Are ghost restaurants haunting our neighbourhoods, or scaring up business for entrepreneurs?
Blue Plate Diner has been serving the community for more than 15 years with favourite dishes such as mac and cheese and meatloaf. But the restaurant has experienced more than its share of changes recently, from a new location (12323 Stony Plain Rd.) to the mandated closure of its dining room due to the COVID-19 pandemic.
But for John Williams, co-owner, adapting to change is par for the course in the restaurant industry. Their latest adaptation due to the pandemic is utilizing third-party delivery apps for the first time to cater to consumer demand. Williams has even considered taking this further and creating a “virtual kitchen” using Blue Plate Diner’s kitchen space.
“You have to be able to adapt and survive, and ghost kitchens might be a way to do that,” he says.
Also known as virtual kitchens, ghost kitchens offer multiple food-delivery options from a location that may or may not offer dine-in. Chefs often prepare food for multiple restaurants and cuisines and fill online orders placed through popular third-party delivery apps such as SkipTheDishes, Uber Eats, and DoorDash.
The kitchens, which have become increasingly popular across the country, were first introduced to Edmonton in 2019 and are disrupting the traditional brick-and-mortar restaurant model. Now there are five permanent-structure and nine mobile kitchens that are licensed in the city, according to Alberta Health Services, with at least seven of them located in the core.
“It’s almost like a mini food court, so to speak,” says Marc Choy, president of Ghost Kitchens Canada. “If people can get the convenience of offerings from six different brands all from one [delivery] fee, then all of the sudden that makes their life much more convenient.”
“How do you have one kitchen doing nine different types of food with any authenticity?”Glenn Quinn, co-owner, Tzin Wine and Tapas
Ghost Kitchen Canada’s business model involves having a physical location that offers dine in, take-out, and delivery. The Toronto-based company has three locations in Edmonton, including one on 117th Street and Jasper Avenue. Each location offers food from multiple brands and a range of cuisines.
Other companies, such as Miami- based REEF Technology, don’t offer dine-in at all. The company, which operates Impark, uses parking lots to station trailers that provide kitchen space to virtual brands including Red Corn Taqueria, American Eclectic Burger, Breakfast All Day Everyday, and Rebel Wings.
The kitchens don’t rely on foot traffic for business, allowing them to operate in locations with lower rental rates. “You don’t need to be on a main street to be able to deliver,” Choy says. “As long as the driver can find you and as long as you have a presence on an online platform, then you don’t need visibility, access, signage—all those things which are typical to the restaurant industry.”
The savings on overhead might allow current restaurateurs the opportunity to be innovative and experiment with different sub-brands. This is what draws Blue Plate Diner’s Williams to the idea, especially during the uncertain times of a pandemic.
“Say this continues on for us for months—we can always make another virtual restaurant and have that available through one of the third-party delivery apps or our own delivery,” he says. “I would consider doing something completely different than what we’re doing now just to give that distance from the Blue Plate brand.”
Convenience vs. dining experience
The popularity of third-party delivery apps has certainly risen over the past few years, and with it, the existence of ghost kitchens. Canadians spent more than $4.3 billion in 2018 on online food delivery, which was a 44 per cent increase from 2017, according to Restaurants Canada. An Angus Reid Survey in 2019 found that 29 per cent of Canadians had used a food delivery app at least once. This same survey predicted growth to slow from 2019 to 2021, with the possibility of an additional peak in 2022.
While ghost kitchens offer consumers convenience, some restaurant owners are skeptical of their longevity and ability to build brand loyalty.
“I think consumers have lots of options when it comes to food and delivery, and I’m not so sure that, in the long run, ghost kitchens will be able
to create the brand that’s necessary and get the repeat business that’s necessary to be successful,” says Gavin Fedorak, co-owner of Love Pizza (10196 109 St.).
His restaurant tried third-party delivery but eventually opted out due to the large cuts the apps take, which can be as much as 30 per cent, and issues with service quality of the drivers. “We put a lot of work into our restaurant, making the food from scratch, making the pizza, getting the order right, then we were handing it over to somebody that didn’t care,” Fedorak says.
Glenn Quinn and Kelsey Danyluk, co-owners of Tzin Wine and Tapas (10115 104 St.), have seen how both ghost kitchens and the business model of third-party delivery have disrupted the restaurant industry, but have chosen to focus on providing customers with a unique dining experience.
“You can equate meal-delivery disruption in the restaurant industry to Amazon’s disruption of the retail industry. We want convenience. We want everything without having to go and get it,” Quinn says. “I would like the consumer to be aware of where the money actually goes.
“If people can get the convenience of offerings from six different brands all from one [delivery] fee, then all of the sudden that makes their life much more convenient.”Marc Choy, president, Ghost Kitchens Canada
“[This is a] big disruptor to experience-driven restaurants who make their business on food, service and atmosphere,” Quinn continues. “I understand it because it makes sense to some people to save on brick and mortar and things like that, but how do you have one kitchen doing nine different types of food with any authenticity?”
For those who care about neighbourhood walkability and supporting local, ghost kitchens have raised eyebrows for other reasons. Ian O’Donnell, executive director of the Downtown Business Association, questions the appropriateness of having ghost kitchens located on high streets such as Jasper Avenue.
“It’s important that we keep those spaces for their intended purpose, and that’s to front our walkable, inviting main streets,” he says. “Those retail bays and restaurant bays are meant to be people- forward [and] provide activation and add to the vibrancy of our streets.”
Because ghost kitchens can partake in a variety of activities, there is a range of use classes under zoning bylaws in which they might fit. Factors such as customer seating or whether the location is used for strictly food preparation all contribute to how a kitchen is classified.
“The city is currently reviewing the permitting and licensing for ‘ghost kitchens,’” said Karen Burgess, a communications advisor for the City of Edmonton, in a written statement. The statement explains that the kitchens are permitted and licensed on a case-by-case basis, depending on their location and on-site activities.
“It’s hard to say what their classification should be, and I think that’s where we wanted to make sure that there’s clarity, that there was an even playing field,” O’Donnell says, emphasizing that he believes the kitchens should follow the same regulations and requirements as anyone else would in the restaurant industry.
“We need to make sure that ghost kitchens, or whatever iterations there are of that world, have a proper classification, have proper zoning required, have areas that they are permitted and others that might be discretionary or not permitted.”
Ghost kitchens must meet all food safety regulations under the Public Health Act, says Alberta Health Services, and must be inspected and have a valid food handling permit.
Delivering the future?
With COVID-19, both third-party delivery apps and ghost kitchens seem here to stay as the restaurant industry innovates to survive. Even with his concerns, O’Donnell agrees that ghost kitchens may offer entrepreneurs a unique opportunity.
“Innovation in industry is great. It allows other businesses to shift and other ways for businesses to deliver offerings in new and innovative ways,” he says. Blue Plate Diner’s Williams agrees, especially as restaurants face COVID-19 and the impacts of the pandemic on their typical business model.
“These days, since the future is so uncertain, you need to be able to [pivot]. You have to be able to reinvent yourself, be flexible and change with the changing environment,” Williams says.