The continued rapid growth of virtual restaurants suggests they have a future beyond the pandemic, which has spurred an increase in takeout and delivery orders. It also shows how restaurant technology, which started with online ordering platforms, continues to disrupt the industry. Digital ordering and delivery allows restaurants to operate without diners or servers, eliminating large expenses in a low-margin business. Today, some restaurateurs are going even further by using artificial intelligence and robotics to replace chefs.
For now, the action is taking place in virtual restaurants. Even as COVID restrictions ease, sales continue to surge at places like Kitchen United, a California-based company with ghost kitchens in the Loop and River North.
“The pandemic has been a boost, but as we hopefully come to an end, it’s not a drag,” says commercial director Atul Sood.
But ghost kitchens are not without controversy. Some traditional restaurateurs fear doing to restaurants what Uber did to the taxi industry. Virtual operators don’t need expensive prime locations and don’t have reputations forged in physical locations to uphold, some say. It’s another rebuke for traditional restaurateurs who are also fed up with third-party delivery apps, which have faced allegations from the city about abusive restaurants, which they deny.
“It doesn’t look or feel right, and I think it’s unfair to brick and mortar,” says Scott Weiner, co-owner of Fifty/50 Restaurant Group. “These kind of fake brands that have much lower overhead than the rest of us…the word to describe them is parasitic.
Most shadow kitchens tout their ability to lower barriers for entrepreneurs who don’t have the capital to open a traditional restaurant.
CloudKitchens adviser Bradley Tusk responds that his company’s “low-risk kitchen space” helps restaurateurs who “have struggled during the pandemic and lack the ability to afford a physical location.”
Traditional restaurateurs are not the only ones to criticize ghost kitchens. Neighbors at a North Side CloudKitchens location complained last year about double-parking delivery drivers, trucks blocking alleyways and cooking smells wafting through the neighborhood, Ald says. Matt Martin, 47th.
CloudKitchens made changes to quell the anger, hiring people to direct traffic and renting nearby parking for delivery drivers. Martin says complaints have “significantly decreased”. Yet he introduced a draft ordinance last July that would restrict shared kitchen locations. The measure remains with the city council’s licensing committee.
The city allows shared kitchens and the health department inspects them, a spokeswoman for the Department of Business Affairs and Consumer Protection said. The city also offers a Shared Kitchen User License, which allows an individual to use, rent, or lease space in a shared kitchen.
Some brick-and-mortar restaurants are adding shadow kitchens as they strive to recoup losses from the past two years.
Pescadero Seafood & Oyster Bar began selling two virtual brands of its Lakeview restaurant last fall, says owner Nick Hynes. It’s one of about 30 restaurants working with Foodhaul, a shadow kitchen that was founded before the pandemic by North Shore restaurant veteran Bill Stavrou. Foodhaul offers its partners a handful of virtual restaurant brands developed by celebrity chefs, who are then trained to cook food and pay licensing fees. The idea is to use excess kitchen capacity to bring in extra cash for restaurants, Stavrou says.
The partnership has paid off for Pescadero, which sells Rick Tramonto’s Smokeheads and Dirk Flanigan’s Pluck’d Wings. Hynes claims that virtual brands have increased revenue by 4% in a recent period “without adding additional overhead”.
“It’s basically an additional stream of income without having to do much,” says Hynes. “The omicron variant that’s coming in, which really puts a stress on everyone and any extra income is going to help.”
Similarly, ghost kitchens that house many restaurant brands can serve as lower-barrier launch pads for budding restaurateurs. West Pullman resident Jasiman Griffin-Green says she turned her baking hobby into a full-time gig after launching dessert shop Jars by Jasiman in CloudKitchens’ Bronzeville last year. She went from selling about 100 tubs of dessert a week to 250 a day.
“Without being there, I don’t know if we could have done it,” she said.
Still, Griffin-Green plans to open a brick-and-mortar location in Chicago’s South Shore neighborhood. She says she received several calls a day from clients wanting to meet her in person. It’s a nod to another growing pain facing new virtual brands: Most consumers still want transparency about the restaurants they frequent, virtual or not.
Ultimately, the restaurant world is changing and operators need to decide where they want to compete, says David Henkes, senior director at industry consultancy Technomic.
“The competitive landscape has shifted from physical locations to applications or cyberspace,” he says. “At the end of the day, they’re still basically competing for this offsite delivery consumer. This part of the business has become much more competitive.