Ghost kitchens, also known as cloud kitchens or dark kitchens, is a relatively new concept for the public even though it has existed for years in the UAE. According to Acumen Research and Consulting, the global cloud kitchen market is expected to grow at a CAGR of 22 percent during the forecast period of 2020-2027 and reach USD 201.1 Billion by 2027. This can be attributed to the fact that the ghost kitchen business model has proven itself more adaptable to changing market conditions than other restaurant models post-pandemic.
Ghost kitchens are growing their market share in the UAE. More restaurateurs are setting up their kitchens, while the existing ones seek funds to expand their horizons. Kitopi, a renowned Dubai-based cloud kitchen, already handles 60 kitchens and is seeking around USD 200 million to expand to Southeast Asia in 2021. Furthermore, following a merger between Kitch, a cloud kitchen operator, and Barbar, a Lebanese restaurant chain, Dubai is set to launch the first Barbar restaurant this year, followed by seven other outlets in other parts of the UAE.
The question is, with all the mergers, expansions, and acquisitions coming up, are ghost kitchen restaurants the future of the restaurant industry? Let us find out.
What Makes The Future Bright For Ghost Kitchen Business Model?
The food and beverage industry of the UAE is endlessly evolving. The increasing adoption of technology has given rise to cloud kitchens. Cloud kitchens have been leading the revival of the restaurant industry in the post-pandemic environment. They have helped myriad restaurateurs survive the pandemic. They have been providing services to the customers at a time when every other restaurant model was disrupted by lockdowns and restricted operating hours.
Let us look at various reasons that highlight the future growth potential of cloud kitchens.
1. Rise Of Online Deliveries
The entire restaurant industry was toppled due to the pandemic last year. However, the online segment soon picked up and started meeting the needs of home-bound customers. The service that used to compliment dine-in restaurants before the pandemic became their primary source of revenue during the lockdown.
According to the POSist Prime Report UAE, one out of three restaurant professionals expects more than 60 percent of their revenue to come from online deliveries in 2021. Also, around 70 percent of the surveyed restaurateurs were interested in starting their own ghost kitchens. Since online deliveries are here to stay, so is the ghost kitchen business model!
2. Advantages Offered By Ghost Kitchen Business Model
Ghost kitchens are an ideal solution to the different problems faced by restaurateurs throughout the pandemic. Numerous reasons make this restaurant model better than the others. Following are a few advantages of the ghost kitchen business model.
- Location: There is no need for setting up the ghost kitchen in a posh locality. All you need to consider is easy accessibility for vendors and suppliers, availability of raw materials, and proper sanitation, electricity, and water facilities.
- Low Cost: Ghost kitchens operate from the back-of-the-house and have no front-of-the-house operations. Thus, the operational and labor costs are approximately cut in half. Furthermore, the cost of renting a ghost kitchen is also reduced.
- Scalability: Expanding a ghost kitchen is much easier than traditional restaurants, thus increasing the scalability.
- Customer Safety: Ghost kitchens deliver the food to the customers’ doorstep, thereby protecting them from the risk of exposure to the virus. Ghost kitchens are much safer models in terms of contactless delivery and online order tracking.
- Innovation: Not only are they a good opportunity for existing restaurant brands to scale and upgrade their menus but are also a golden opportunity for new brands to try out new concepts.
- Multi-brand cloud kitchens: Ghost kitchens allow you to serve different demographics simultaneously by operating multiple brands under one roof.
3. Reviving Tourism
The UAE is the most popular tourist destination in the Middle East region. Post pandemic, tourism was almost switched off for the country. However, the regulations have now been relaxed in some parts of the country. Tourism is thus expected to grow in the years to come. This could still mean more business for the cloud kitchen businesses, given the convenience offered by online ordering.
While restaurants are slowly returning to normal operations in the UAE, with the maximum capacity per table increased to 10, it could be months before they are back to full capacity. Few will make it; the rest won’t.
In a classic case of survival of the fittest, brands backed by cloud kitchen technology could emerge as victors in the new normal. Restaurant brands operating under a cloud kitchen brand clearly have a better chance of survival than the traditional brick-and-mortar restaurants, cafes, and food trucks. The bottom line is that the future for the ghost kitchen business model is bright in the UAE.