The bright future of dark kitchens
The food delivery sector has been booming for a while. In early 2020, forecasting showed an expected annual growth rate of 6.5% and a projected market value of £5,974m by 2024.
The pandemic effect has been nothing short of spectacular.
While lockdowns and social distancing measures have made for a turbulent time for the hospitality industry, the growth of the food delivery sector has accelerated dramatically. Over the course of 2020, to cope with increased demand, Deliveroo increased the number of riders it works with from 25,000 to over 50,000. Since March 2020, 11,500 new restaurants have joined the platform.
Going dark to keep the lights on
One way that restaurants have been managing to cope with a combination of increased both consumer demand and a reduced ability to operate dine-in services is through the use of ‘dark kitchens’: food preparation hubs set up solely to service takeaway orders. The idea isn’t new – Deliveroo set up its first dark kitchen back in 2017 – but 2020 saw a lot of food providers jumping on the bandwagon.
Some big brands such as McDonald’s and Wagamama have set up their own dark kitchens in areas where they do not have restaurants. Small scale operators have been taking advantage of the low capital expenditure offering from Deliveroo, who provide all kitchen equipment, dishwashing staff and cleaning, often in exchange for commission on sales and exclusivity clauses preventing the restaurant from partnering with rival delivery platforms.
Consumers have the benefit of an increased range of options, and tend to receive their food significantly quicker due to the locations of dark kitchens in residential areas. Brands, platforms, consumers: win, win, win.
While the use of dark kitchens increases convenience for consumers and enables food providers to operate under Covid restrictions, it does not come without controversy. The choice of locations in quiet, residential areas has led to criticism from councils and families wary of extra traffic. The working conditions can also pose issues, with a tendency towards small spaces with little or no natural light and staff working in close proximity to one another.
David Page, the chairman of Franco Manca owner Fulham Shore, explained that their dark kitchen trial two years ago came to an end after staff complained of being “cooped up like battery hens”. Furthermore, any form of customer interaction is removed from the process, often resulting in operators having to pay chefs more to compensate.
In the most extreme cases, a lack of transparency between operator and consumer has meant that brands listed on delivery platforms have been discovered to be cooking in unlicensed premises.
The obvious solution to these issues is adequate regulation that protects both consumers and staff.
Here to stay
However, these concerns do not seem to have hindered the rapid growth of, and investment into, the industry. In 2019, Uber co-founder Travis Kalanick’s Cloud Kitchens acquired its UK rival Foodstars; Kalanick has since raised $400m in investment from Saudi Arabia, valuing Cloud Kitchens at up to $5bn. Google has recently backed Californian start up Kitchen United.
Different business models are also emerging: Karma Kitchen, set up by sisters Eccie and Gini Newton, charges a flat rate of £3,500 a month and endeavours to make kitchens a more attractive place to work, with skylights, large windows, pretty units and music all contributing to the ambience.
Covid-19 has been a major accelerator for the food delivery sector. While the hospitality sector will fight to come back from lockdowns and the theatre of dining in a restaurant will endure, make no mistake: dark kitchens are here to stay.
Ghost kitchens do not have to be basic. Luxury ghost-kitchen restaurateurs Cook and Thief seek out the best dishes from the hottest restaurants and collaborate with acclaimed chefs to curate them into one single menu at a central London ghost kitchen. Then, using their patent-protected technology, deliver them to diners, in pristine condition. They plan to open six new ghost kitchens in London within a year, reaching over 80% of the capital’s target market. In five years, they plan to be operating over 100 ghost kitchens worldwide.
Read more from this edition of Ahead of the Curve
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