Embracing Restaurant Delivery through Real Estate

Embracing Restaurant Delivery through Real Estate

Real Estate Considerations for Now and in the Future

There are many names for this fast-growing trend in commercial and industrial real estate. Whether you refer to it as a ghost kitchen, cloud kitchen, satellite kitchen, shared kitchen, or virtual kitchen, the idea remains the same.  This model provides an off-premise location for represented restaurant brands and their chefs a place to prepare food, without the expense and maintenance of a brick and mortar location.

Due to rapidly changing consumer habits, and recent advances in technology this delivery-only model is experiencing monumental growth. Statistics on food delivery point to the opportunities that exist for commercial real-estate:

  • Over half of US consumers order delivery at least once a week; more than 20% of Generation Z gets delivery at least three times a week.
  • Meal delivery is growing 300% faster than dine-in over the last 5 years.
  • Ongoing growth: A market research firm recently estimated that delivery-only restaurants could be a $1 trillion business by 2030.

What are the Benefits for Real-Estate Owners and Ghost Kitchen Operators?

  • Low overhead costs. Your cost of real-estate will be much lower than a traditional restaurant location. And, no need to invest in an in-person dining experience.
  • Faster opening times -renting/buying space in existing facilities dramatically increases your speed-to-market.
  • Additional revenue streams – established brands can generate additional revenue by renting out a third-party ghost kitchen or by launching a delivery-only spin-off from their primary concept.
  • Flexibility – Ghost kitchens are easily adaptable as the market or customer preferences change.
  • Efficient ghost kitchens can accommodate a variety of cuisines and restaurant brands with the necessary corresponding equipment.

Ready to Dive in?

Here are 4 things to consider when looking at potential sites:

  1. Site selection is the most important aspect to consider. Potential sites can include closed restaurants and retail/big box stores, former culinary schools, warehouses and dated industrial space in markets all over the country. Warehouses and light industrial use space just outside dense urban centers often meet the need for delivery personnel parking, affordable rent, and satisfy the purchasing demand of nearby residents.
  2. Site selection must consider delivery driver parking in addition to shift worker parking. Locate where the driver waiting areas will be, and where you can place outdoor screens for drivers to monitor order times. Ask yourself if you can add a drive thru for an even more seamless driver pick-up.
  3. Interior space planning for the site must identify the most efficient layout for plumbing, electrical, HVAC, and other elements of the kitchen to allow various tenants to work and thrive side-by-side in a fast-paced environment.
  4. Remember the key to profitability is effective design that gets your food out the door and into the customer’s hands as fast as possible.

What Else Do You need to Know?

  • Because this concept is still new, zoning and approval processes are often not clear-cut, and vary depending on the municipality you are working in. Regulators may be unfamiliar with the concept, and requirements may be inconsistent from location to location and inspector to inspector.
  • Food production is largely regulated at the local level by the health department. This means the local Health Department is likely to be involved with your permitting.
  • Hire a professional firm (i.e. JL Architects) to secure the necessary building and operating approvals and design the best use for your location.

For years Americans have used third-party providers to place billions of dollars in food delivery orders. With the rise of ghost kitchens to compliment this trend, restaurants are capitalizing on this low-cost, low-risk way to maintain brand awareness, expand product availability, and endure the pandemic’s recent effect on the industry.