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Cloud technology has been instrumental in growing businesses’ profits. With cloud technology, organizations can reduce hardware and labor costs while increasing productivity. Many industries have experimented with cloud technology for years with great success. In the past few years restaurants have started using cloud technology in hopes of securing that same achievement.  According to the Food Service Restaurant (FSR) Magazine, 60% of restaurants fail in their first year while 80% don’t make it past their fifth anniversary.  With raising food costs, competition from neighboring restaurants, rent, and labor wages - restaurant margins tend to be razor thin. In a cut-throat industry – error is not an option.

Due to thee expensive nature of brick and mortar restaurants – many companies are turning to ghost kitchens or cloud kitchens to expand their margin and increase profitability by cutting down on costs associated with restaurants.

 “Ghost kitchens are largely a response to margin challenges,” Technomic principal David Henkes said in an interview with CNBC. Cloud kitchens are restaurants that don’t serve patrons – instead focusing on delivery to nearby businesses and homes. With delivery, business growing up to 300% faster than brick and mortar restaurants coupled with the success of Uber Eats and DoorDash – more restaurants than ever are turning to delivery.

While many restaurants offer delivery services many businesses employ third-party apps such as Uber Eats and DoorDash to reach a wider range of patrons. But employing third party resources are not always the answer.  Uber Eats charges most restaurants a 30% commission fee – a steep price for businesses whose margin costs are already low. In fact the commission is so high, Forbes wrote an entire article on how Uber Eats will cause any restaurant to go bankrupt. Thus, more businesses are experimenting with ways to delivery to their customers without the help of third-party companies.

Many restaurants cite a decrease in overall costs as a driving factor to investing in cloud kitchens. A restaurant isn’t just successful because the food is delicious or because it gets rave reviews. There are other factors that investors have to take into account. One of them is location. If the location of a restaurant is too hard to get to – they may lose a percentage of their clientele. This especially becomes an issue if delivery is a focal point in a restaurant’s business plan. With rental prices soaring all over the country – having a ghost kitchen not only enables restaurants to rent from less desirable areas (thus saving them money), but also allows them to purchase smaller spaces since they won’t have to accommodate for patrons. Added to the fact that they can save money on décor and furniture while not having to pay to staff a full -functioning restaurant – cloud kitchens are becoming very desirable in the restaurant industry.

The demand for cloud kitchens are only going to increase as more owners turn to delivery services. Ghost kitchens allow restaurants to save money overall by decreasing the amount of rent they pay, the space they take up, and overall wages. By investing in cloud kitchens – restaurants can focus on delivery which will ultimately save overhead costs without having to get rid of their brick and mortar restaurant.

Last modified on Monday, 19 August 2019
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Danielle Loughnane

Danielle Loughnane earned her B.F.A. in Creative Writing from Emerson College and has currently been working in the data science field since 2015. She is the author of a comic book entitled, “The Superhighs” and wrote a blog from 2011-2015 about working in the restaurant industry called, "Sir I Think You've Had Too Much.” In her spare time she likes reading graphic novels and snuggling with her dogs.

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