- Ghost kitchens are a new type of restaurant model in which several restaurants share a kitchen and many of the operating costs.
- These restaurants are delivery-only and rely on apps like Uber Eats and Grubhub.
- We toured a ghost kitchen and found out why it's creating opportunities - and challenges - for the food industry.
- View more episodes of Business Insider Today on Facebook.
Following is a transcript of an episode of Business Insider Today. Watch the full episode here.
This pizza is made by a restaurant that no one can eat at.
Same with this sandwich and this salad.
It's a new type of business model called a "ghost kitchen," a shared space for restaurants with no traditional storefronts or dining room.
Instead, they're delivery-only, relying on apps like Uber Eats and Grubhub.
Enrique Mendez, cofounder of Stone Bridge Pizza & Salad: "The way people are finding food is no longer physical. It's not by walking around and seeing the restaurant. A lot of people find restaurants online or in the virtual world."
Kevin Reilly/Business Insider Today
Ghost kitchens like Zuul Kitchens in New York City act like a WeWork for restaurants.
Last year, one in four Americans used apps to order food. And by 2025, online ordering could bring in more than $200 billion globally.
It has created both an opportunity and challenges for the food industry.
Mendez: "The cost of those ancillary services is so high that even though they're helping you get to a certain volume, they're not necessarily helping with profits."
Food apps take a percentage of each order they service - sometimes up to 30%, plus processing fees for credit card orders.
That can be overwhelming for restaurants that already operate on thin margins.
Zuul Kitchens opened last year as a way for restaurants to share costs and make the most out of these third-party apps.
The idea is like a WeWork for kitchens.
And it works like this: Kitchens receive orders from a variety of online apps or direct calls. The food is then prepared and bagged as the restaurant sees fit. A Zuul employee then takes the food to the central dispatch area. The dispatcher makes sure the right courier collects the right order, and out the door it goes.
Stone Bridge is one of six restaurants operating a delivery-only kitchen here.
Kevin Reilly/Business Insider Today
Restaurants in a ghost kitchen share kitchen space and some costs.
Corey Mancione, CEO of Zuul Kitchens: "We clean their equipment for them. We take the finished product from their kitchen pod and bring it to the front, where we act as actually the liaison between the brands and the couriers up front and curate a better experience for the couriers as well. When you kind of pare back the operation, we allow our members to focus on doing what they do best, which is cook food."
Dishwashers, walk-in refrigerators, locker rooms. Anything that can be shared, is.
For its services, Zuul charges a membership fee, though it declined to say how much.
And the kitchens? They cover their own equipment and labor costs.
Less space also means fewer people working in the kitchen, lowering the cost of labor.
Fernando Piasarolo, Director of Operations for Junzi: "Right now we have, you know, a total of two employees working per shift, which is very different than our current locations that we can have, you know, six to eight at a given time."
Stone Bridge's first location in midtown Manhattan attracts the kind of foot traffic you need to run a successful pizzeria. But that comes at a high price. Commercial real estate in Manhattan is some of the highest in the nation.
When he was ready to open a second location, Enrique opted for one of Zuul's kitchen pods.
Katie Canales/Business Insider
DoorDash Kitchens, a ghost kitchen in Los Angeles.
Mendez: "Building a restaurant in a city like New York can cost you a million dollars."
You'd never know behind this storefront, there are six busy kitchens operating today.
Mancione: "You're paying a fraction of that to pop up down here and operate in a delivery-only capacity."
The delivery-first model isn't new, but it's gaining traction.
Communal kitchens are popping up in major urban areas in the US - San Francisco, Chicago, LA - including one company by the former CEO of Uber, Travis Kalanick.
And recently, the New York City Council scheduled oversight meetings on ghost kitchens. The question is whether this consolidation and sharing is good for small business.
The apps give you any choice of food at your fingertips. But in the tight-margin restaurant industry, any hit to profits could lead to a business failure, leaving you with less choice.
The restaurant industry has always been a tough one. Even a bright new shiny kitchen knife has a sharp edge.
Yet restaurant owners continue to find creative ways to keep the lights on, even if it means sharing it with a competitor.
Mendez: "The sharing of ideas is very important. You know, you're no longer in your bubble just thinking about your business, but you have a community of other operators that are facing similar challenges, sharing ideas."