Why do ghost kitchens fail?

Ghost kitchens have been thriving over the years, but plenty of them also fail. Here are some reasons why, and how to prevent it.

Why do ghost kitchens fail?

Ghost kitchens are everywhere. In fact, the sector is projected to be a $1 trillion industry in the next decade. Seems everything is on the up and up, right?

Not always. Like any traditional business, it takes acumen and dedication to keep a ghost kitchen afloat. We’ve seen some ghost brands thrive over the years, but we’ve also seen plenty of them fall.

So what’s in the secret sauce? Ghost kitchens fail for a variety of reasons. In our experience there are three main failure points:

  1. Poor Marketing/ Social Media Presence
  2. Bad Operations
  3. Location, great concept but bad location.

Poor Marketing

The main reason a ghost kitchen fails is due to a lack of marketing. Unfortunately, paid ads only work so well—they do drive customer growth, but the acquisition cost for new customers is often higher than the lifetime value (LTV) that the customer will provide.

That said, paid ads are effective for building a base of customers. However, it is important that paid ads are supplemented immediately with good content creation and organic growth.

Many of the ghost kitchens we have seen go out of business failed to cultivate a good presence on social media, mainly Instagram.

One of our favorite partners has been Seated; they help drive traffic to your site and they don’t take a commission for it.

Bad Operations

Just because there is no front of house to deal with, does not mean that ops can go out the window. If anything, having a streamlined system for processing orders and executing a clean hand-off to the delivery drivers becomes more imperative when you lose the support of the front of house. Your new customers have no way to develop loyalty without the benefit of a traditional in-house operation. For that reason, every delivery has to be perfect.

We have tested every major platform and POS system currently available. Most Major POS systems now offer some form of order aggregation (Toast and Square) that can take in orders from the major delivery platforms as well as your own native solution.

Our favorite setup so far has been Otter as an aggregator and Chownow as our native solution. It just works well. We have used both DoorDash and Relay as our delivery solution—both have been effective.

Location/Concept

Location is still king, even when dealing with a ghost operation.

The basics still apply: don’t launch a sandwich concept while there are another 10 similar concepts in the area. Just because you are lean does not mean you will beat well entrenched competition.

The benefit you have as a ghost kitchen operation is that you can quickly and inexpensively run several other virtual brands out of the same space. Most of our ghost kitchen partners now run multiple brands—it’s a great way to keep busy in off hours as well as to drive additional revenue. We currently partner with some pretty cool virtual brands that are worth checking out.

The proof is in the pudding… or pizza… or sandwich…

Business is better when you have good relationships. Having a host that supports your business and a strong following will help take a ghost kitchen far. This starts with finding the right host. It’s not as easy as just plugging into Google.

Shameless plug here: Kitch’s marketplace helps you find the right host in the right location, and we take care of all the busy details. That means insurance, leasing, payments, conversations and more are all done right within Kitch. Give it a shot now.