Question

Food delivery apps like Uber Eats, DoorDash and Grubhub are starting to reshape the American food industry. As more people order food to eat at home, and as delivery becomes faster and more convenient, the apps are changing the very essence of what it means to operate a restaurant. No longer must restaurateurs rent space for a dining room. All they need is a kitchen — or even just part of one. They can then hang a sign inside a meal-delivery app and market their food to the app’s customers, without the hassle and expense of hiring waiters or paying for furniture and tablecloths. Diners who order from the apps may have no idea that the restaurant doesn’t physically exist. The shift has popularized two types of digital culinary establishments. One is “virtual restaurants,” which are attached to real-life restaurants like but make different cuisines specifically for the delivery apps. The other is “ghost kitchens,” which have no retail presence and essentially serve as a meal preparation hub for delivery orders. Many of the delivery-only operations are in the early growth stage, but their effect may be farreaching, potentially accelerating people’s turn toward order-in food over restaurant visits and preparing home-cooked meals. Uber and other companies are driving the change. Since 2017, the ride-hailing company has helped start 4,000 virtual restaurants. Since the pandemic began many restaurants have pivoted to providing takeout and delivery. It’s a move that shows no signs of diminishing, even as they reopen for dining in one form or another. To accommodate this increased demand, they are depending more and more on various types of off-premises kitchens. Several companies are counting on the continued growth in the ghost kitchen trend. Their inventory is so-called ghost kitchens — off-site meal-preparation facilities that are untethered from physical restaurants. They predate the virus but are multiplying now and taking many new forms. Ghost kitchens allow restaurants to outsource the making of their takeout and delivery meals without cannibalizing the stoves, walk-ins and prep areas needed to serve seated diners outdoors or in. With national reach, they’re also promising to expand a restaurant’s footprint and brand recognition beyond the immediate neighborhood. 1 Reef Kitchens is one of these. It was started in June 2019 in Miami, using parking lots and garages. Today it has some 4,500 parking sites across the country where it is installing mobile pods — roughly the size of shipping containers — that it calls kitchen vessels. The same space might house cooks preparing delivery orders from several restaurants, whether the food is Indian, Mexican, Italian or burgers. Reef has three modular kitchens up and running in New York City. It expects to more than double that by the end of the year and hopes to get its nationwide total to 300. When a customer orders online through the website of a Reef Kitchens client or one of the delivery apps like UberEats or Postmates, the information goes to Reef, but the customer never interacts directly with Reef (though the service is adding pickup at some of its locations). The company started before the virus hit, but Carl Segal, the chief operating officer, said that what it is doing feels more urgent now. For a restaurateur, establishing a second kitchen would be expensive given the costs of rent, construction, utilities and staffing, but with Reef, the restaurant has no upfront expenses. “It doesn’t cost them anything,” Mr. Segal said. “We enter into a partnership with them, we keep the revenue and pay them a royalty percentage every month.” 2 One of the main drivers of the growth of the ghost kitchen market is the changing cost structures of the foodservice environment. Ghost kitchens push restaurant cost structures toward delivery rather than in-person dining, and the reduction of employees that comes with a delivery-focused model can significantly bring down rent and staffing costs for restaurants and grow thin margins, he said. For example, 60% of the cost of a Starbucks latte represents the cost of rent and staffing according to Euromonitor, which cited data from Financial Times. As delivery becomes less expensive and ghost kitchens grow and become more centralized, reducing food delivery times in the process, restaurants could find financial gains in optimizing their business for offpremise rather than dine-in experience. 3 The ghost kitchen concept is establishing itself in the Canadian restaurant industry as well. Joey Restaurants opened a ghost kitchen at Kwantlen Polytechnic University in Surrey, B.C., on May 14 and another in a stationary food truck in Brampton, Ont., on May 21. It did so partly to provide jobs to staff who could no longer work as servers in its dining rooms, as well as create new jobs, said Rupert Martin, vice-president of culinary. Ghost kitchens offer a quick, cost-effective method, Martin said, noting brick-and-mortar restaurants are very expensive to open and can take months, whereas ghost kitchens can be opened in weeks. Before the coronavirus, the off-premises channel accounted for less than 10 per cent of the commercial restaurant industry's revenue. It is predicted it to make up close to 20 per cent of a full-service restaurant operator's business once the pandemic ends.

How does the ghost kitchen reflect the concept of a virtual organization?

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Answer 1

The concept of ghost kitchen simply refers to the idea of delivery-only restaurant without having an actual physical space for the diners or customers to sit, order meals, and dine as in any traditional restaurant. The operational functioning of ghost kitchens reflects some of the features or characteristics of a virtual business organization which can also be considered as online organization or company. First, the entire business or commercial operation of ghost kitchens is conducted increasingly online or electronically entirely through a digital platform and connectivity. It mainly includes obtaining food orders from the customers, order processing and tracking, contacting and tracking the respective delivery agent, customer connection and interaction, receiving and processing payments, employee and staff payments, and much more. All of these activities are essential parts of the business operation of the ghost kitchens that are conducted predoinantly through an interconnected digital medium. Secondly, many of the ghost kitchens are increasingly operating through third party delivery agencies such as DoorDash, UberEats, Deliveroo, Grubhub, etc. under a revenue sharing and royalty based business plan. It significantly reduces the practical and financial hassles associated with physical delivery of food orders directly by the restaurants and food joints and saves a lot of time as well thereby improving their overall operational efficiency. In this regard, contacting the agents, food order tracking, tracking agent location, order delivery, etc.can be accessed electronically through the usage of appropriate software applications. Hiring a commercial delivery agent or company can also reduce delivery time and consequently, enhance customer satisfaction thereby increasing potential customer acquisition and sales revenue. Thirdly, ghost kitchens or delivery-only restaurants doesn't necessarily have any physical operational or office space and mainly consist of mini-kitchens which have their own separate food brands. It also doesn't require as many employees and staff such as Food and Beverage staff and employees, receptionist, welcome staff, security personnel, and so forth which are required in traditional dine-in restaurants thereby saving a considerable amount of operational costs or expenses and other regular maintenance related expenses for the sellers or kitchens. Moreover, the inventory and the meal preparation facilities of the ghost kitchens are also offsite and are often handled and administered virtually through online or digital medium. Therefore, there are no physical inventory and resource facility centers such as any actual physical business organization and all the revelavnt activities and functions pertaining to inventory management and ordering can be conducted electronically or digitally by the ghost kitchen managements. Fourthly, ghost kitchens also facilitate growth of the virtual workplace for the relevant employees and staff as many of these kitchens do not have any exact physical office space or operational space for that matter. The employees and staff working under any ghost kitchens can be spread out physically and do not have to be under one roof to operate. For example, the independent and separate food hubs or mini-kitchens under any ghost kitchen can located in a different geographical location and does not necessarily have to be a commercial implying that it can even a private home or residence exclusively providing home-cooked food or meals and the food kitchens can conveniently process any food order by contacting the respective food hubs or mini-kitchens electronically or through digital mediums or tools. In this context, any financial transactions or payments between the kitchens and food suppliers can also be conducted electronically or digitally impliyng an integrated electronic supply chain and logistics system. Therefore, considering all these individual features and characteristics regarding the operational aspects of ghost kitchens, these can be theoretically or conceptually considered as virtual commercial or business organizations.