The Pros and Cons of Owning a Ghost Restaurant

Should you open up your own ghost restaurant this Halloween?


A ghost restaurant isn't as spooky as it sounds. It is essentially a restaurant that operates out of a kitchen and delivers food to its customers. There is no physical brick and mortar location for patrons to dine in, which has its benefits and also its drawbacks. Below, we'll take a look at both sides of the coin and see whether ghost restaurants could be the newest restaurant trend. 


PROS


1. Drastically Reduce Overheads

Given that the front-of-house portion of a traditional restaurant business doesn't exist for ghost restaurant owners, they get to simply skip all the related costs. For example, wait staff salaries, utility costs, décor expenses, rent and parking space costs all immediately vanish. 


2. Location, Location, Location...Is Irrelevant?

Whereas regular restaurants benefit greatly from their location, ghost restaurants can operate much more humbly. Frontage and foot traffic is irrelevant to a ghost restaurant, so setting up in expensive and happening districts is simply not required. Again, this is a major cost-saving measure. 


3. Focused Customer Targeting

Instead of having to spread out how customers are targeted, ghost restaurants can easily focus their marketing budget and direction. Given that ghost restaurants operate solely online, marketing strategies can focus on targeting those who are tech-savvy or those who enjoy delivery. Narrowing down and focusing customer targeting can yield greater results. This could lead to greater potency in attracting customers since regular restaurants are often forced to appeal to a much larger demographic of people while using more avenues to advertise. 


4. Data-Driven Decisions

Keeping patrons happy in a brick and mortar restaurant can be tricky. Removing someone's favorite item off the menu can result in bad word of mouth and lower sales. However, for ghost restaurants, they can simply track sales data and react accordingly. Since there is no direct relationship between the ghost restaurant and its customers, ghost restaurants have the luxury of reacting to market trends to protect their bottom line while saving costs on ingredients that would otherwise have been wasted on low-selling items. 


5. Greater Exposure

Ghost restaurants rely on delivery to get food to customers. Most third-party delivery companies have apps and websites that feature the restaurants that they support for delivery. Customers are able to filter delivery results by location and food type, which narrows down search results to what is relevant for the customer. This means anyone accessing a large delivery platform could be introduced to a ghost restaurant directly through the delivery company's app or web platform. 



CONS



1. Packaging Peculiarities 

Ghost restaurants focus their businesses around delivery which means suitable packaging will need to be purchased or arranged. Many customers are conscious about the amount and type of packaging they receive, so providing packaging that's as environmentally-friendly and as robust as possible is a tough balance to strike - at least initially.


2. Fewer Touchpoints

The more touchpoints a restaurant has with customers, the more chance they have to make a good impression. Without a traditional restaurant location, face-to-face interactions are non-existent. It also means that customers will not have the chance to pass by a physical location and walk in out of curiosity or interest.


3. Quality Control

While the food produced by ghost restaurants may leave the kitchen flawless, they are reliant on delivery services - often from third parties - that may deliver food in a far worse condition than it left the kitchen in. Late deliveries and rude delivery drivers are also quality control factors that are completely out of the ghost restaurant owner's control, but might still leave a negative impression.


4. Online Reviews are Everything

Word of mouth will not really suffice for a ghost restaurant. Review sites like Grubhub, Yelp and OpenRice are key elements in a ghost restaurant's success. With just a few bad reviews, a ghost restaurant's rating can decrease considerably and lead to a sudden drop in sales.