As any restaurant worker or owner can tell you, the Covid-19 pandemic has sent devastating shockwaves throughout the entire hospitality industry.
Following the initial shutdowns in March 2020, the month of April brought the lowest sales period for the industry in over two decades. Sales improved the following year but were drastically slowed by the third and fourth Covid waves that eliminated in-person dining. As of 2021, more than half (51.2%) of food and beverage services in Canada stated that they did not know how long they could continue operations before having to consider closure or bankruptcy. An additional 81% took on additional debt due to the pandemic, with 60% of table-service restaurants operating at a loss.
These numbers and the lasting effects of Covid-19 restrictions can be seen in today’s industry through business closures, staffing shortages, and unfortunately a decreased number of unique independent businesses. The negative impacts trickled down to also impact foodservice operators and suppliers across the country. As the industry re-emerges, business owners and industry suppliers are working to pay off their increased debts and lower operating costs to get services and profits back to pre-pandemic numbers.
A new trend emerging out of this has been an increased reliance on food delivery and take-away solutions. Canadian hospitality data shows that traditional restaurants are seeing annual growth of 11.45% when it comes to food delivery services. By definition, food delivery services refer to any method of take-away experience, whether that is third-party delivery apps, first-person delivery, or pick-up from the location. With most restaurants choosing to partner with third-party delivery services like SkipTheDishes, DoorDash, and Uber Eats, they’re forced to make the difficult choice between meeting customer demands for increased delivery options and losing 20% of profit to the third-party services or not realizing that incremental revenue potential
Restaurant owners are looking for new ways to tap into this growing trend without having to sacrifice a significant profit margin. This search for a middle ground has opened the door for new opportunities, specifically strategic partnerships between virtual brands and traditional restaurants. Restaurants typically lose 20-25% of profit when partnering with third-party delivery services for existing menus. By introducing a new stream of revenue using ghost kitchens, the surcharge is less impactful to the pre-existing restaurant revenue and less time and money are spent on the creation and operating process behind new menu items. By partnering with ghost kitchens, restaurants open the door to unlocking new earning potential through a program that offers menus, recipes, training, technology, branding, marketing, and promotions.
From the perspective of the ghost kitchen operators, it is imperative to partner with a professional and experienced restaurant that can introduce curated brands to their community. To make this relationship work, the curated brands must fit with the original restaurant audience and fit into the setup of the existing kitchen. Once set up, customers can select the virtual brands from the same method of online ordering as they would with the original restaurant. The virtual brands multiply the digital storefronts and increase incremental revenue potential substantially. The restaurant takes majority of the profit, less fees to the managing virtual restaurant company.
One thing is very clear – Canadians love food delivery services and show no sign of decreasing demand. With the Canadian food delivery market projected to reach $98 billion by 2027, restaurant operators will have to integrate delivery services to stay on top of the growing demand. Many creative strategies are hitting the market (drone deliveries, for example), but not all of them will be a fit for every audience and customer base. Ghost kitchens offer a unique opportunity to increase delivery services and serve a variety of offerings, without losing profits from pre-existing operations. The mutual benefits received by ghost kitchen and restaurant partnerships offer a new approach to overcoming the damage of the past two years. The hospitality industry must work together to rebuild what was lost and ghost kitchens might be the key in doing so.
About Ryan Moreno:
Ryan Moreno is the CEO and co-founder of the collective hospitality group, The Joseph Richard Group (JRG). Since first opening in 2009, JRG has expanded exponentially, now featuring more than 25 unique locations, including an impressive list of restaurants, Public Houses, Liquor Outlets, Private-label beer & wine, ghost kitchens, and a Hotel.