Pros & Cons of a Ghost Kitchen Franchise: Unseen Costs Can Haunt You

Ghost kitchen franchises seem to be a new trend, but are they more profitable than a traditional restaurant? The unseen costs can haunt any restauranteur.

The Rise of the Ghost Kitchen Franchise

Ghost kitchens, also known as cloud kitchens, dark kitchens, or virtual restaurants, are a relatively new trend in the food industry that has gained popularity in recent years. Developments in tech, the expanding use of mobile delivery apps, and the pandemic all contributed to the increased use of ghost kitchens.

But what are they? They’re a $43 billion restaurant segment focused on takeout and delivery. Instead of restaurant kitchens, they use commercial kitchens designed solely for the purpose of fulfilling delivery orders for multiple brands. Consumers usually use a ghost kitchen via a third-party delivery app.

Is now the best time to invest in a ghost kitchen franchise? The answer to this question depends on several factors, such as your experience in the food industry, your financial situation, and your risk tolerance. While there are some advantages to investing in a virtual restaurant franchise, there are also some hidden costs and potential drawbacks. Before deciding, it’s important to conduct thorough research. Investing in a ghost kitchen franchise may seem like a lucrative opportunity, but it’s important to weigh the pros and cons before making a decision.

The Pros of Investing in a Ghost Kitchen

Let’s examine the pros of investing in a ghost kitchen franchise so you can make an informed decision about how to make the best investment for your personal and financial goals.

  1. Lower overhead costs: Ghost kitchens come with lower overhead costs than a brick-and-mortar restaurant. Ghost kitchens typically operate from shared spaces, with multiple brands using the same kitchen facilities, mitigating rent, utilities, and maintenance costs associated with a physical restaurant.
  2. Reduced risk: Since you don’t have to invest in a physical restaurant location, there can be less financial risk. Also, since the franchise is typically associated with an established brand, there’s a built-in customer base, which can help reduce marketing costs and increase revenue.
  3. Focus: You don’t have to maintain a dining room, so you can focus solely on food preparation and delivery.

The Cons of Ghost Kitchen Investment

While deciding if a ghost kitchen business is right for you, consider the following cons:

  1. Labor and supply issues: You don’t need waitstaff in a ghost kitchen, but you’ll still rely on skilled chefs and food preparers, and you’ll need a well-stocked kitchen. That can lead to some hidden costs. Those staffing ghost kitchens may encounter labor shortages, increased labor costs, and difficulty attracting and retaining qualified employees. Higher costs on goods and supply chain issues may also affect your business.
  2. Inconsistent customer experiences: Since you won’t have a physical storefront, customers won’t be able to experience your restaurant’s ambiance and atmosphere. You’ll be relying solely on delivery services, so there’s a greater risk of delays, mistakes, and other issues that can negatively impact the customer experience.
  3. Competition: Ghost kitchens operate in a highly competitive environment, with multiple brands sharing the same kitchens and competing for the same customer base. Additionally, since you’ll be competing with a larger selection of restaurants beyond your area, building customer loyalty and increasing sales can be challenging.
  4. Commission fees: As the owner of a ghost kitchen, you may have to pay a higher commission fee to third-party delivery platforms. If you’re relying on these platforms to deliver your food, you’ll need to factor in these costs when determining your pricing and profitability.
  5. Technical difficulties: Ghost kitchens rely on third-party online ordering systems to field customer orders. Any technical difficulties they have can lead to delays and other issues that have an impact on your customers’ experience and your bottom line. Plus, you can’t rely on walk-in customers to keep revenue coming in.

A Genuine Opportunity with Freddy’s Frozen Custard & Steakburgers

Freddy’s Frozen Custard & Steakburgers gives you the opportunity to own multiple units in exclusive territories across the U.S. With Freddy’s, guests get what other competitors can’t provide – quality, cooked-to-order food, in a clean environment with first-class hospitality. Our restaurant franchise costs include an initial franchise fee of $30,000 and an initial investment of $794,254-$2,523,239.

We’re looking for ambitious franchisees with the capital to invest in a minimum of four units. Fill out and submit a franchise form today.

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