How to disrupt the restaurant industry in 2 easy steps
For at least the past several generations, people have fed themselves by two major means: 1) purchasing ingredients at a store and cooking them at home, and 2) dining in restaurants. Sure, there were those who grew most or all of their own food, or ordered the occasional pizza or Chinese takeout. But for the lion’s share of people, dining in and dining out were the options.
Since the days of the classic diner, starting a restaurant has been based on how long it takes to build something brick-and-mortar, then test the concept, then scale the concept. Think about Subway, with 42,000 stores worldwide — it took them a long time to scale up to that number. But that’s the way it’s always been done....until recently.
Where have all the restaurants gone?
I read an article in the Los Angeles Times last week about “The Rise of the Ghost Kitchens.” As they define it, a ghost kitchen is a restaurant set up to make delivery-only meals. Ghost kitchens offer no place for the public to sit down, pull up a chair, or be restored (as per the roots of the word restaurant).
The Times reports that growth of food delivery is projected to be 13.5% annually, in contrast to the 3% projected growth of the industry as a whole. And is it any wonder? Starting a ghost kitchen is unbelievably easy. Think about it: you can throw a menu up on the internet and social media, you can cook up Korean BBQ and chicken fried steak in the same facility, and you can rely on Uber Eats or DoorDash or Postmates to get the food safely to customers. What’s more, you don’t have to deal with the overhead, liability, or long payroll of a traditional brick-and-mortar restaurant. For consumers, the ghost kitchen experience is also ridiculously easy. As a customer, I have to do almost nothing to access the largest variety of foods and cuisine, delivered at lightning speed to my door. With technology, we’ve been able to expedite our preferences and choices — often options we didn’t even know we wanted.
From what I can tell, this is the quickest and widest evolution of access our food system has ever seen. Ghost kitchens were on the rise already as early as 2017, but COVID has really set the concept ablaze. People are nervous to eat in restaurants and restaurants need to pivot when they can’t do business as usual under lockdown. And this upheaval of the restaurant industry happened in just two steps:
Put the internet in everyone’s pocket, and
Go through a pandemic
Buckle up for an equal and opposite reaction
With all these changes, I’m curious what kinds of repercussions will emerge in response to having whatever we want, whenever we want it. I suspect one of the major outcomes of this trend is a greater continued focus on food delivery. That’s not just restaurant food, by the way: the grocery delivery business will also continue to grow rapidly.
Another repercussion is the huge impact on the survivability of traditional brick and mortar restaurants. As those eateries close, there will be a vacancy issue, and then a real estate issue. How can you transform what was a restaurant into something else? They’re built specifically for making certain kinds of food; you can’t just turn a restaurant into a daycare, for example.
I think there will be sneaky repercussions to ghost kitchens, too. With the rise of delivery-only dining, ghost kitchens will have a tough time reaching and maintaining customer loyalty. Think about your favorite server or bartender at a restaurant you visit regularly. A customer’s brand loyalty rests on the quality of their human interactions, not just on the food itself. As the field becomes more crowded with brands, the chance that a customer will return to one ghost kitchen over another becomes narrower and narrower.
And then there’s the army of servers, bussers and dishwashers who will need to find work elsewhere, not to mention linen companies and restaurant suppliers. These changes have a domino effect that goes on and on.
The upside
It may be hard to see right now, but this massive shift away from brick-and-mortar has a silver lining: the greater the disruption, the greater the opportunity for creativity and boundary-breaking. For us, we see a whole new channel opening up with ghost kitchens. Whereas a humble Spinaca zucchini could only go to supermarkets and restaurants before, now it can turn up in multiple spots, from your home delivery meal kit to your functional foods to your Uber Eats ghost kitchen lunch.
If recent events have you reeling, try asking yourself: what’s on the other side of this disruption for you?
Eat your veggies.