m, CloudKitchens has never ran liquidation event for employees afaik. I wonder how they attract/retain talent in that scenario.

> Approximately 7,606 ghost kitchen operations remain active across the United States5. This sounds substantial until you realize how many have closed, pivoted, or failed in the past two years.

The article says this but never actually says how many have closed or failed. The only evidence it provides is that some operators have shut down. But that could be industry shakeout. So, are ghost kitchens actually doing?

They grew during the pandemic, for obvious reasons. Now that that's over, it's no surprise that they're dying off.

> Shared kitchen facilities meant that one staff member prepared food for multiple brands simultaneously. No ownership. No accountability. Just assembly-line cooking with zero connection to customers.

It's funny because it's not like (normal) restaurants don't exist where they have crazy-big menus with a wide range of choices and cuisines. Certainly some of them are kinda mediocre, but many are actually pretty great, and you can get a solid dish regardless of what you pick. Some pride themselves on their ability to make basically anything, and make it well.

A ghost kitchen where the same staff works for several different "restaurants" simultaneously can work just fine, assuming actual training, and an effort to create quality recipes and use quality ingredients.

But I can easily see how a lack of a sense of ownership among the assembly-line-style staff could make this dicey. If you're making random dishes for a random set of "brands" (a brand among many that was plucked out of a hat, complete with AI-generated food images and descriptions), you're probably not going to take much pride in the quality of your work. And I do think the author has a point about connection; certainly a connection to customers is no guarantee of quality, but I think it's a much harder sell to inspire that quality without it.

Easy come, easy go

I think the food trucks fulfill the idea behind ghost kitchens of an easy, low-risk way to start a food business. They also share some of the flexibility, because you do have the option to move locations.

But they have the additional benefit of a physical location so you can get profitable orders that you don't pay the UberEats tax on as well as build brand recognition.

the basis of ghost kitchens started with one restaurant being cloned by the same restaurant to serve as a preparation nexus for their own menu to get local coverage and gain economies as the restaurant ramped up. Later pirate restaurants that were clones that copied the menu and snapped up the order - often assisted by delivery companies that had the stats. Later these grew larger, multi menu clones, often with 3-6 restaurant clones in one spot. Then someone got greedy, and the rents for these spaces destroyed their economic basis, and the city got greedy, rubbing their oily hands together to get taxes, levy code shit etc. The original restaurants lawyered up and the ghost kitchens became anonymous - and Oh yes, COVID was over

I've always ordered from restaurant I actually walked in before and knew, so I'm not really surprised by this

Ironically, some (if not all) of the biggest companies in that market force their employees to work from offices, so they lose that potential consumer base right away.

I live near a CloudKitchen location and I use it often. I always pick up on my bike, so I'm skipping a lot of the expense of delivery. The pickup is locker-based which is easier to deal with than a restaurant where you have to get someone's attention.

The variety is great because my partner and I can get wildly different things and I need only make one stop. Ours is stocked with the standard set of generic "restaurants" plus serves as a "location" for several real local restaurant chains and even a food truck. The generic stuff is passable but uses cheap ingredients, the partnered restaurants seem to have fine quality control and use the same stuff they use elsewhere, so I find them to be quite good. Picking up myself I don't experience the cold food issue others complain about.

It does such brisk business every time I'm there I have a hard time believing this specific one is dying. I hope it's not.

For traditional restaurants, what percentage of orders are for delivery (using Doordash, etc)? Excluding pickups where the customer comes and picks it up himself.

I can't imagine it's even close to 50%.

I don't know the patterns of regular folks, but for me the prices in general have crept up enough that's it rare I want to try some new place - unless I get multiple strong personal recommendations for it. You can forget about paying extra for delivery to home!

A buddy of mine is an executive at one of the successful ghost kitchen companies. I asked him about this article. His comments:

- They aren’t dying. Most of them are just not run well, and there isn’t a widely-known “playbook” to use to spin one up.

- Demand is high. Supply of what people want does not meet this demand.

- Lots of people use ghost kitchens to chase fads or to try to get rich quick. These rarely work long term.

- Profitable ghost kitchens are well-run kitchens (or restaurants without a front of house).

- His abbreviated playbook for ghost kitchens that work: prep everything (nothing cooked to order), finishing and assembly should be the only thing done when the order comes in, every order should be done within 5 minutes (this blew my mind) so that it will get to the customer within 20 minutes, make sure your images look exactly like the food you will deliver, get packaging that makes it so that food can be delivered and still look good, advertise (promote) in the apps when you open, and cut back as organic sales and reorders start rolling in, master one location first and then scale out with a provable system, add additional compatible brands (e.g., cakes expanding to cupcakes or cookies) later in the life cycle with a similar development process (but in the same kitchen).

- There is a truckload of restaurant kitchen workers who love good ghost kitchen work — high pace, limited menu (relatively speaking), no front of house staff to deal with, etc.

- When a ghost kitchen hits product-market fit, labor and food costs can be sub-20% of revenue each (this is insane, imho). Marketing starts at 25% of revenue and rapidly drops to sub-5%. Note that this is based on what they receive from the delivery companies, so percentage of sales is higher.

- My friend can spin up a new location in 20 days and $10k from getting the go ahead to delivering food. That includes setting up the kitchen, hiring, training, and initial inventory.

I know capitalism and I don't always get along, but it's so good to see its desire for profitability and the need to protect investors actually kill a business that needs killing. Nice.

> Approximately 7,606 ghost kitchen operations remain active across the United States5. This sounds substantial until you realize how many have closed, pivoted, or failed in the past two years.

The article says this but never actually says how many have closed or failed. The only evidence it provides is that some operators have shut down. But that could be industry shakeout.