Six Lessons we Learnt From the Latest Ghost Kitchen Research
With over 750 ghost kitchens operating in the UK and 1500 in the US (Source: Euromonitor data), multi-brand virtual kitchen businesses continue to disrupt the F&B industry at pace.
But opinions around crucial topics, including barriers to expansion and even food ordering priorities, remain divided.
In a recent poll conducted by PKL Delivery Kitchens, the company received feedback from a wide range of industry experts, including Uber, Delivery Hero, Grant Thornton and McDonald’s.
PKL remains at the forefront of catering infrastructure partnerships after 30 years of growth and ran the Poll to their global LinkedIn network.
Led by Global Head of Delivery Kitchens Charlie Farr, the objective centred on learning more about the opinions driving virtual kitchen launch and expansion decision making.
Charlie is an expert in building fast-growing start-ups, with several years of real estate experience.
He led the ‘Roobox’ concept at Deliveroo, which launched as ‘Deliveroo Editions’ in 2017. The concept brought hubs hosting collections of hand-picked food brands together, connecting great food and restaurants across the Country using containerised kitchen concepts.
The PKL poll garnered feedback on five key topics:
1. The barriers to setting up a food business.
2. The obstacles to expanding a hospitality operation.
3. Operational timelines.
4. The importance of commercial catering equipment cost-saving and maintenance.
5. Perceived customer preferences on menu updates and ordering app affinity.
Read on to see how the questions we raised resulted in divided opinions.
Feedback and Analysis by Poll
Poll 1: What do you Believe are the Biggest Barriers to Setting up a Food Business?
- 33% of respondents saw finding a property as the most significant barrier
- 23% of respondents felt staffing, marketing, or both are the greatest barriers
- Only 3% of the respondents felt design and fit-out is a barrier
- 40% of respondents claimed funding is the biggest barrier
While we might expect financing to be a significant obstacle in any business, funding as a barrier to setting up a food business did not dominate opinion overall. Building and operating delivery kitchens at scale requires high capital outlay, coupled with the cost of running a delivery app and logistics business – it’s no surprise start-ups need to regularly go through funding rounds.
Respondents also saw finding a property as an issue, despite 165,000 privately owned commercial and business premises remaining empty in the UK (Source: M&G Plc, June 2021). The key challenges with finding a property are around planning, use class, and having the required level of utilities on site.
And less than a quarter (23%) of respondents believe that staffing, marketing, or a combination is a barrier. This came as a surprise to the team, as Charlie Farr explains:
“One in 20 people who want a job can’t find one [according to the Office of National Statistics]. But it doesn’t mean they are skilled in hospitality and catering.”
“Many people with catering skills were forced to gain employment in other industries during the pandemic and we expect it to take a while for people to migrate back to F&B. And this puts a lot of pressure on starting up a food business.”
“On top of this, a lot of those staff now don’t want to go back into those jobs post-pandemic, and have migrated back to other areas”.
Marketing may also be a bigger barrier than some people think.
Multi-brands delivering through virtual kitchens don’t have physical storefronts to generate awareness, meaning that having the correct cut through and impact requires specialised marketing support and more often than not a healthy budget to back it up.
For perspective, McDonald’s, with 1300 restaurants, spent £89m on advertising in the UK during 2020 (Source: Statistica).
Yet, the most surprising result is that only 3% of respondents felt that design and fit-out are barriers to setting up a food business.
“This may be because people are more aware of the modular owned or rented commercial kitchen concept than we thought”, claims Charlie.
And the optimism here is also felt in the second Poll relating to operational expectation:
Poll 2: How Long Would you Expect it to Take to Get your Commercial Kitchen Operational?
- 77% of respondents felt a commercial kitchen could be operational in 1-3 months
- 23% of respondents believe that it takes 3-6 months to get a commercial kitchen operational
The F&B industry seems increasingly aware that modular delivery kitchens offer a lean operational alternative to traditional brick-and-mortar sites.
Respondents who felt it took 3-6 months to get a commercial kitchen up and running typically factored in delays associated with brick-and-mortar setups. Especially finding a location.
But the 77% who felt that an operational kitchen is viable in under 3-months know you only need space to set up a modular unit.
As Charlie Farr confirms, “It’s possible to have a large modular kitchen accommodating five chefs serving up to 14,000 meals a week working in as little as 3-4 weeks.”
Poll 3: What do Operators Think Customers See as the Most Important thing When Ordering on a Food Delivery App?
- 31% of respondents feel that speed is the most crucial aspect of a food delivery app
- 23% of respondents saw the cuisine type as the most critical factor
- 23% of respondents believe that brand recognition is the most important aspect
- 23% of respondents see price as the most important factor on a food delivery app
In all the polls conducted; Poll 3 triggered an equal response.
Large food delivery operators invest heavily in big data to identify consumer buying habits. But the respondents in this Poll come from a broad range of industries — many without access to detailed consumer insights.
Price may not be a driver for high-end niche operators like La Deli Robuchon or glitzy Chinese Mayfair restaurant Hakkasan. But, the majority of food app users are highly price-sensitive.
“Price is definitely the No1 overall consideration based on my experience at Deliveroo”, claims Charlie. “Free delivery and special offers are pretty vital to attract attention. The speed of delivery is also important. Most users will hesitate to order food if the delivery time is longer than 32 minutes.”
Poll 4: What Are the Biggest Barriers to Expanding your Hospitality Operation?
- 40% of respondents saw finding a location as their biggest barrier to expansion
- 60% of respondents feel that funding is their most significant barrier
- 0% of respondents believe that a lack of resources or expertise is an issue
- 0% of respondents thought that a lack of data was a barrier in their operation
Poll 1 and Poll 4 recorded a marked difference in opinion on finance versus location sourcing being a barrier.
When the question moves from setting up a food business to expanding an existing operation, the gap between finance and funding as a barrier widens.
In Poll 1, 40% of respondents felt that funding is a barrier to setting up a food business versus 33% who chose finding a location.
But funding is seen as a barrier by 60% of respondents when expanding an existing hospitality business.
Lenders seem to be increasingly risk-averse when financing established hospitality operators.
High debt ratios caused by months of lost trade during the pandemic leave some hospitality operators in a weak position.
But lean business start-ups with the ability to demonstrate a rapid return on investment are seen as less risky.
Poll 5: How Often do Operators Believe a Customer Would Like a Menu Change to Make it Fresher and More Current?
- 73% of respondents feel a menu needs updating once a month
- 20% of respondents think that updating a menu once a week is most important
- 7% of respondents thought that customers value menu updates every two weeks
In everything a successful food delivery business needs to consider, the menu sits at the heart of the offer.
And variety is the key to success.
The competition for a consumer’s attention is fierce. For example, Deliveroo currently works with 10,000 restaurants in the UK. A typical menu comprises 40-80 items, which means consumers have an eye-watering choice of around 600,000 food items available on demand.
Updates to menus keep regular buyers interested. But be careful about replacing menu items for the sake of it.
McDonald’s made ten major changes to its menu recently, partly due to customer demand. The company dropped five items and were forced to reintroduce fan favourites, including the Chicken Deluxe Sandwich and the Cheese and Herb Melts.
Poll 6: Out of 1-4, How Important is the Maintenance and Cost Saving of Commercial Catering Equipment?
- 0% rated the importance as 1
- 0% rated the importance as 2
- 0% rated the importance as 3
- 100% rated the importance as 4
It might not come as a surprise that cost-saving ranks unanimously in the importance stakes.
But there are several ways to influence the capital cost and maintenance costs associated with commercial kitchen equipment.
The essential factor is capacity. But the output isn’t only affected by kitchen size.
Depending on the food served, different types of catering equipment support the same peak volume. And some equipment costs significantly less than others.
Capacity and frequency also play a part in maintenance. For example, if your kitchen works continuously at maximum capacity, then maintenance is recommended more frequently.
Saving on regular maintenance costs is an option. But taking a ‘fix it when it breaks’ approach is risky.
If a component fails, it’s likely to happen at peak service. So always have a contingency plan.
Nothing harms a food delivery service’s reputation more than late delivery.
“We have a specialist team at PKL that advises on all aspects of maintenance,” explains Charlie Farr. “Continuous delivery should be a focus for every commercial kitchen. And it starts with the equipment.”
So, What Did We Learn from our Latest Virtual Kitchen Poll?
1. We learnt that funding the expansion of an existing hospitality business is more challenging than financing a new venture.
2. Setting up a food delivery business with a modular kitchen is up to twelve times faster than setting up bricks and mortar establishments. But many respondents were not aware that the difference is so significant.
3. 23% of respondents believe that staffing and marketing is a bigger barrier to setting up a food business than funding or finding a property.
4. When asked about the most critical aspect of selling on a food delivery app, 31% of respondents didn’t feel that price, brand recognition or cuisine type is most important.
5. The majority of respondents feel that updating a menu at least once a month is vital to keep customers coming back.
6. And lastly, catering equipment costs and maintenance costs are considered vitally important by 100% of respondents.