The pandemic-era lockdowns accelerated the adoption of food delivery apps. Even as restrictions were lifted, social distancing rules continued to stifle the restaurant industry.
The rise of virtual restaurants let many existing restaurants cling onto life by allowing customers to place meal orders online or via smartphone app.
Continue reading to learn how virtual restaurants work and what advantages they hold over traditional dine-in restaurants. You’ll learn how to set-up a virtual restaurant of your own, unique marketing challenges faced by this growing industry, and helpful tech tips to take your venture to the next level.
A virtual restaurant operates without a traditional dining space or counter service. You can’t just walk into one. Instead, you have to place an order over the phone or online. Many virtual restaurants partner with third-party delivery apps like Grubhub, Postmates, and DoorDash.
Virtual restaurants are also known as:
Ghost kitchens
Dark kitchens
Cloud kitchens
Delivery food service is nothing new. The first pizza delivery took place more than 130 years ago when Queen Margherita of Savoy asked for a simple peasant dish while traveling in Naples.
However, in the pre-internet era, food delivery services suffered under some serious constraints. Advertising channels were limited, delivery drivers had to rely on paper maps and street signs to navigate, and you had to speak with a real person over the phone if you wanted to place an order.
Consequently, traditional dining restaurants held a sizable advantage over food delivery services. Street traffic lessened the need for expensive advertising campaigns. Low-tech point of sale (POS) systems provided adequate service in a cash economy.
With advances in technology making virtual restaurants more attractive, the restaurant market has split in two. Traditional dining is unlikely to disappear anytime soon. Rather, the split between virtual restaurants and brick-and-mortar restaurants comes down to customer segmentation.
People looking for an experience or a bite on the road will continue to patronize traditional restaurants. However, convenience seekers will increasingly turn to delivery services for their meals.
For restaurant owners, the ghost kitchen model offers several attractive upsides, including higher profit margins, the option to try new concepts, and the ability to reach new customers.
Dark kitchens don’t require front-of-house staff. By eliminating your wait staff, busboys, and hostesses, you’ll save on labor costs.
You can also save money on your lease. Getting rid of the dining room means you don’t need to rent as much space. Many dark kitchens are located in out-of-the-way spaces, such as converted warehouses. These buildings may charge lower rents compared to storefronts in high foot traffic areas.
Imagine you run a restaurant specializing in artisan cheeseburgers, but you’ve always wanted to try your hand at sushi. Running a ghost kitchen lets you create an entirely new restaurant. Since virtual restaurant brands don’t need to share anything in common with their traditional restaurant brand, you have plenty of space to try out new menu items.
Moving beyond the walls of your brick-and-mortar restaurant means getting in front of more customers. Delivery services also help you reach people who prefer eating in versus eating out.
Let’s look at some of the steps you’ll need to take to build out a virtual restaurant of your own, including securing the right kitchen space for your needs, selecting an order and delivery system, and marketing your new venture.
The first step in building out your virtual restaurant is finding adequate kitchen space to prepare your meals. Choose from one of the following four options when setting up your delivery-only restaurant.
Your existing restaurant: If you already own a restaurant, you can simply partition off part of the kitchen area for your new venture. Running both brands in the same space lets you branch out without incurring too many extra costs and hassles.
Other restaurant kitchens: In the restaurant industry, it’s not uncommon for some restaurateurs to rent out extra kitchen space to other commercial ventures for a little extra cash.
Food trucks: They’re more than a trendy alternative to fast casual dining. Food trucks are an ideal base for a delivery-only restaurant to operate out of.
Converted commercial kitchens: The restaurant business is hampered by the first law of real estate: location, location, location! Restaurants that rely on walk-in traffic have to compete for pricey real estate. By contrast, ghost kitchens can be set up in a converted warehouse for a fraction of the cost of a traditional restaurant lease.
Getting the food to the customer is one of the trickiest aspects of running a dark kitchen. Restaurant operators have to choose from one of the following three choices.
Connecting to third-party apps — like Grubhub or Uber Eats — lets you tap into an already existing network of hungry customers. Many restaurateurs prefer this approach because it takes away the stress of dealing with the delivery process. Instead, they can focus their attention on other aspects of the restaurant business.
However, food delivery apps come with a price. For example, Uber Eats charges restaurant operators up to a 30% fee on delivery orders. Delivery app fees have caused some restaurants to raise their menu prices. This may lead to lower sales.
Running an in-house delivery service requires more work, but it may be worthwhile for some high-volume restaurants. Restaurants with an in-house delivery model have to pay labor costs for their delivery drivers. They also have to set up an online order-taking system. Some restaurants may even choose to create their own mobile phone app to place orders on the go.
One of the major disadvantages of an in-house delivery service is the effort required to gain visibility and sales. When you host your own delivery, you’ll need to rely on customers you already know about your restaurant or you need to spend extra on marketing. You will also have to build and maintain an app or online ordering portal.
When you list your restaurant on popular delivery apps, like Grubhub, Postmates, and DoorDash, you get more visibility. Customers who are scrolling through their local options can easily discover new restaurants. Plus, the delivery companies have an app already built, taking one more thing off your plate.
Some restaurants pursue both strategies simultaneously. This gives them broader exposure to the online ordering delivery marketplace while also letting them save money on certain orders. However, it’s important to note that not all restaurant owners have the time, energy, or sales volume necessary to justify a hybrid delivery approach.
Pursuing a well-thought-out digital marketing strategy to reach new customers is vital for virtual restaurants since they’re unable to rely on foot traffic. Consider using one or more of the following tactics to build your brand and reach new customers.
You can use online ads to directly target consumers in your geographic area who match your ideal customer persona. Many social media platforms and search engines sell advertising — like Facebook, Instagram, YouTube, and Google.
Commissioning SEO content for your website can help it rise to the top of Google’s search result’s rankings for relevant keywords. For example, if someone searches for the phrase “best sushi in Lexington, KY” and your website has a blog post explaining why your restaurant serves the best sushi in Lexington, KY, then your website might pop up near the top of Google’s search engine results page.
Many food service delivery apps let you advertise directly on their platforms. This approach may prove especially helpful for businesses that are just starting out or that need to rapidly expand their reach.
The right software can make or break an online food delivery service. To get your virtual kitchen off the ground, you need access to the following tools:
An online ordering platform
A POS system
A menu management system
A delivery management system
A digital marketing system
An inventory management system
You can purchase different systems to manage each of these tasks separately. Some functions can be pawned off to a third-party service. For example, you could let Grubhub or Uber Eats take care of your delivery management for you.
Or, you could take advantage of an all-in-one POS system. These tools let you oversee your inventory, marketing, and online menu all from one location. Many POS systems also include an online ordering system that works with your website or mobile app as well as direct integrations with a number of third-party apps, such as Uber Eats, GrubHub, and Postmates.
Are you interested in trying out new cuisines? Maybe you’d like to take advantage of the cost-savings that come from operating a restaurant sans dining room. If so, a virtual restaurant might be the perfect food service venture for you.
Even if you’re not ready to go all in on a virtual kitchen, there are ways to attract customers looking for convenience to your more traditional or counter service restaurant.
Consider using a self-service kiosk option like KioskBuddy to streamline the ordering and payment process. KioskBuddy is a tablet-based self-service kiosk app that fully integrates with Square POS technology.
Customers can browse your complete digital menu, place their order, and pay — all without ever having to interact with a staff member. You can slash your front-of-house labor costs while providing customers with a smooth and intuitive transaction experience.
Get started today with a complimentary 30-day free trial!