How Small Chains are Growing with Ghost Kitchens

This article was written by Joe Guskowski with Restaurant Business.

The people of Long Beach really wanted a Mendocino Farms. And the interest was mutual.

“We figured we’d end up there at some point,” said Kevin Miles, CEO of the upscale sandwich and salad chain. But Mendo’s was having a hard time finding real estate in the city, which abuts its home market of Los Angeles.

Then the swirling forces of the coronavirus pandemic and the ghost kitchen boom combined to give the chain its chance. On Friday, it opened its first Long Beach location, in a multibrand ghost kitchen facility operated by CloudKitchens.

“We believe this is an opportunity for us to get our food there,” Miles said of the delivery- and pickup-only operation. “But our test first and foremost is being able to execute on the quality. If that works, we’ll be looking actively in the California market” to open more ghost kitchens. 

Mendocino is one of the dozens of small- and medium-sized chains that have launched delivery-only kitchens in recent months, as demand for off-premise has swelled during the pandemic. While some big brands, such as Chick-fil-A and Wendy’s, have gotten into the format, it has been especially popular among smaller players that view it as a low-cost way to break into new markets or reinforce existing ones.

“It’s the young guys that I think are gonna be really advantaged by the ghost kitchen opportunity because they can get in at far, far cheaper loads and liabilities,” said Drew Kellogg, CEO of Oath Pizza. “The big guys might fill in with it, but I don’t know if they need it.”

Oath opened its first ghost kitchen, in Philadelphia, in late October. It joins a brick-and-mortar location and a food truck in the city, giving the Boston-based fast-casual brand a multichannel presence there. 

Chiefly, Oath saw it as a more economical way to grow. The capital expenditure on the 400-square-foot kitchen, located in a facility with space for about 20 other brands, was 10% of what it would cost to open a traditional restaurant in Philly, Kellogg said…

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