Can South African restaurants be saved by “ghost kitchens”?

“Business basically dropped 75% overnight,” he says.

Restaurants around the world have faced an unappetizing reality in response to the Covid-19 pandemic, as closures and indoor dining restrictions crippled the industry. In South Africa alone, more than half of restaurants have closed permanently since the start of the pandemic, said Wendy Williams, CEO of South Africa’s Restaurant Association.

With indoor dining restrictions, delivery quickly became the only way most restaurants could stay afloat. For Proctor-Irwin, surviving meant going beyond traditional delivery routes and turning to a trend that actually began long before the pandemic: ghost kitchens.

Also known as “dark” or “virtual” kitchens, ghost kitchens are commercial facilities that process online orders from delivery applications. Customers cannot order in person or dine at these establishments.

In an industry known for its low margins, reducing costs such as rent and personnel by operating ghost kitchens can lead to increased profits. Ghost kitchens are expected to grow into a trillion dollar global industry by 2030, according to Euromonitor International.

The rise of South Africa

When it comes to ghost kitchens, two movements are emerging in South Africa. The first involves smaller restaurants with existing dining halls banding together to start their own online businesses. Proctor-Irwin opened a separate delivery-only brand called The Hunger Stop in its existing kitchen and partnered with other restaurateurs to share the costs.
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The other is creating ghost kitchens from the start, with Cape Town-based Smart Kitchen Co. being the industry’s biggest achievement in South Africa.

Founded in 2015 by entrepreneur Jasper Meyer, Smart Kitchen Co. has since grown to include six ghost kitchens featuring 32 digital-only food brands in Cape Town.

This growth has aroused the interest of international investors. According to Meyer, US venture capitalist Tim Draper has invested $ 400,000 to help test and refine the company’s offerings. Last year, he agreed to fund an additional $ 1.4 million for the business to grow nationwide.

Even before the pandemic, the restaurant industry was already experiencing strong growth in online sales and deliveries. Insight Survey research director Yashvir Maharaj said data from Euromonitor International shows the value of online orders in South Africa more than doubled between 2019 and 2020, from 4% in 2019 to 10%. Last year.

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Ghost kitchens have helped establishments recoup some of the losses due to lack of in-person meals. They also provided small restaurant owners with the ability to operate without depending on delivery apps like UberEats — which charges restaurants up to 30% commission fees.

“In order to guarantee our profitability, we have decided to also implement our own deliveries (with) our own ground fleet,” explains Proctor-Irwin.

In an email to CNN, a representative from UberEats said it recognizes the commission fee issues faced by ghost kitchens and is looking for ways to ease the burden.

The recipe for success

While the practice is not without controversy in the United States, with some restaurant chains selling the same food under different names, international fast food chains like Chipotle and McDonald’s have also launched ghost kitchens in recent years. McDonald’s opened its first kitchen in London in 2019.
All orders for ghost kitchens are placed online or via a mobile application;  there is no physical location to order or dine.

For those in South Africa who have incorporated ghost kitchens into their business model, the movement is going beyond surviving the current Covid-19 crisis to creating lasting success for the future.

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Even as diners slowly return to Proctor-Irwin’s restaurant, he says his ghost kitchen is here to stay.

“I think every restaurant should now be looking for ways to collaborate with other brands and find ways to lower your overhead,” he says, “because I think that’s the key to running a lean business. and average, and that’s what we’ve been able to do. ”

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