The coronavirus likely sped up the trend of virtual restaurants, sometimes also called ghost restaurants.
When the owner of a virtual restaurant does it correctly, for example, with commissary kitchen rentals and adherence to food preparation regulations, it can be a unique business model with low overhead. There are potential downsides of virtual restaurants too though.
The following are some of the things to know about virtual restaurants.
Taking Advantage of Food Delivery Trends
Owning a restaurant is one of the most challenging businesses there is. It’s estimated that 60% of new restaurants fail within the first five years. Since the coronavirus pandemic, the effects on restaurants have been devastating, but at the same time, the increasing use of mobile technology to facilitate more efficient home delivery has created new opportunities.
Virtual restaurants are becoming more and more prevalent, especially in big cities, but in other places too.
Again, this is a trend likely sped up because of coronavirus, but it was already beginning before the pandemic.
What is a Virtual Restaurant?
A virtual or ghost restaurant is a delivery-only dining option. There’s a full menu available online, but the restaurant doesn’t have its own dedicated space.
There are different ways to make the food. Using a commissary kitchen rental is one option, or sometimes businesses will partner and share a space. In some cases, a restaurant with a physical location will then produce a secondary concept that’s virtual.
Food trucks can be another way to facilitate a virtual restaurant.
The most important things you need for a virtual restaurant are access to some type of commercial kitchen space, an ordering platform, and you’ll probably also need to utilize the services of gig economy workers, like DoorDash delivery drivers.
What Are the Benefits of a Virtual Restaurant?
The primary benefit of a virtual restaurant is that you don’t need a space located in an area with a lot of foot traffic. You have flexibility in the type of kitchen you use and how you pay for it. You can, for example, rent the kitchen space just as you need it.
Rent of traditional restaurant space is a massive expense, and with reduced capacity limits and forced restaurant shutdowns, it’s difficult to justify that expense these days.
You’re also less dependent on table turnover rates, and a virtual restaurant gives you a lot of flexibility.
For example, you don’t have to stay dedicated to one menu or concept. You can experiment and find the right formula and test out new ideas.
Consumers are very rapidly adopting the virtual experience because it’s easier for them to order, more convenient, and gives them the chance to try new things that they might not otherwise.
Something that’s especially compelling about the idea of a virtual restaurant from a business standpoint is the data collection opportunities it creates.
Using technology platforms, you can gather data like search history and demographic data and you can also track feedback after the meal. This lets you improve your experience based on data rather than feeling. You can make more strategic decisions for your business when it has underlying data to support it.
What are the Downsides of Virtual Restaurants?
While the idea of a virtual restaurant is one that seems to offer a low-risk way to be in the food business, and there are a lot of perks, there are downsides that you have to think about.
For example, if you use a third-party delivery platform, you’re going to pay a premium—maybe as much as 30% of an order.
It’s also difficult to build a brand when you’re using these platforms like GrubHub and DoorDash. The brand is the app itself, so everything that you would normally put into the branding of your business gets overshadowed.
You also lose the personal element that comes with the food business.
For some customers, getting to know the restaurant staff and even the chef is part of their experience. You build relationships in the restaurant industry, and a virtual concept completely eliminates that.
If your customers see you as some name on a list of restaurants within an app, they’re not going to have that sense of loyalty that comes from relationships.
Overall if you’re thinking about a virtual restaurant, you do have to weigh both the pros and cons, and there are logistical considerations. While your expenses are going to be lower, for example, you still have to think about your delivery expenses and renting a commercial space. It’s an interesting idea for the current environment we’re in, but not without pitfalls.