Are Ghost Kitchens on the Rise in Commercial Real Estate?

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Due to recent events, many traditional Arizona restaurants have adapted to offering delivery and “to-go only” menus to remain operational. Even with the state opening back up, some residents will opt for curbside or delivery rather than a sit-down experience. With these changes, some restaurant owners are permanently moving to a “delivery-only” model. However, even before the pandemic, the industry was shifting towards virtual or “ghost kitchens.” This has raised the question: Are ghost kitchens on the rise in commercial real estate?

What is a Ghost Kitchen?

The online food ordering market is a reported 26.8 billion per year industry and growing. Ghost kitchens are a part of how the industry functions. A ghost or cloud kitchen can be an ample commercial kitchen space where multiple restaurants prepare and package food for pick-up or delivery. Some ghost kitchens work in conjunction with trailers that are parked in popular areas. Under this model, the food preparation may be done offsite. Then, prepared items will be brought to the trailer for sale. In other instances, food preparation can be completed inside a food truck. The finished meals can be purchased through an app such as UberEats or DoorDash, and then delivered to the customer. Local restaurants can set up operations for ghost kitchens together. For instance, in Scottsdale, residents can use Kitchen United Mix to pick up or have their favorite meals delivered from one of ten local restaurants through an area ghost kitchen.

Ghost Kitchens Can Be More Affordable for Restaurant Owners

When you are in the restaurant business, you have to find an affordable space in a good location, with fair lease terms, and pay labor costs. There are also expenses associated with advertising and the pressure of needing to maintain a solid customer base to remain solvent. By contrast, ghost kitchens tend to require far less capital to get started. Further operation and overhead costs tend to be lower through a virtual kitchen than a traditional restaurant.

Ghost Kitchens Can Benefit Traditional Restaurant Models

Restaurant owners offering dine-in service can continue to do so while also giving clients the virtual kitchen model’s benefits. For example, restaurants with limited seating and long waitlists could add a ghost kitchen with delivery services for clients who would prefer not to come in or wait. This provides options that reaches a new customer base while maintaining the restaurant experience.

Ghost kitchens offer a more affordable way for restaurant owners to remain operational under uncertain conditions. This model also provides an avenue for up-and-coming business owners who might not have the funds needed to start a traditional venture. With more restaurant owners moving towards variations of the virtual kitchen model, commercial real estate in this area may be a good investment.

Laura B. Bramnick is an Arizona real estate attorney with the knowledge and experience to protect your interests during every stage of your real estate matter. If you are seeking an exceptional, client-driven real estate lawyer in Scottsdale, Phoenix, Sedona, and throughout the State of Arizona, contact Laura B. Bramnick to schedule your consultation.

 

 

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