Hospitality in the news

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Your latest instalment of articles and opinions from across the hospitality sector.

Thinking differently

We are exploring the theme of change in the hotel, hospitality & leisure sector and in this edition we are looking at the growth of "dark kitchens" also known as "cloud kitchens", "ghost kitchens" and "virtual kitchens". For those of you who have not come across this term before, these are professional commercial kitchens where takeaway food is produced for delivery only. We prefer the term "delivery only". Landlords fit out a property with multiple kitchens and let them out to restaurants to prepare meals for delivery to customers. You could have a Burger King kitchen preparing Whoppers (they are currently trialling their first ghost kitchen in Kentish Town) next to a Wagamama kitchen next to The Cheesecake Company preparing dessert.

Post-COVID, the demand for the convenience of eating at home is here to stay. In London alone, it has been reported that restaurants are selling over 900,000 more takeaways a week. Restaurant brands recognise that leather-clad helmet wearing bikers coming into restaurants to pick up orders clashes with dine-in customers sitting down for an enjoyable night out. There is also the significant capital outlay required to sign a lease on new sites and fit them out. Flexibility is the name of the game and delivery only kitchens offer this where you can take space on a short term basis in exchange for a revenue based fee.

As well as Deliveroo setting up Deliveroo Editions to offer delivery only kitchens to third parties provided they use the Deliveroo App, there are a number of big players entering this space. Travis Kalanick (who founded Uber) has invested, buying UK business FoodStars in 2019. These delivery only kitchens are probably best suited to small industrial units close to, or embedded in, residential areas. It has been suggested that hotels could use their kitchens for this and other sites re-purposed – and that may be a partial answer in highly residential areas.

There will be growing pains (e.g. different cuisines cooking under one roof, mixed ingredients, H&S issues, etc.) and, like other real estate heavy models, the delivery kitchens will rely very much on being able to pass on their long term property owning liabilities to third party customers who will sign short term flexible deals. It's also likely with more players entering the market that commissions will reduce.

Does this mean the death of the restaurant? In our mind, emphatically no. As many people experienced in lockdown, apart from hampers, delivery does not really work for fine dining where service is a key component of the overall experience. And breaking bread with family and friends in restaurants, enjoying great service and hospitality will always survive.

But for the mid-market, casual dining sector, where eating out is often done as a convenience rather than for the experience, delivery only kitchens will likely be the main driver of growth. Perhaps we may see restaurants brands in the future which have never actually owned a restaurant. And looking even further forward, we wonder if this network of kitchen sites could be used for other "last mile" purposes. For example, we saw this week that wine app Drop are looking to establish a series of "dark store" logistics hubs around the UK so why couldn’t these sites be used for storage and delivery of different products.