December 4, 2018

Dark Kitchens: The Next Generation of Food Delivery Service

Dark Kitchens: The Next Generation of Food Delivery Service

In an unassuming strip mall location in Pasadena, California, Kitchen United opened its doors earlier this year.

The startup aimed to shake up the restaurant industry, and so far, it’s delivered.

Think food court, but with no fast food or plastic tables in sight. Kitchen United is a space filled with commercial kitchens for restaurants to rent and use as “dark kitchens,” sometimes called “cloud kitchens,” or kitchens they use solely to fulfill takeout and delivery orders.

There are no tables. No servers. No front-of-house staff at all.

The concept of dark kitchens isn’t new, but Kitchen United’s opening (and its $10 million Series A funding round led by Google Ventures in October) has generated a lot of buzz around the idea. The startup has plans to expand nationwide in 2019, and Kitchen United isn’t alone in offering this kind of service. CloudKitchens is a similar concept that’s been operating since 2016 in Los Angeles, and has plans to expand to San Francisco, Chicago and New York.

More and more restaurant owners are wondering if opening a dark kitchen should be the next step in their establishment’s growth. Is it right for your restaurant? Here’s what you need to know.

What is a dark kitchen? 

Dark kitchens get their name from dark stores

— stores that don’t serve any guests at their physical locations but exist only to fulfill online orders, which have existed almost as long as online shopping has. Dark kitchens aim to make room for catering and the ever-increasing demand for food delivery in the age of apps like Seamless, Grubhub, and UberEats.

Dark kitchens can be satellite kitchens that only fulfill online delivery orders.

They can be outfitted so guests can stop in to pick up takeout orders, too. They can simply support catering operations. Kitchen United is a mix of all of the above.

Among the half-dozen tenants, there’s Barnaby’s Gourmet Hamburgers, which boasts a handful of Bay Area locations and two restaurants in Los Angeles, with the dark kitchen space in Pasadena now helping to fill takeout and delivery orders. Canter’s Deli and Grilled Cheese Heaven each have one physical restaurant in the L.A. area, and rent spaces in Kitchen United to expand their delivery and takeout capabilities without opening full new restaurants. Mama Musubi is a staple at Southern California farmers markets, and with a dark kitchen space in Pasadena, can now cater and deliver food seven days a week. The Lost Cuban and The Pizza Plant don’t have any brick-and-mortar stores (yet) but offer takeout and delivery from their spaces at Kitchen United.

For establishments that don’t have full-service restaurants, a dark kitchen can provide a way to start serving food, building a guest base and earning money to put toward future expansion (be that a restaurant space, a food truck, or something else) with lower startup costs and less overhead than it takes to run a full restaurant.

For existing restaurants, a dark kitchen can be a solution to a kitchen that’s backed up by delivery and takeout orders, slowing service for guests who dine in. Rather than sacrificing guest service at their restaurant locations, or spending big money to open new restaurants, those eateries have found a solution in renting dark kitchen space to fulfill the extra orders.

Is dark kitchen the right next step for your restaurant? 

Should you launch a dark kitchen for your restaurant? That depends. A dark kitchen can be a great growth tool, but it’s not the right path for every restaurant. A key criteria for starting a dark kitchen: you’ve got an abundance of delivery and/or takeout orders. Without the demand for these types of orders, it may not make sense to ramp up a dark kitchen for your restaurant.

If you want to expand your restaurant (assuming the delivery/takeout demand is there), but save on infrastructure, a dark kitchen might be a good choice. Opening a second restaurant location is an expensive endeavor. There’s the cost of real estate, outfitting a seating area, plus the cost of all the staff you need to take care of guests. Renting a kitchen space on its own can be a far cheaper option.

If you want to cut down on service time for your guests, a dark kitchen might help. Guests at your full-service restaurant will spend less time waiting, because that kitchen doesn’t have to handle as many delivery and takeout orders. Delivery and takeout guests will get food that’s delivered hot, fresh and, most importantly, fast, because there’s a dedicated kitchen making just their food. If you have multiple kitchens spread out in different parts of town, you’re even better positioned to make fast deliveries.

There are a few other benefits to opening a dark kitchen rather than a full restaurant space for your next location.

With a dark kitchen, you have the chance to try out far more competitive prices, because you save so much in overhead. It’s a chance to test out different price points to see how they perform in your market. Even with lower-priced menu items, your margins are likely to be high, because your operating costs are so much lower.

Operating a dark kitchen also gives you a chance to collect some valuable guest data. Because you’ll most likely be taking orders online, it’s easy to create a database of your guests, their home and work locations, their ordering habits and more. That kind of demographic information is invaluable when it comes time to redesign your menu, open another restaurant location or launch a new targeted marketing campaign.

It’s important to note that delivery is still a small part of the overall restaurant industry — as the Chicago Tribune recently noted, delivery accounted for just 3 percent of all restaurant transactions in 2016. However, as overall restaurant traffic declines, delivery and takeout continue to rise. By taking proactive steps now to optimize your restaurant for takeout and delivery orders by opening a dark kitchen, you put yourself in a great position to take advantage of future restaurant trends.

How do you launch a dark kitchen? 

If you’ve made the decision to dive into opening a dark kitchen, there are some tactical tips that will help ensure that is is as successful as possible.

If your city has a startup like Kitchen United or CloudKitchens that offers the space along with marketing support, that’s a good option for a first foray into operating a dark kitchen.

Otherwise, choosing the right location for your dark kitchen is one of the most important steps in the startup process. If you already deliver and have any data about your delivery guests, that will come in very handy here, as you can choose a location that’s close to where large numbers of your delivery orders tend to go. Otherwise, you’ll want to choose a neighborhood that’s near the densest population centers in your area, but preferably in a lower rent neighborhood so you can cut costs.

Then, concentrate on doing what dark kitchens do best. Provide an efficient, excellent delivery experience by tightly managing your supply chain and controlling everything from the ingredients to the packaging to the delivery time.

Consider delivery-only specials that can come out of your dark kitchen. Focus on local ingredients or trends, and offer what delivery guests want. Think about niches that aren’t being filled in your city or neighborhood, and whether your dark kitchen can fill a need.

As technology continues to change the restaurant industry, dark kitchens are just the latest way that restaurateurs are merging tech and food service to better serve their guests. It could be that a dark kitchen will help you better serve yours. If so, you’re now armed with the knowledge to succeed at opening your first dark kitchen.

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