Specializing in delivery, low-cost startup. Learning from ghost restaurants: The future of sharing platform businesses

Food delivery services rapidly gained popularity amid the COVID-19 pandemic and the resulting stay-at-home requests. Riding this wave, a new business model called "ghost restaurants" is spreading. A ghost restaurant is an establishment without customer seating, specializing solely in delivery. It's not uncommon for a single store space to be shared by multiple restaurants, such as a fried chicken specialty shop and a curry specialty shop.

From a sharing economy perspective, this business model seems to hold hints applicable to other industries. Therefore, this article explores the theme: "Can the ghost restaurant scheme provide hints for creating new sharing platform businesses?" We will explain the mechanisms, advantages, and disadvantages of ghost restaurants and consider their application to new business ventures.

What are Ghost Restaurants, the game-changers in the food service industry?

Amid the spread of the novel coronavirus, food delivery services gained widespread popularity. Their appeal lies in the ease of ordering via smartphone or computer. However, have you ever wondered why so many unfamiliar restaurants appear when selecting where to order? Visiting the listed address reveals no signboard and no signs of operation. Some may have questioned this business model.

The answer is "ghost restaurants." These establishments operate without dine-in space, preparing meals exclusively for online or phone orders and delivering them. Since they require only a kitchen and no dining area, many operate without a physical storefront.In such cases, methods include: "shared kitchens," where multiple restaurants share a single kitchen; "subleasing," where they use the kitchen of a restaurant outside its operating hours to handle both delivery and dine-in; and "cloud kitchens," where multiple kitchens are installed within a single facility, each used exclusively by a different restaurant. Furthermore, for delivery, it's common to see cases where they utilize delivery platforms instead of hiring their own delivery staff.

These establishments, also called virtual restaurants, are attracting attention not only from new startups but also from major corporations entering the market. In March 2022, a major convenience store chain announced plans to strengthen its ghost restaurant business. Having previously conducted a pilot test at one Tokyo location, it aims to expand to around 100 stores in the Kanto region by the end of February 2023 and to around 1,000 stores, including areas outside Kanto, by fiscal year 2025.Furthermore, major food delivery services are also launching full-scale ghost restaurant operations. They announced plans to launch original brands and expand to 300 locations by the end of 2022. While the entry of major companies into ghost restaurants could present significant business opportunities for partners and suppliers involved in joint product development, it also signals the emergence of new competitors for existing players in the industry.

Now, let's examine the advantages and disadvantages of these ghost restaurants.

Advantages of Ghost Restaurants

• Lower startup costs, labor expenses, and rent
• Easier to adjust store concepts and strategies
• Less dependent on location for customer traffic
• Expand sales channels
• Enables marketing utilizing delivery app data
• Easier to operate multiple brands
• Can exchange information with other stores using the same kitchen (e.g., shared kitchens)

Disadvantages of Ghost Restaurants

• Difficulty in building brand recognition
• Difficult to build customer relationships
• Tendency to rely heavily on web-based customer acquisition
• Target audience is limited to delivery users only

The biggest advantage is likely the ability to keep costs down. Even locations on upper floors of buildings with relatively low rent or areas with poor transportation access aren't necessarily disadvantageous. Since there's no need to spend money on interior design, initial costs and rent burdens are reduced. Additionally, no floor staff are required, so labor costs are also kept low. This makes it easier to change the menu or alter the restaurant's concept based on sales or circumstances.Furthermore, it lowers the barrier to operating multiple brands, such as starting a fried chicken shop in a space previously used for a curry restaurant. This ease of small-scale experimentation appears to be the driving force behind the expansion of ghost restaurants.

Ghost Restaurants Revitalize the Food Service Industry: Driving Sales Growth and Multi-Brand Expansion

What impact are the ever-increasing ghost restaurants having on the food service industry? Let's look at some concrete examples.

In response to their growing popularity, dedicated ghost restaurant buildings have emerged in Tokyo. A cloud kitchen operator opened in Nakameguro in June 2019 and has since steadily expanded its business.In October 2020, it opened a dedicated cloud kitchen building in Shinjuku Kagurazaka, housing 21 stores across four above-ground floors and one basement floor. It now operates seven locations in Tokyo (with one more planned for summer 2022) and one in Osaka. Several other companies also run cloud kitchen businesses in Tokyo.Furthermore, existing restaurants are also launching ghost restaurants. One izakaya opened separate ghost restaurants specializing in fried chicken and curry, resulting in a dramatic increase in sales.

Traditionally, renting kitchen space during a restaurant's off-hours ("subletting") mostly relied on connections with property owners or acquaintances. However, the rise of sharing delivery services has spurred growth in platform businesses that match restaurant operators with available space or facilitate shared use. Companies offering parking lot sharing services, for example, have also started operating subletting matching sites.Often offering favorable conditions like lower startup costs than cloud kitchens and the ability to open for short periods, ghost restaurants are also attracting attention from those considering starting a food business as a side venture.

Thus, ghost restaurants—which can be launched at low cost and offer diverse expansion possibilities—hold the potential to create new business models for the food service industry. Furthermore, ghost restaurants, which share locations and delivery methods, can be seen as entities that stimulate the "sharing economy," currently expanding across various industries. We will explore the potential of the sharing economy in more detail in the next chapter.

The Future of Sharing Platform Business Predicted from Ghost Restaurants

As introduced so far, ghost restaurants have created new value by "sharing" kitchens and delivery methods while also utilizing various platforms. Services that mediate the lending, borrowing, and sharing of things, places, skills, etc., are called the "sharing economy." From here, let's consider the sharing economy not only in the food service industry but across various businesses.

Services within the sharing economy primarily share "space," "transportation," "items," "skills," and "money." Beyond business models like ghost restaurants that share physical stores, various sharing platforms have emerged: meeting room and space rental services sharing space; bike-sharing services sharing transportation; flea market apps sharing items; housekeeping services sharing skills; and crowdfunding services sharing money.Furthermore, the sharing economy is expanding into diverse industries, such as shared salons where freelance stylists share space and matching services providing farmland to those seeking agricultural experiences.

Department stores, where numerous tenants operate side-by-side within a single facility, can also be considered a traditional form of sharing platform. However, historically, establishing a presence in such locations required significant brand power. Amidst this, "Co-Retailing" – where startups and new brands still in their growth phase share storefronts – is becoming established.Many people have likely seen this business model in pop-up stores within train stations or large commercial facilities. This format not only allows low-cost entry into vacant spaces but also enables faster development of better products based on immediate customer feedback and reactions. It can be considered an effective platform for marketing.

Furthermore, the sharing economy contributes to solving larger challenges, including reducing food waste. Food rescue services, which sell food and dishes that stores cannot consume, are prime examples. Users report benefits like acquiring new customers, stating that "it gave me a reason to visit a store I didn't know before" or "after buying food through the rescue service, I visited the store again."In ghost restaurants, when multiple brands operate from a single kitchen, sharing ingredients is also possible, which can ultimately reduce food waste. Moreover, the aspect of enabling efficient business operations by minimizing resource waste could serve as a hint for creating new value across all other fields as well.

In this way, the sharing economy is viewed with high expectations across various industries, not only for revitalizing existing businesses but also for contributing to the expansion of surrounding businesses and solving social issues.

The sharing economy, exemplified by ghost restaurants, continues to evolve by effectively utilizing diverse assets such as space, people, materials, ideas, and delivery methods. Applying this model could offer hints for new businesses and scalable services. It may be worth considering as a widely applicable framework for other industries as well.