Are Ghost Kitchens the Future of Restaurants in Colorado?

Food delivery is a popular and growing industry, projected to reach $467 billion in sales over the next five years by one estimate. And when the coronavirus pandemic struck this spring, state-mandated dine-in restrictions led many restaurants, bars, and breweries to offer more robust takeout and delivery options, which will undoubtedly remain a popular choice for many in the months and years to come.

Enter ghost kitchens, also known as virtual kitchens, a business model that hopes to capitalize on our love of having food brought directly to our doors. Denver is now home to two such ghost kitchens that promise to help restaurants survive in the wake of the pandemic.

But what is a ghost kitchen? It’s a term used to describe a commercial kitchen occupied by a chef or restaurant owner that prepares food intended for pickup and delivery only, without a dine-in storefront. Most of these kitchens, which might house several different vendors, partner directly with third-party delivery apps like GrubHub, DoorDash, and Uber Eats. Think: a delivery-only food hall.

The newest virtual kitchen on the block is ChefReady, founded by Bay Area marketing veterans Nili Malach Poynter and her husband Robert Poynter. The venture is opening this summer in Platt Park with 10 high-tech commercial kitchen stations, ranging in size from 200 to 250 square feet; the owners are currently reviewing applications for delivery-only concepts from local chefs and restaurateurs. 

Why would an operator opt to conduct their business in this way? A virtual kitchen includes less overhead than a traditional brick-and-mortar restaurant, and the plug-and-play vendor spaces are equipped with all the necessary infrastructure (commercial hoods, sinks, electric and gas hook-ups, and more). The concept aims to lower the barrier to entry for new or would-be restaurateurs, making the profession accessible to a wider range of people. It can also help existing restaurants reach new diners and generate income during off hours. “Restaurants, for many years, have been working on such low margins at their brick-and-mortar locations,” says Malach Poynter, who grew up in Denver. “It gives all these struggling restaurant owners a chance to rebuild themselves. If done right, they can really help save the restaurant industry.” 

ChefReady is also offering to help its vendors with marketing, permitting, cleaning, and architectural guidance (chefs can customize their kitchen’s layout). The company plans to streamline the delivery process with software that aggregates the most popular third-party apps; it will also hire food runners to take meals from the kitchens to delivery drivers. 

Malach Poynter wants to build community among the participating chefs and will emphasize diversity when selecting the virtual kitchen concepts. “We don’t want them all to be the same,” she says. “We want some that are established restaurants and others that are entrepreneurs—maybe they’ve always wanted to open a restaurant but couldn’t quite afford it because of all the investment required.”

When it opens in July, ChefReady will join Nextbite Brands, an eight-month-old virtual kitchen company headquartered in the former Wayward space near Confluence Park. Nexbite’s business model is different from a traditional ghost kitchen in that it develops data-driven, delivery-only restaurant concepts—like Firebelly Wings, Outlaw Burger, Grilled Cheese Society, and Monster Mac—which it then offers to restaurants to run within their existing brick-and-mortar kitchens, alongside their own menus. In essence, partners are operating multiple restaurants in one building—some that are for delivery, some that are for dine-in service, and some that are a mix of both.

Nextbite wants to help restaurants generate new revenue streams while also getting the most out of the resources they’re already paying for, including their workforce, kitchen space, and equipment. A restaurant that’s only open for breakfast and lunch might operate one of Nextbite’s delivery-only brands for dinner and late-night eats, times when the kitchen would have otherwise been sitting empty and unused. “It’s increased revenue without increased cost beyond food,” says Nextbite CEO Geoff Madding.

The company manages everything on the front end—testing and developing menu items, branding, advertising, and coordination with the third-party delivery apps. Restaurant partners are left to buy the necessary ingredients and start cooking. Dishes on Nextbite’s branded restaurant menus are meant to be easy for partner restaurants to produce without changing their supplies, staff, or kitchen equipment. On average, participating restaurants have four Nextbite brands under their roofs, with some operating as many as eight at once. The company now has more than 150 virtual restaurant locations across the country, but so far is only working with one Colorado restaurant, located in the DTC in what was Nextbite’s original test kitchen; the company declined to share the name of its local restaurant partner with 5280. 

Nextbite works primarily with full-service restaurants specializing in American cuisine, including regional restaurant groups and franchises (it is also in talks with a “very big chain,” Madding says). The company says that it’s developing more diverse offerings, including Asian- and Latin-inspired dishes, as well.

Consumers aren’t always aware they’re ordering food from a virtual kitchen, but it’s not something Nextbite is trying to hide, either, Madding says. This transparency issue gained traction recently when diners in Philadelphia realized pizza they ordered from Pasqually’s Pizza & Wings was really from a Chuck E. Cheese virtual kitchen. 

Some diners won’t care if they find out that their food was prepared by a big chain restaurant, but others might—and Madding welcomes their feedback. He points out that there’s not a “virtual restaurant” option for restaurants to select within the third-party delivery apps, nor is the concept easy to advertise, though some restaurants are putting Nextbite’s brands alongside their own signage. Madding also points out that the people who regularly use third-party delivery apps are not necessarily seeking out new brick-and-mortar restaurants to visit—in other words, they want their food to be convenient and to taste good, without much concern about where it comes from. 

“There’s a lot of room in the market for more choices,” Madding says. Time will tell as to whether Denver diners take the bait.