An inside job: Lower capital costs make ghost kitchens a new entry point to restaurant industry - Charlotte Business Journal (2024)

Ghost kitchens are a rising niche in Charlotte’s culinary scene, as the pandemic continues to drive innovation.

That business model sees chefs working out of third-party commercial kitchen space — or virtual kitchens — shared by multiple concepts. Some ghost kitchens are carved into existing restaurants, where a new idea is tested to gain traction. National chains are testing streamlined menus in some cases, seeking to boost the bottom line.

The pandemic limited indoor dining capacity and inspired restaurant operators to get creative. Takeout and delivery are at the forefront of those moves — cutting real estate and other overhead costs.

“When you look at what constitutes a restaurant in America today, that definition is rapidly changing,” says Hudson Riehle, senior vice president for research at the National Restaurant Association.

Lower capital costs make ghost kitchens the new low-cost entry point to the restaurant industry.

“It’s a long-term trend. It’s not a fad,” Riehle says. “It’s essentially a new business model.”

Innovation is being driven by sustained and accelerating costs tied to food and labor. Ghost kitchens’ lack of on-site dining allows for a laser focus on specific menu items. Consumers have become comfortable with ordering from establishments they’ve never visited in person.

“These new models can realize higher pre-tax profit margins,” he says.

It’s also convenience driven for consumers. Digital ordering has improved those offerings and eased consumer hesitation. Digital orders now account for 20% of restaurant orders, up from 5% pre-pandemic.

During the depths of the pandemic, off-site sales soared to 91% of business. It has leveled off at 79% of sales — still well above pre-pandemic levels of 61%.

That creates additional points of access for restaurants.

It’s key for ghost kitchens to dial in their menu theme, price points, marketing and limit the geographic area for delivery.

“There’s no substitute for a well-thought-out and refined business plan,” Riehle says. “Because of the competitiveness of the industry, a love of food and beverage is not enough to ensure success.”

Two commercial ventures housing ghost kitchens have popped up in the Charlotte market: The City Kitch and CloudKitchens.

Lillian McGuire, director of growth for City Kitch, says her phone has been ringing off the hook lately.

City Kitch opened its 13,000-square-foot location on Thrift Road in August 2020. It is home to 16 ghost kitchens that are dishing up everything from baked goods and tacos to fried-chicken sandwiches and authentic New Orleans cuisine.

Customers can order online through City Kitch’s website or individual ghost kitchens’ sites. Picking up at the facility involves a check-in via a QR code.

“People are still picking up food. People still want to eat out. They like the convenience of being able to pick up something that’s locally made and delicious,” McGuire says.

It’s a perfect fit for someone to test a new concept, expand their delivery footprint or add pick-up options, says Jen Classic, City Kitch director of business development and technology. “We really do serve businesses in any stage of growth,” she says.

In total, City Kitch West End has space for 40 different concepts and is 90% occupied. Food trucks, caterers and restaurants needing additional production space make up the remaining tenants.

It also operates commercial kitchens in University City and Greensboro. The Greensboro location opened in December and was designed with ghost kitchens in mind.

McGuire says future growth is planned, with the Southeast — from Virginia to Georgia— being considered for a fourth location.

“We have a great opportunity to give back to the community in multiple ways. We can help people start their food business in a way that no other business can,” McGuire says.

Those looking to crack into the restaurant industry can take advantage of shared kitchen space, prep stations and equipment such as convection ovens, fryers, a flat-top grill or a smoker as well as cold and dry storage.

Monthly costs vary from $1,100 to $2,600 based on the number of hours for shared space. Suites are between 224 and 245 square feet. Prices start at $3,100 for a hooded suite and $2,800 for non-hooded spaces.

“We can create a better quality of life for people that are trying to realize their dreams that don’t have the upfront capital it requires to do something like that,” McGuire says. “We can really help make somebody’s passion a reality.”

CloudKitchens is another ghost-kitchen offering in the Charlotte market. A representative declined to talk to the Charlotte Business Journal, saying the company was in “ghost mode.” Questions submitted to a corporate media contact were not answered.

Thrift Commercial Real Estate Services is marketing that property for lease. A flyer for the 12,000-square-foot facility at 500 W. Summit Ave. says Cloud Kitchens is leasing its delivery and takeout kitchens in Charlotte.

CloudKitchens’ website says it partners with large national franchises, local businesses, food entrepreneurs and food trucks “to reach the growing food delivery market with a scalable solution.”

It eliminates front-of-house labor costs and overhead. The upfront investment to open at CloudKitchens is $30,000 versus $1 million for a traditional bricks-and-mortar establishment, according to the site.

It provides 200 to 300 square feet of space, infrastructure and amenities, from software to utilities — and operates with just a handful of employees.

The CBJ recently spoke with some ghost-kitchen operators. Here are their experiences.

Mariah's Taco Spot

Mariah Brown wanted to learn how to make birria tacos for fun. She’d just gotten a promotion at her corporate job with Duke Energy Corp. Then Covid sent her home to work. “Cooking became a therapy for me,” she says. “It allowed the creative side of my brain to get flowing.”

It also flipped her life upside down.

She left corporate America behind to launch Mariah’s Taco Spot — a ghost kitchen at The City Kitch. Last year, sales topped six figures. Brown estimates she sells between 450 and 500 tacos a week. It all started with a video online on how to make birria tacos.

Brown spent weeks learning the process and tweaking recipes. She’s learned to crisp the tortilla shell using chili oil, stuff it with cheese and beef, chicken, salmon or shrimp. Each is served with slow-cooked beef broth for dipping.

A friend suggested she sell her tacos, and she tested the market on Instagram. Before long she was dishing up tacos from her apartment, with lines of cars stretched around her building.

“Tacos are universal,” she says. “I’m sure there’s someone in the world that doesn’t like a taco, but it’s not me.”

Brown began considering options. She didn’t know what a ghost kitchen was, but she quickly saw the potential benefits with access to commercial kitchen equipment and lower overhead costs than a bricks-and-mortar restaurant.

She moved into City Kitch in November 2020, investing about $3,000 in supplies. Rent costs $1,620 a month for shared kitchen space with access to a flat-top grill, storage and other amenities.

“The ghost-kitchen concept, in my opinion, is the best way to determine if the food and beverage industry is for you,” Brown says.

It comes with its own unique challenges, from shared space to no direct storefront. That puts a spotlight on marketing.

It also makes it critical to dial in your product offerings and price point.

“I was very structured with how I wanted my profit margin to look,” Brown says.

Her average ticket is between $20 and $25, with single tacos, combo options and taco trays available. A partnership with another ghost kitchen gave her the idea for oxtail tacos — the top-selling item when it’s available.

Success has her looking toward the future. She’s invested roughly $45,000 into a food-truck trailer. She’s getting ready to launch that venture in the next few weeks. Brown sees room for additional food trucks in the future, or maybe a bricks-and-mortar location one day.

Brown intends to hire and keep the ghost kitchen running as well. “I’m gonna shoot for the stars,” she says. “Being an entrepreneur is something you have to be prepared to be strong for. It’s so easy to fail.”

Mad Dash

Corey Jones has been a professional cook for half his life. Now, the 32-year-old is working to carve out his own niche with ghost kitchen Mad Dash. The Johnson & Wales University grad launched that venture at The City Kitch in October 2020.

The pandemic had left Jones unemployed and trying to figure out his next steps. A former corporate chef at the airport, he snagged a gig with DoorDash to pay bills in the interim. He spent his spare time planning to get a food truck up and running.

“I’d been pushing everybody else’s business and said, ‘Now I’m going to make this happen,” he says. “That’s the hardest thing at the end of the day is somebody just giving you that opportunity to start.”

Then he stumbled across City Kitch. It cost less than opening a food truck and presented an opportunity for Jones to build his name and brand.

He invested roughly $6,000 to open — and says that he could have used additional funds. He’s now cook, prepper, dishwasher and everything else the concept needs to survive.

“It was starting out from ground zero. Trying to make myself known in Charlotte as a chef. Until you get out on your own doing it, you’re a nobody,” Jones says. “I’m stepping out on faith.”

He started Mad Dash by opening for lunch only. “We had a couple days we didn’t sell anything,” he says. “Nobody knew who I was, who Mad Dash was. It was fighting an uphill battle.”

He turned to social media, pop-up events and catering to promote the business and boost the bottom line.

Mad Dash has gained a following for its best seller — the Dasher Chicken Sandwich, hand-breaded buttermilk fried chicken topped with coleslaw, house-made pickles and Jones’ signature Dash sauce. Last year he sold nearly 1,100 chicken sandwiches at the ghost kitchen.

Jones saw sales top six figures in 2021; he’s aiming for a 3% to 5% increase this year. That figure includes ghost-kitchen sales as well as pop-up and catered events. On a good week, the ghost kitchen brings in between $1,500 and $1,700.

It’s not all been easy. Confusion over how ghost kitchens operate lingers. Diners still don’t always understand the business is virtual. There’s nowhere to see the food being prepared. Orders are dropped off in City Kitch’s waiting area. A lack of foot traffic also impacts sales.

“I wouldn’t say no to the ghost kitchen. You just learn how to pivot and make stuff work,” he says.

His next goal is to find a bricks-and-mortar spot and have a food truck for catering as well. “I want Mad Dash to be its own independent name.”

Southern Comfort Café

Scott Guynup’s first ghost kitchen started as a figment of his imagination. The executive chef for Cantina 1511 says the idea of building a new concept with a streamlined menu piqued his interest. “It’s a complete reset for what I’ve been doing for 30 years,” he says.

The Southern Comfort Café ghost kitchen launched in January. It operates out of less than 300 square feet in Cantina 1511’s kitchen at Park Road Shopping Center. It uses existing coolers and freezers, with a few prep tables squeezed in.

“There’s a lot of people that don’t even know what a ghost kitchen is. But it’s the way of the future. It’s never going to go away,” Guynup says.

He hopes to start additional ghost concepts at Cantina 1511’s other locations. Menus will be based on storage and workspace available and options that require minimal equipment. “I have a million of these concepts in my head,” he says.

Ghost kitchens emerged during Covid-19 as restaurants struggled to keep their doors open amid shutdowns and restrictions.

Southern Comfort Café is no exception.

Cantina 1511’s sales are still down about 30% from pre-Covid levels, Guynup says. The ghost kitchen adds another revenue stream — without paying rent for more space. He says sit-down casual restaurants with bars continue to struggle. “It’s been pretty much a nightmare,” he says. “We’re just trying to think outside the box. We have to increase sales or we’ll wind up closing.”

Southern Comfort Café recently marked its 90th day in operation. It offers scratch cooking with comfort food including chicken pot pie, meatloaf, mac and cheese, mashed potatoes and pineapple upside-down cakes — all dishes with a touch of nostalgia. “It’s all a learning process. I have the leeway to try something out and, if it doesn’t work, then I’ll replace it with something else. It’s not a set-in-stone menu.”

Southern Comfort Café continues to gain traction as word of mouth helps drive sales. Guynup hopes to reach weekly sales of $5,000. “It’s definitely something that’s achievable. I’m all in on this.”

It’s key to set your concept apart in the market — find that niche nobody else is doing, Guynup says. Utilize the best ingredients and serve a high-quality product, and people will pay for it.

He’s also dialed in on ratings amongst delivery services. Southern Comfort Café currently offers takeout or delivery via DoorDash — where it had a 4.7 rating as of this article’s deadline. As much as 80% of business is through delivery.

“I think we’re on the right track. I found a niche that people enjoy,” he says.

He’s already talking about possible bricks-and-mortar locations — be it for Southern Comfort Café or one of his other planned ghost kitchens. “It’s in the cards for me in the future, down the line.”

Honeybear Bake Shop

Hannah Neville always wanted to be a baker – the pandemic just pushed her to dream bigger.

Neville found herself furloughed from her job as head pastry chef at The Ritz-Carlton in Charlotte as Covid-19 shuttered businesses and tanked travel. She took a breath, then launched Honeybear Bake Shop out of her one-bedroom apartment.

“I’ve always wanted to do my thing, and I’ve just been scared,” Neville says. “I think I came to terms with it like, ‘Alright, now this is really what I want to do and where I want to go,’ and got the encouragement to do it.”

Neville started with cookie orders for family and friends, filling 20 to 30 orders a week and building a social-media presence. Before long she was covering every square inch of available space with cookies on busy days.

Within three months, her efforts to promote Honeybear had caught the attention of The City Kitch, which reached out about starting a ghost kitchen.

She negotiated rent down from a $3,000 starting point — doing calculations on how many cookies she’d have to sell to break even. She rejected a second opportunity that would have capped her growth potential.

“I was like, ‘I will work until I can pay this.’ I want to grow,” she says. “I’m happy that I made the decision to go in here because I’ve grown so much. At the end of the day, I wouldn’t trade it for anything.”

She’s found a rhythm to the ghost kitchen. Neville is in a private suite but relies on the main kitchen’s prep tables and ovens to finish her product. Cookies are picked up from City Kitch on Saturday or can be shipped.

Sales topped $200,000 in 2021 driven by individual cookie sales, her themed cookie boxes — think sweet treats inspired by nostalgia, from Pop-Tarts to breakfast cereal — and pop-ups, private events and farmers markets. She also has a handful of wholesale clients.

Her online cookie boutique handles roughly 60 orders a week and bakes up to 1,500 cookies.

Neville has about 20 flavors she rotates through with new options constantly in development. There are favorites such as the Brown Sugar Pop-Tart or It’s Your Birthday — a vanilla cookie with funfetti morsels, cake and sprinkles folded into the dough before topping the icing with birthday cake crumble. She’s added cookie cakes, Cookie Monster buns and other items to diversify her product mix.

“I just like constant change, and I just get bored with doing the same stuff over and over,” she says.

She’s added one full-time employee and one part-time employee to keep up with demand.

Next up?

Neville wants a picture of herself with the key to her own storefront in hand. The goal is to find space this year and work toward that bricks-and-mortar space becoming a permanent home for Honeybear.

“Obviously, I’m scared, but I’ve always been scared and I’ve done well before. I’ll make it work. I’ll work until I can do it,” she says.