How Ghost Kitchens Went From $1 Trillion Hype To A Struggling Business Model

The Rise and Fall of Ghost Kitchens in the Food Delivery Industry

Ghost kitchens experienced a major boom during the Covid-19 pandemic as closed restaurants and kitchens led to increased demand for delivery options.
Chefs and restaurant owners turned to ghost kitchens as a cost-effective way to continue operating and make money.
Big restaurant brands, such as Denny's, Ruby Tuesday, and Wingstop, joined the ghost kitchen trend, utilizing their idle locations to serve customers.
Investors poured billions of dollars into the ghost kitchen space, raising over $3 billion in venture financing between 2020 and 2022.
Entrepreneurs also saw an opportunity to build their own small brands through ghost kitchens, further contributing to their growth.
However, the ghost kitchen trend is now facing challenges, with major brands like Wendy's and Kroger moving away from the model.
Delivery companies are removing ghost kitchens from their apps, and companies like Cloud Kitchens are closing down stores and laying off workers.

Ghost kitchens were expected to have a significant presence in the restaurant industry, but have become less popular.
Consumers have returned to their old habits of dining in restaurants rather than ordering from virtual brands.
Price inflation and the high cost of delivery have contributed to the decline of ghost kitchens.
Stronger regulation of delivery apps has addressed the issue of clandestine ghost kitchens with obscure addresses.
Transparency is key to building trust with consumers, and Nimbus has implemented measures such as visible kitchens and community-facing spaces to increase transparency.
Delivery apps have removed problematic ghost kitchens from their systems and implemented stricter regulations.

Ghost kitchen startup Cloud Kitchens faces job cuts, closures, and failed restaurant deals.
Oversaturation and the impact of the pandemic have led to closures and cancellations across the industry.
Larger brands may be less inclined to invest in ghost kitchens, but there is still a use case for smaller brands.
Nimbus Kitchen finds success by focusing on events and catering in addition to delivery.
Nimbus offers flexible kitchen spaces for a variety of food businesses.
The future of the industry lies in catering to different types of food businesses, not just delivery concepts.
Nimbus has a rotating schedule for clients to utilize their kitchen space.
Operating costs for co cooking spaces can still be significant, with fees adding up for food delivery businesses.

Marketplace fees can account for upwards of 30% of costs for businesses utilizing platforms like UberEats and DoorDash.
Direct channels, such as a brand's own website, can help reduce costs by avoiding marketplace fees.
The pandemic has shown that the impact of ghost kitchens was overestimated, with a decline in their popularity.
Russian brands are investing in the expansion of drive-through options and optimizing physical restaurant spaces for pick-up orders.