You start a diner. Then, you notice that you’re missing out on delivery orders during the night, so you leave the kitchen open 24/7 to fill delivery orders. That business works out, so you launch a bunch of different brands and start opening up delivery-only locations. Then, you realize you’re leaving money on the table by not offering takeout, so you add in pick-up windows, digital ordering kiosks, and even a few tables.
What does that leave you with? A ghost kitchen? A tech-forward QSR? It’s unclear. But According to Marc Choy, president of Ghost Kitchen Brands, that’s what Ghost Kitchen Brands is. That company started in 2015 in Toronto as Bite Me Diner and now operates 25 multi-tenant ghost kitchens across Canada and the United States.
“There’s a certain type of consumer that likes to walk in and pick up,” said Choy. He’s one of them. Despite running a large ghost kitchen company, he said he prefers to pick up food himself, and often forgets that delivery is even an option. Takeout customers like Choy are a boon for the business, “Average ticket is around 50 percent more” on pickup orders, he explained, and they don’t have to pay commission or delivery fees to an aggregator to make the sale.
The only operational difference between takeout and delivery that Choy identified was in juggling wait times. “You have a 15- to 20-minute window for delivery orders,” he said, but with takeout, the customer is waiting right there. You have to move faster and prioritize that takeout order.
While the operational difference between a QSR and a ghost kitchen with takeout may be negligible, the attitudinal difference is obvious. “There’s no customer service,” Choy said of GKB’s restaurants. Customers order through a kiosk and are told by text when their food is ready. Compare that attitude to restaurants, which often see hospitality and service as a key part of their value.
Figuring out how to describe GKB is more than a theoretical challenge. Choy said customers “usually have follow-up questions” when they hear about the concept. “Once they learn about it, they love it,” he said, but explaining it to customers and even more sophisticated stakeholders such as landlords and vendors takes time.
The company is gearing up for a significant expansion. Choy said GKB set the “lofty” goal of opening 150 new kitchens across Canada and the United States this year, primarily from inside Walmarts. But “getting vents and hoods and restaurant equipment is becoming an increasingly difficult challenge” because of supply chain challenges, he added. The lead time on an oven the company uses is currently at 22 weeks.
Per Susi Graf, director of marketing for GKB, the company is working on Walmart-based locations as far afield as Texas and California, and closer to home in states such as New York and Illinois.
Choy sees Ghost Kitchen Brands, and companies like it, as an ideal partner for a company with strong brand recognition and weaker distribution channels. He cited Quiznos, a once-large sandwich chain that has shed thousands of units over the past decade, as a prime example, as well as Ben & Jerry’s, a company whose consumer branding runs well ahead of its network of ice cream shops.
The company is attractive relative to more conventional franchisees because of its existing network, said Choy. Brands “can either find a franchisee and do one [location], or sign with us and be in 25 [locations] next month,” he explained.
Licensing agreements like the ones GKB has with brands can be attractive in other ways, too. On a recent earnings call, Wendy’s CFO Gunther Plosch noted that the company took a 6 percent royalty on sales made by Reef-operated ghost kitchens, compared to four percent on a traditional franchise location.
The process also works in reverse. Graf said the company is looking for partners and investors to open and operate ghost kitchens under the GKB umbrella. For such people, the primary draw is GKB’s roster of more than 20 national partners, including Cinnabon, Wow Bao and Taco Del Mar.