There is no doubt that the culinary world has been taken by storm in recent years with the popularity of dark kitchen restaurants. These establishments, which operate out of a strictly online-only business model, have generated intense curiosity and gained much traction. A number of restaurant operators and food business owners have recently opted to focus on takeaway and delivery in an effort to reduce operation costs, prioritise the need to fulfil orders and adapt to changing consumer expectations.
With that being said, are dark kitchens restaurants here to stay for good? We investigate…
The dark kitchen concept
Dark kitchens have no storefront and offer a menu available for delivery via digital ordering platforms. The dark kitchen concept is a simple and innovative solution for restaurant brands looking to provide food delivery services without overwhelming their on-premise operations.
Which business models are fit for a dark kitchen?
The dark kitchen phenomenon has stirred interest with;
- Companies hoping to compete with lower startup costs
- Established brick and mortar high street restaurants looking to service more areas without having to open up a physical store
- Fresh/frozen meal kit companies looking for a facility to prepare their meals with low overheads
- A brand new concept with low startup capital look to test the online ordering market
- An existing food truck looking to expand its offerings through deliveries
The history of the dark kitchen business model
In 2017, delivery platform Deliveroo launched its Editions scheme to promote the idea of virtual kitchens to a wider audience, by providing hubs where catering businesses are set up solely as delivery-only restaurants.
The first Deliveroo Editions outlet provided the food business start-up with an opportunity to have control over a crucial part of the food production process – by setting up and renting out off-site kitchen facilities to restaurateurs. This dark kitchen business model proved to be beneficial for restaurants, too, satisfying both their take-out and in-house orders. Deliveroo’s Editions brands had a 12% increase in vendors using its kitchens as a base for delivery-only services.
The Covid-19 impact on foodservice businesses
Although the virtual restaurant trend started years before we first heard the word ‘Covid-19’, the pandemic caused another huge uplift in consumers, who were desperate to get a small slice of the outside world.
The pandemic changed consumer behaviour and increased the demand for food deliveries. It triggered a cascade of emerging trends in the hospitality and restaurant industry. Some of them, such as the emergence of dark kitchens (also known as commercial kitchens, virtual kitchens, cloud kitchens or ghost kitchens), have triumphed.
Lockdowns and temporary restaurant closures dramatically altered Britain’s takeaway landscape, leading to a 45% rise in the number of UK food outlets on Deliveroo and Uber eats overall. The last two years have seen a plethora of new dark kitchen start-ups emerge as demand for home-delivered meals soared.
The post-pandemic food delivery industry
User-friendly delivery apps and changing consumer expectations have sky-rocketed ready-to-eat food delivery businesses. Lockdowns during the pandemic gave the category an enormous boost, with delivery becoming the only lifeline for the restaurant industry. For post-pandemic life, digital dining is set to remain a permanent fixture.
Taking lockdowns out of the equation, data derived from CGA’s Hospitality at Home Tracker showed that delivery and takeaway sales were 273% higher in May 2021 when compared to May 2019. Despite the hospitality market reopening in May 2021, takeaway and delivery sales accounted for half of hospitality sales despite 91% of restaurants reopening.
These figures demonstrate how important the ‘at home’ market is becoming for the food and beverage sector, not only as a revenue stream unaffected by changing lockdown rules but also as a way for their brand to reach a new audience.
Dark kitchen funding
Dark kitchen firms have acquired a great deal of investment. The UK’s Karma Kitchens raised £252m in its latest funding round. Not only did the pandemic result in higher demand for food delivery, but introduced millions of older customers to the market.
Are dark kitchen restaurants the future of the hospitality industry?
The resilience of the hospitality industry in adapting to changing consumer behaviours has been evident for some years. Dark kitchens have grown exponentially since 2020 and this type of model will become ever-more popular as hospitality brands move towards delivery-first models to maximise on the ‘at home’ trend, with the additional growth of food hubs that house several different dark kitchens in one building for several different virtual brands.
The opportunity to rent a dark kitchen space offers a fantastic solution to many restaurant businesses and the concept will only grow in popularity as the population adapts to the ‘new normal’ but retains the habit of using delivery apps to order in.
