George Kottas had a great idea for a business franchise about four years ago, to set up a chain of breakfast places across the Greater Toronto Area. Then he had a better idea – who needs the bricks and mortar?
It was as if he had seen a ghost, and, in fact, he did envision something of the sort – a ghost kitchen.
“It fell into my lap. We opened a breakfast place [called Bite Me Grill]. Then two delivery services, Uber Eats and Just Eat asked me if I wanted to work with them to provide deliveries,” says Mr. Kottas, CEO of Toronto-based Dekotas Group.
“Our place was open from 7 a.m. to 3 p.m. every day. One day, by accident, we left our tablet menu open for orders online for 24 hours, while we were closed, and when I came in the next morning, we had 40 missed orders. That’s when a light went on in my head, that delivery is a big thing,” he explains.
Indeed, delivery became such a big thing for Mr. Kottas that he pivoted his entire business. Bite Me Grill has bit the dust, but its successors are doing well.
Say hello to the ghost, or virtual, kitchen.
Ghost restaurants have menus offering everything from burgers to burritos to baklava, pizzas, chicken, sushi and wraps.
They can serve the appetites of virtually anyone who gets the munchies, anytime.
What they don’t have is the restaurant. No reservations. No tables. No candles. No soft conversations above a smooth jazz soundtrack.
No counter. No servers, not even a physical takeout place.
Everything is ordered online, prepared in the ghost kitchen and delivered. Customers interact directly only with the delivery company, which contacts the ghost restaurant and brings the meals to people’s doors.
Mr. Kottas, 46, says he has already created more than 30 different restaurant “brand concepts” with catchy names, such as Churro Burger and Wrap Me Up, diverse menus and, of course, no physical location other than a commercial-grade kitchen. He plans to launch services in cities across Canada.
He worked as a franchising consultant for more than 10 years before pivoting to the ghost world four years ago. He creates his concepts based on market research and what he expects will be popular for delivery in different cities and neighbourhoods.
The delivery companies he works with help by offering him demographic data about the areas where he delivers – telling him what foods people order most and what shows up on search engines.
Right now he is trying to up his game by launching delivery services for major, already recognized, foods, starting with desserts. “I don’t want to say which ones yet, but you’ll know them,” Mr. Kottas says.
The rise of the ghost restaurant is inevitable in a society and economy where the sharing economy, using services such as Airbnb and Uber, is growing more important, he says.
It has been happening for a while, coinciding with when Mr. Kottas pivoted his business toward the virtual economy. Statistics Canada reported in 2017 that 2.7 million people, just less than 10 per cent of Canada’s population, participated in the sharing economy, whether by renting out or staying in an Airbnb unit or driving or taking a ride with Uber or Lyft, or using similar services in other fields.
“Restaurateurs will surely add to that number,” says Robert Phelps, writing in Restobiz, the website of the Canadian Restaurant and Foodservice News. According to Restaurants Canada, the industry umbrella group, salaries and wages eat up about a third of restaurants’ operating revenues in Canada, so any restaurant that can do away with its entire front of house and still sell meals might have an advantage.
“With rents going up, and taxes and labour costs, it’s tougher and tougher to open a restaurant,” says Mr. Kottas. Instead, he is opening ghost kitchens across Canada.
At the same time, Mr. Kottas, who delivers via Uber Eats and Skip the Dishes (which was bought by Just Eat in 2016), says the delivery services typically take a 30-per-cent cut from every order, though larger users sometimes negotiate slightly more favourable rates.
There are four big delivery services in Canada – “in addition to Uber and Skip, there’s DoorDash and Foodora,” he says. Uber Eats estimates that on its platform alone there are now nearly 100 online-only ghost restaurants across Canada.
“In the United States, there are already 10 delivery services – even Amazon is delivering dinner there,” Mr. Kottas says.
The delivery companies’ percentages may be high, but connecting with a major delivery service is essential, Mr. Kottas says.
“The old-school restaurateurs don’t want to pay the fees, but they’re going to get killed,” he believes. “People will always still go out to eat, but more and more people order online,” he says.
The other advantages to running a ghost operation are that a commercial kitchen can handle more than one type of cuisine – Asian, Tex-Mex, Greek, Italian, breakfast, lunch or dinner. As well, Mr. Kottas says he designs his concepts and menus so that food can be easily prepared.
“I spent two years developing the back end,” he says.
Another advantage for Mr. Kottas: “No chefs – I have 19-year-olds who have never worked in a kitchen. I can train them within a week and they can handle 12 different types of menus without having any experience.”
His advice for others who arrive at a pivotal point in their business? “You have to keep your mind open. The world is changing so fast. When I started this three or four years ago, nobody believed in it – it was almost impossible to explain,” he says.
“You can’t wait to adjust – you almost have to act before anyone else can adjust.”