How ghost kitchens are staying alive as Toronto reopens

Chef Matt Dean Pettit
Courtesy of COAST

When restaurants closed their doors during the pandemic and there was nowhere to go, a new type of business started booming quietly. The only way to order from these restaurants is online, and they only have a kitchen. Call it a smart, virtual or ghost kitchen – these are entirely online businesses, with no front-of-house staff or dining options. They cropped up all over the city, cooking up everything from Japanese to Italian and everything in between.

But as COVID restrictions started lifting and people went back to patios and indoor dining, many chefs running these kitchens called it quits, including popular joints like Mel’s Pizza and JapaSando & Co. Why? The restaurant leasing them their kitchens needed the space back, business slowed and there was a general shift in consumer behaviour, chefs said.

Even among these closures, many ghost kitchens have stayed open and thrived. In Restaurants Canada’s recent Foodservice Facts research, four per cent of respondents said they currently operate a ghost kitchen as part of their business model and another eight per cent are planning to open one within the next two years.

Still, the summer has been tough on ghost kitchens like Adobar. The modern Filipino restaurant is run entirely through Instagram, led by Nina and Aldrin Cortez. After losing their jobs during the pandemic, the siblings opened Adobar in September 2020.

“Whenever we dine out and want to experience Filipino food it has always been traditional but we saw that in Toronto people actually want fusion,” says Nina Cortez. “This is a fresh take on what is familiar to us in terms of our childhood memories of our mom’s cooking.”

Since opening though, both have landed new jobs and noticed a 35 per cent dip in revenue this summer. They had to wind back operations and only do pickups and deliveries on the weekends, but plan to ramp back up as the weather cools.

Keeping the business running one year after launch and through the lull has a lot to do with Instagram. Adobar has partnered with several food bloggers, influencers and other ghost kitchens to do promotion, including Taste the Six and Toronto Things To Do. Once got 1,000 followers, Nina Cortez noticed that more people started to trust them. More followers and orders came after, and they now have more than 4,000 Instagram followers with all orders coming through the platform.

Ghost kitchen COAST by Matt Dean Pettit has also experienced slightly slower sales this summer but not when it comes to its signature item – the lobster roll. The key to survival as a ghost kitchen is to have something like a lobster roll on the menu, says Pettit.

“It’s really important to try and be the best at one thing,” says Pettit. “Specialization really helps and hopefully that volume can keep your margins in place.”

Focusing on one item that can be executed really well helps bring more attention to the ghost kitchen through word of mouth and media coverage, says Pettit. By having the “best” of something in the city it means that consumers will have to order from that kitchen – ghost or not. It also keeps costs down rather than trying to service a full French bistro menu and hoping people order a lot of food in one go, he says.

COAST has also focused heavily on its packaging to make sure that when lobster poutine or a smash burger leaves the kitchen, it ends up in the same shape at someone’s home. It’s a tip Pettit picked up from catering that he says all food delivery should be paying attention to, but is especially important for ghost kitchens since there’s no in-person version of the dish to try.

Meanwhile, Guerilla Burger co-founder and CEO Justin Butler has also found the key to longevity lies in packaging. Every time someone orders anything from the vegan burger joint, the bags are stamped with an insignia that says “delivery is expensive for you and for us, help us save some of those costs by ordering directly from us.”

“The cost for delivery from third-party apps is egregious,” says Butler.

Since delivery apps take upwards of 30 per cent from a restaurant, the margins are so small that it makes it hard to justify running a ghost kitchen. So, Butler baked an extra 30 per cent into the cost of the food and just sees those apps as a customer acquisition tool. Then, if people like what they’re eating, they can order from the restaurant’s website directly next time. Or they can come in to its new takeout window. Guerilla Burger has no plans to open dine-in service (it opened out of the back of Eva’s Original Chimneys at Bathurst and Bloor in October 2019 as a way to offset costs), but people can order from the takeout window and get a 15 per cent discount.

“We wanted to reward our customers for not being lazy,” says Butler. “Since I built the model based on delivery, I can offer the customers a cheaper price if they come into the store because I’m not paying the 30 per cent delivery fee, so why would I not transfer that savings over to the customer?”

All three of these ghost kitchens are planning to continue operations for the foreseeable future, despite their competitors’ closures. The market that these ghost kitchens are operating in is an eager one. Research firm the NPD Group found that digital food ordering represents 15 per cent of all restaurant ordering. That’s six per cent higher than prior to the pandemic.

Now ghost kitchens are preparing for winter when diners will flock back to their homes and happily order from anywhere – so long as the food is good.

“It’s going to get colder, patios will become less and less, indoor dining is at a cap of how many people can be there,” says Pettit. “These restaurants need additional revenue and you’ll see another influx of ghost kitchens, so that restaurants can survive.”

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