“It took a pandemic to realize that the restaurant industry wasn’t bulletproof,” says Toronto-based restaurateur Matt Dean Pettit. “It was filled with holes.”
Pettit is no stranger to Toronto’s food scene, having made a name for himself in the past decade for his beloved previous business ventures, the Rock Lobster Food Brand and Matty’s Seafood Co.
Pettit’s latest culinary endeavour COAST foregoes a physical restaurant (and sky-high Toronto commercial leases), instead relying on a delivery-centric digital model. Residents from across the city – and soon, beyond – can enjoy Pettit’s comforting gourmet seafood creations from home with just a few taps on their delivery app of choice.
Pettit is at the forefront of the “ghost franchise” concept in Toronto. Most basically, “ghost kitchens” and “ghost franchises” are restaurant and food brands that lack brick and mortar locations, relying solely on delivery, or – in some cases – takeout. The digital concept actually started to emerge pre-pandemic, but gained traction in response COVID-19-related restaurant closures.
The ghost kitchen concept takes on a few forms. In the case of COAST, Pettit has teamed up with a select few restaurants in Toronto, sharing his branding, recipes, and training with their chefs. When downtown Toronto residents order COAST on a delivery app, it’s actually made at Pearl Diver Restaurant on Adelaide St. E. The kitchen services orders for both takeout from their own celebrated seafood-filled menu and for COAST’s popular lobster rolls, lobster poutine, and smash burgers.
This mutually beneficial partnership – which launched October 1 – offers host restaurants a secondary revenue stream, keeping their business running and staff employed. Naturally, this “side hustle” is especially appealing to hard-hit restaurants as the pandemic rages on.
“We share in the profit together with the restaurant. They’re the execution teams taking in the money, which is the most important element,” says Pettit. “When a sale comes through on Uber Eats, our restaurant partners get that money and as a parent company, we take a small percentage; our role involves working with them on the backend to support them fully with the branding, marketing, and training.”
This model allows Pettit to give back to the restaurant community. “It’s a restaurant solution, not a take-away or a competitor,” he says. After all, Pettit is familiar with and vocal about, what he calls the “insane” costs of operating a Toronto restaurant – global pandemic or not.
Another increasingly popular model involves one ghost kitchen that may operate close to a dozen different ghost brands through the space, essentially functioning as a virtual food court. Toronto-based Ghost Kitchen Brands, for example, houses seemingly endless food concepts in its kitchens, all of which are available within a 30-minute delivery range.
“We will never replace the experience of in-restaurant dining, but our model produces jobs, brings economic stability to each kitchen, and offers convenience to consumers at home for delivery or in store for pick up,” says Marc Choy, President of Ghost Kitchen Brands. “Combining popular restaurant and consumer brands, with our use of technology and our real estate is a win-win for everyone.”
According to Uber Eats, while the pandemic and dine-in closures have certainly accelerated the trend, virtual brands have been a growing in prevalence since 2017 and continue to see momentum. There are now more than 10,000(!) virtual restaurants on Uber Eats in the U.S. & Canada, says the food delivery service.
Critics worry that popular and rapidly growing ghost franchises – especially those backed by big celebrities that we’ve seen launched as of late – will hurt smaller independent restaurants. This could happen if competition stiffens in the delivery app game in a way that serves larger and more visible brands over small local businesses. Likely, it won’t be long before some of these widely successful ghost franchises south of the border make their way to Canada.
The hope is that a collective desire to keep local spots in business will ensure their success despite an influx of ghost franchises and their limitless options. Perhaps more independent restaurants like Pearl Diver will actually turn to housing ghost brands for additional revenue to put back into their own restaurant.
Nicki Laborie, the owner of Toronto’s Reyna Restaurant brand, isn’t overly concerned about the emergence of ghost brands with respect to their impact on independent restaurants. Especially after a year of pandemic-inspired restrictions, there is a widespread craving among diners for in-person dining experiences and a desire to keep beloved spots like her Bar Reyna and Reyna on King in business.
“It is no secret that small businesses suffered enormously through COVID, so I believe that the population will lean towards supporting the independent restaurants vs. ghost chains,” says Laborie. “People don’t want to see their local spots go. While the big ghost franchises are appealing, the local places will remember your name when you walk in, they take the time to ensure you’re favourite wine is listed in their notes, that your favourite table is reserved when you come in – it’s a completely different experience.”
According to Restaurants Canada’s Chef Survey, 61 percent of respondents said they are not at all interested in a ghost kitchen; 21 percent are somewhat interested, but not actively exploring; 14 percent are interested and actively exploring; and four percent are currently offering.
Despite this apparent relative lack of interest, when you have access to a kitchen already, starting a ghost brand to exist separate from a restaurant’s main menu is a relatively simple and low-risk feat. Partnering with supplemental ghost kitchens in other parts of town may also help restaurants reach larger audiences throughout the city for takeout and delivery. Both, at least theoretically, result in an increase in sales.
Typically, when a restaurant wants to open up a new revenue stream, it often involves an investment in a new brick and mortar location. According to Uber Eats, virtual restaurants can experiment with brand-new concepts based on data, leveraging the assets they already have. They can easily test and experiment with the menu, with the Uber Eatsfeedback tools to continuously optimize the product-market fit.
One thing’s for sure: COVID-19 changed the at-home dining experience for the better, shaking up delivery app offerings in the process.
“Not all trends that we have seen emerge during the pandemic are going to disappear. Food delivery is one area that will probably level out to a new normal that is higher post-pandemic than pre-pandemic, and that bodes well for ghost kitchens,” says John Kelly, CEO of Zenreach, a San Francisco-based tech company that specializes in walk-through marketing. “Good quality food ready for delivery without the costs of the traditional restaurant will have a certain appeal to both restaurateur and consumer alike.”
According to Uber Eats, their customers are indeed looking for more choices and more types of cuisine to enjoy from the comfort of home, and the company is focused on creating more quality offerings.
So, don’t expect the ghost kitchen concept to disappear into thin air any time soon.