The 10 Best Cities to Open a Restaurant in 2020

The restaurant business is highly competitive and often unforgiving to newcomers. There are many factors that will contribute to a restaurant’s success (or failure) including food quality, service quality, marketing, and competition. Restaurant success and new business success overall is almost impossible to predict.

However, there are several cities in the US where restaurant start-ups are more likely to succeed simply due to the environmental factors in that location.

Restaurant Environmental Success Factors

There are several environmental factors that may impact the success (or failure) of a restaurant that is entirely based on the location of that business. It is difficult to say which of these factors is most important, as all should be considered before deciding. No one location is going to be perfect in every category, so it is up to you to determine which factors are most important for your business. It is also crucial to be aware of which factors may be competing against your success in any given location.

Factors that contribute to how ideal a location for a new restaurant may be include:

  • Number of restaurants already located in the city
    • Obviously, the amount of competition in a given area will affect the success of your restaurant. Another factor that is more difficult to compare numerically but should be considered before a final location is chosen is how many direct competitors are in the area. For example, if you want to open a new Thai restaurant, how many other Thai restaurants are already in the city?
  • Annual restaurant sales per capita
    • This is one of the leading indicators of a city’s health for new restaurants, but it can be a bit trickier to calculate. While it is often readily available for some of the larger restaurant-dense cities, it may not be for a city you are considering.
  • The ratio of restaurants to households with an annual income of at least $100,000
    • An annual income of at least $100,000 for a household tends to indicate a good amount of disposable income that can be used for luxuries like going out to eat. This means you want to look for locations where the median income per individual is close to $50,000 or more.
  • Number of individuals aged 35 to 54
    • Unless your restaurant idea appeals to a different demographic (i.e. is a children’s party restaurant), then this is your target market. Obviously having a population that is made up of more of these individuals will be positive for your restaurant.
  • Number of restaurants workers per capita
    • Another factor that contributes to a restaurant’s success is the availability of labor in the area. Cities, where there are few restaurant workers, may make it harder for you to staff your business, and labor will likely cost you more. Additionally, restaurants that open in markets without much available labor tend to see a decline in service quality. This can lead to a major problem for restaurants because it can reduce the number of returning customers, which is critical to a restaurant’s success.
  • Rate of population growth (or decline)
    • High-growth cities need more of everything, including restaurants. Population growth is one of the leading indicators of success for new ventures, including restaurants.
  • Rate of job growth
    • Except for the number of restaurant workers available in an area, it can be difficult to see how the rate of job growth will impact your business. However, you want to make sure you are opening your business in a financially healthy community. The rate of job growth is one indicator of community financial health.
  • The overall cost of living
    • Similar to the rate of job growth, the overall cost of living is an indicator of how healthy your target community is. It can also be an indicator of how expensive rent or utilities might be in your location.
  • The five-year survival rate of new ventures
    • While the success or failure of other businesses in an area does not automatically mean your business will have the same fate, it can be an indicator of how many resources are available to new business owners in an area.

The 10 Best Cities for Opening a Restaurant

#1 – Cedar Park, Texas

Cedar Park is one of the major suburbs of Austin. The Austin area of Texas is one of the fastest-growing metropolitan areas in the country. In fact, Austin is the fourth largest city by population and the nation’s second-largest restaurant market.

Despite Austin being saturated, Cedar Park can afford additional businesses. Over the past three years, Cedar Park has consistently seen a population increase of more than 20%. Because of the population growth in the area, demand for new dining options remains strong.

Additionally, the median income for Cedar Park is just shy of $80,000, indicating a healthy number of households with annual incomes of at least $100,000 annually.

Texas generally has always ranked high for business “friendliness” due to low costs, large labor supply, significant job growth, the economic climate, and the educational quality. These factors combined with the population growth indicate that Cedar Park is a strong location for new restaurant ventures and should be a contender for any restauranteur.

#2 – Minneapolis, Minnesota

Minneapolis has a strong economy and a highly educated workforce. While not the highest median income on this list at just under $61,000 annually, this median does indicate a good amount of expendable income within the community. The median annual income, median annual housing costs, and unemployment rates in Minneapolis all point to a strong financial community, which is ideal when opening a new restaurant.

The annual growth rate for Minneapolis is on the low side, at just around .04% annually. However, because of the already-strong economy, this likely would not have a major impact on a new restaurant in the community.

#3 – Louisville, Kentucky

Louisville also has considerably better utility rates than other Midwestern states and is 26 percent lower than the national average. Even if your restaurant will not pay your own utility bills, these savings should translate directly into your rental costs. This also contributes to the lower cost of living in Louisville, which means residents have more expendable income despite the lower median of approximately $45,000.

Louisville’s annual growth is around 4%, which is fairly strong for an already-established city. Louisville also has growing music and food scenes, which create a significant amount of tourism revenue.

#4 – Riverside, California

Riverside is one of the fastest-growing counties in the country, and certainly the fastest in California. So if your heart is set on opening your doors to the California sunshine, Riverside is likely your best bet.

The largest demographic in Riverside is in the 25 to 44 age bracket, which makes up more than 27% of the entire population. This is a strong indicator that there are plenty of individuals within the targeted 35 to 44 demographic.

The cost of living in California is one of the highest in the country, but the median household income is a bit above the average in the US at $56,000. This indicates that residents do have a decent amount of disposable income for dining out.

#5 – Kansas City, Missouri

In Kansas City, there are about 20 restaurants and bars per 10,000 residents. To compare, San Francisco has nearly 40 restaurants and bars per person and New York City comes in at 25 per person.

Another interesting fact for restauranteurs considering Kansas City is that restaurants in the area tend to divide evenly between full service and fast food. So there is an equal opportunity no matter which type of restaurant you are more interested in opening.

Kansas City has a median household income of approximately $64,000, which puts it shy of the $100,000 marker. However, the cost of living in Kansas City is significantly lower than other locations in the United States, so the lower median income is not as big of a detractor as it could be in another location.

#6 – Boston, Massachusetts

The restaurant sales per capita are $3,404 in Boston, Massachusetts. The restaurant workforce is more than 5,100 and the median individual income is a little more than $107,000 per year. These are all positive indicators for a restauranteur who is considering Boston, especially the individual median income.

However, it is also important to note that Boston, MA is one of the more restaurant-dense cities on this list. Boston has close to 25 restaurants per capita, which means there is a significant amount of competition in the area.

#7 – Arlington, Virginia

Arlington may not be the hottest location on anyone’s list. However, with approximately 380 restaurants per capita and 7,700 workers, Arlington’s success location success factors are among the best.

The median income is slightly more than $108,000, meaning more than half of the households in Arlington make more than $100,000 annually. This indicates a significant amount of disposable income – which is a huge indicator of a restaurant’s success.

#8 – Ann Arbor, Michigan

Restaurant sales per capita in Ann Arbor were $2,877. The restaurant workforce is approximately 5,800 and the medium income per individual falls just shy of $58,000. While these numbers fall a bit short when compared to other cities on this list, Ann Arbor does rank well in other factors.

Ann Arbor’s population is growing by 8.2% annually. While not as significant as the growth in Cedar Park, Texas, it is still one of the fastest-growing communities in the United States. This growth is a huge success indicator for new restaurants in any given location.

#9 – Fishers, Indiana

Nearly 35% of the residents of Fishers are 35 to 54 years old, which is the prime target market for restaurants. Fishers is an affordable community, has strong schools, and residents have easy access to nearby Indianapolis. These factors have helped the city draw in young professionals, families, and businesses that cater to them specifically. Restaurants in Fishers earned more than $100 million in annual sales for 2018.

Fishers are only seeing about a 2% growth per year, likely due to the slightly higher median age of its residents. However, median household income is growing steadily, so although grow isn’t as high, the potential for increased sales remains strong in this community.

#10 – Milwaukee, Wisconsin

Milwaukee is one of the highest-ranked cities for starting a new restaurant by multiple sources. There is a strong private-sector financial community, and there is an established network of venture capitalists, angel investors, and economic development agencies. Wisconsin itself offers many tax incentives for businesses, and many agencies to help assist small businesses with their ventures at the state and city level.

However, Milwaukee’s population growth rate is on the lower end at a mere 1.3%. The median income for Milwaukee is only about $35,500 per year. So while the government assistance for small businesses makes it a great community, the population demographics may make it difficult to be successful.

Conclusion

It may be surprising that the cities that are traditionally known for having the best restaurants in the United States (and in some cases, the world) are absent from this list. Many of those markets are already filled to capacity. Additionally, a majority of restaurants operate in small cities and thrive there.

Depending on the concept you envision opening, your restaurant’s location will play a role. But the most important factor is the food you serve. If you can afford a good location and serve great food, that is ideal – but it is not critical to success.

Besides the food, marketing is probably one of the second-highest factors for a restaurant’s success, even before the location. No matter where you decide to locate your new restaurant, you might consider hiring a restaurant consultant to help you with your marketing efforts. Restaurant consultants can help business owners from logos all the way to menu creation and interior design.

Restaurant Marketing Ideas for 2020

The restaurant industry has historically been among one of the most competitive industries. In today’s digital marketing landscape, this has never been truer.

When advertising your restaurant online, you’re not just competing against other restaurants to get your ads in front of your potential customers. You’re competing against millions of brands that are targeting the exact same individual.

This article showcases 7 ways you can get in front of potential customers and keep your existing customers loyal in 2020.

1. Messenger Marketing

With modern technology, wearable devices, and a phone in every pocket, it should be a no-brainer that restaurant marketing tactics should evolve as well. The days of generic direct mail campaigns to the masses are gone. These types of marketing campaigns were very difficult to track, and would often result in wasted money.

Messenger marketing for restaurants is a great new way to engage with your audience, track their behavior and purchases, and bring in predictable revenue on a monthly basis. Using applications like ManyChat or MobileMonkey you can set up these campaigns for your own restaurant. They can be fairly complicated, however, so it may be worth working with a restaurant marketing consultant to get help.

Even a simple Messenger Marketing campaign generated over $16,000 in revenue for a restaurant over the course of 4 months.

2. Free Wi-Fi

If you aren’t offering Wi-Fi in your restaurant – or you are just freely giving it away – you are making a huge mistake.

Don’t charge your customers money for the Wi-Fi. Instead, they require them to sign up with their phone number and email address.

This is a fairly inexpensive way to boost your customer remarketing list – plus offering Wi-Fi is another perk for your customers. On your form, you can notify them that they’ll be opting into email communications automatically, but they are free to unsubscribe any time. Then you can send emails about sales, new menu items, and friendly reminders about how awesome your restaurant is.

You can also ask them if they would like to receive text messages from your brand.

3. Text Message Marketing

Text message marketing has been on the rise for a few years now, but brands are still trying to figure out how to use it to their advantage. The key with text message marketing is to hit your customers frequently enough that they keep you top of mind, but not so often that you become a nuisance.

There are also a lot of privacy laws that apply to this type of marketing, so it is critical that you get your customers’ permission (and a second opt-in) before you start utilizing this channel.

Once you have a customer list, you can advertise your sales or promotional menu items. There are a lot of third-party text messaging providers to choose from. Several of them are budget-friendly. Some of them may even integrate with your POS system. It is critical to shop around for the best bang for your buck with any technology platform – but that is especially true for text message marketing.

4. Push Notifications

If your restaurant has an app, you are likely already utilizing push notifications. However, if it doesn’t, or you aren’t, here are a few examples for when to use them:

  • When a customer is near your restaurant
  • When you have a sale or coupon code
  • When you release a new or promotional menu item
  • When they have not visited your restaurant in a specific amount of time

If you do not have an app and are not interested in creating one, you can set these up as browser notifications. Browser notifications are slightly less effective because they are designed for the desktop instead of mobile. However, if you’re mostly serving a lunch crowd – it could be worth sending a lunch reminder push notification out to your potential customers.

5. Delivery

Delivery is king in the restaurant industry at this time, and there are no indications that that is going to change in the next couple of years. Some restaurants are attempting to fight the inevitable, and it isn’t going well for them. Still, others are doing the bare minimum by simply pairing with a 3rd-party food delivery service but that may not be a great strategy either.

Delivery is king in the restaurant industry at this time

Yes, you should consider partnering with a food delivery service, but you must also make sure your food (or at least the food you allowed to be ordered through the service) is still delicious when it arrives. Too many restaurants are offering their entire menu without any modifications, and it is preventing their growth.

If the budget allows, it is also worth offering promotions or even purchasing ads through these delivery services so that your restaurant is sure to be seen. Many of the delivery services will remind customers of restaurants they have ordered from or browsed in the past so that extra marketing boost can help offset the cost of the service.

Several restaurants also offer promotions for new customers, such as free delivery. You’ll want to explore your promotional opportunities with each third-party vendor before settling on one specifically.

6. In-Store Kiosks

Several fast-food chains have started incorporating in-store kiosks already, and this is another trend we expect to see growth over time. Customers enjoy being able to customize their orders without having to talk to a person. They also help increase accessibility at your restaurant.

Additionally, in-store kiosks give you the opportunity to collect additional data that restaurant owners have not had access to before. For example, you can collect data about the most-viewed menu items, even if they aren’t ordered the most. That type of insight encourages you to change an ingredient in that menu item to make it more appealing.

Many in-store kiosks also partner with the POS for aggregate data about specific customers. This means you can personalize your marketing efforts in a new way. Imagine being able to send an email or text to a specific customer, advertising a discount on an item you already know they love.

Although the initial cost is high, there is also a decrease in labor costs associated with a kiosk. It is certainly something worth looking into this year.

7. Community Events

People are also placing higher importance on brands who do “good” and restaurants do not fall out of this category. While it’s great if you can source all local ingredients and recycle practically everything, that may not be realistic.

Another route to consider is utilizing brand activation ideas such as getting involved in local community events and sponsoring charity events. These can seem like losses, but they can do a lot to boost your reputation in your local community.

If you aren’t sure where to start, contact your local school systems and see if they are interested in doing a “Dine and Donate” event. Basically they pick a day and anyone who brings in a flyer for the event on that day (or mentions the promotion if you don’t really want to collect dozens of flyers) your restaurant would donate a percentage of the check to the organization.

While you certainly shouldn’t do this too often so that it isn’t sustainable, it can be a great way to get in front of new customers while building goodwill and a solid reputation in the community.

Things to Keep Doing

We’ve also put together a shortlist of items that you should already be doing by now. If you aren’t, make these marketing efforts urgent priorities. While you may not be able to incorporate all of them right away, you’ll certainly want to tackle a majority of them by the end of 2020.

Advertise Your Restaurant on Social Media

Yes, there are a lot of brands advertising on social media already. However, most social media advertising platforms do offer pretty specific targeting options, which means you have a good shot of getting in front of your customers.

Because competition is so high, social media advertising should not be your only marketing strategy. However, it definitely needs to be part of your restaurant marketing mix.

Facebook is the largest social media marketing platform – and for good reason. Facebook also has the most users. One of the best parts of Facebook advertising is the audience targeting options. You can choose customers based on their locations, and/or their demographics. If you have an idea of who your target market is, this can be invaluable.

You also have the option to target an audience based on their interests. That means if you’re a vegan restaurant, you can target users who have expressed interest in veganism. If you are a burger and fries place, you can target users who love a good sandwich.

Another great component of Facebook advertising specifically is that you also have the ability to create specialized ads when a potential customer is near your restaurant. This can mean if they are a few blocks away to within a certain zip code. This type of targeting is great because it can also help you get in front of potential customers who may just be visiting the area instead of only those who live nearby.

Local SEO for Your Restaurant

Make sure your website is optimized for local SEO. This means optimizing your website so that you always rank in localized searches. This means making sure you’ve completed your Google My Business profile, and embedding a map on your site. You’ll also want to include your city name and state in titles, headers, and meta-descriptions within your site. While this sounds like a complex strategy, once you understand the concept of local SEO, it can be fairly straightforward to implement.

Manage Feedback

Online reviews greatly influence decisions when it comes to choosing a new restaurant to go to. While you can’t/shouldn’t delete negative reviews, you can respond to the guest’s comments and try to make bad experiences better.

You should also respond to positive reviews. This will create a relationship between your brand and the customer, which may encourage them to share their experience with your restaurant with their friends and family. You can also consider services such as Ovation to help you easily capture and manage feedback from your customers.

Restaurant Loyalty Programs

If you don’t already have a loyalty program in place, get one. There are several options out there. You might look to see if your POS system has one already. If your POS system does not, there are several third-party vendors you can try. Most of them are pretty affordable – and it is easy to calculate your return on your investment once you start tracking your loyal customers.

Some examples of third-party loyalty programs include Preferred Patron, ReUp, and Upserve.

Discount Apps

There are several restaurant discount apps out there such as ChowNow or Restaurant.com. You might even consider running a promotion on Groupon. This is an excellent way to draw in new customers as well as to remind past customers to come in again.

Print Advertising & Coupons

For almost all industries, print and coupons seem to be dying off. The two industries where that doesn’t seem to be the case are restaurants and grocery stores. If you are already sending coupons out to local residents, continue doing so. In fact, there are now several services available where you can send specialized coupons or letters to those who have just moved into your city or within certain zip codes.

If you haven’t implemented this strategy already, consider it. There is likely a coupon circulation in your area designed for local restaurants to advertise in.

In Closing

If you are interested in any of these marketing tactics but aren’t exactly sure how to set them up or which ones to prioritize, consider hiring a restaurant marketing agency or restaurant consultant. Restaurant consultants have likely worked with several restaurants in your area. They are already familiar with how to best get in touch with your target market.

A restaurant consultant can help you create an overall marketing plan for your business. Some restauranteurs consider hiring a general marketing firm to handle the promotion of their restaurant. However, they quickly discover that marketing or PR firms can be too expensive for one single restaurant. Your consultant will either handle your marketing directly or come up with a promotion and brand strategy utilizing outsourced agencies that the consultant is familiar with and trusts.

This marketing strategy can include everything from the overall restaurant concept to web design and the social media strategy. You will discuss your current marketing efforts and any that you wish to include in the upcoming year, and your restaurant consultant will balance your budget along with the typical efficacy of each tactic before helping you decide on a perfect strategy. Hiring a restaurant consultant can be an excellent way to boost your brand quickly, without having to make any marketing mistakes in the process.

Does 3rd Party Delivery Make Sense for Your Restaurant?

An increasing number of companies are thriving through the rising of 3rd party delivery services. Like many other trends in the hospitality industry, the development of this one has been driven by changing customer expectations.

In this case, the demand comes not only from the younger generations (ages between 18 to 34), but surprisingly older generations are showing interest. Being able to respond efficiently to the needs of your customers is vital to increase profitability and customer retention.

Being able to respond efficiently to the needs of your customers is vital to increase profitability and customer retention.

However, investing in this trend can be an intimidating step due to its cost and high competition. The main questions to ask are: Is this trend going to last? Does 3rd party delivery make sense to your restaurant? Should you avoid or master this tool? I hope this article will help you make that decision.

Is This Service Trend Going to Last?

This is always a difficult question to ask, especially in the hospitality industry There are a few pieces of evidence and statistics that can suggest an answer.

The outsourced delivery service trend can potentially be one of the greatest modern disruptors in the restaurant sector.

To understand if it will last, it is important to analyze what kind of customers are driving the changes that the industry has been undertaking.

Millennials’ Expectations Are Different

Millennials are the main demographic responsible for the current changes in the food delivery industry.

A survey has found that 21% of customers are preferring third party delivery services, a number that increases to 30% when considering only ages between 18 to 34. While the rise of casual dining has so far been a blessing for restaurants and chains, millennials are now preferring to savor their favorite dishes from the comfort of their homes.

The Decision Process

A study suggests that potential customers won’t be looking specifically for your restaurants on third party delivery platforms. Moreover, the choice is often driven by the reviews of other consumers rather than the actual offer.

So, it is important to create an effective relationship management strategy, especially as there is no physical interaction with your customers.

What Is the Market Like?

Dining patterns have been developing and changing over the past few years. Today the delivery service industry is worth $90 billion globally.

Depending on the type of product your restaurant is offering, trying to get a share of this market can be vital. For instance, for franchise restaurants, it is a must today to rely on a third-party service for a large portion of their profit.

The Companies

Globally, an increasing number of 3rd party delivery service companies are thriving thanks to this trend. The scene is dominated by famous names like Deliveroo, DoorDash, and GrubHub.

However, private transport companies are also expanding in this area (Uber Eats or Grab Food). This makes it easy to find a delivery services vendor that fits your needs, but don’t forget that they do charge high fees for each delivery!

The Industry’s Reaction to The Trend

While restaurants have been able to serve takeaway food for a long time, there has been a resistance in accepting this new trend.

It is understandably difficult for mature restaurants to let go of the direct and personal interaction with the customer. Moreover, hospitality trends come and go quickly and a little hesitation in investing in this one is expected.

Hospitality trends come and go quickly

The Future of Third-Party Delivery

While the whole food delivery industry has bloomed in only a few years, this is only the beginning of it. Figures are rising constantly. Not investing in this trend could lead to a great loss of income and customers.

While there are other viable options, 3rd party delivery services are the modern answer to increased market share and visibility that doesn’t require a major initial investment to see results.

Should Your Restaurant Use A Third-Party Delivery System?

The decision of investing capital in the services of a third-party delivery system can be extremely rewarding.

However, it is important to have a deep understanding of your business’ identity and customer base to predict whether the expenditure will be beneficial. In case you decide that the investment is right for you, this analysis will help you pick the right platform.

What’s Your Business Identity?

Are you the owner of a small family-run restaurant, specializing in particular dietary requirements or part of a larger chain? The size of your business matters in this case, as you would have to balance the investment with the potential profit deriving from it.

The size of your business matters

Also, statistics suggest that for specific types of businesses, such as late-night food vendors or pizzerias, it is vital to be included in one or more third-party systems.

What Is Your Customer Base?

By including your restaurants in a third-party delivery service platform, you are likely targeting a market share made up by Millennials and younger generations.

They are often tech-savvy and will base the decision to order from a specific place on reviews and scores. So, for instance, if yours is not a casual dining restaurant marketing to Millennials, you might neither see any positive result nor target the customers you wish to attract.

Promoting Your Restaurants

If you have just opened a new restaurant or outlet, while it is a considerable investment, could be beneficial to affiliate yourself with a third-party delivery service to improve your business’ visibility.

These platforms will let you enhance your marketing strategy, create promotions and offers. This is great to create an initial customer base and spread the word about your new business in no time!

Are You Looking to Expand?

Third-party delivery systems can be extremely beneficial if you are looking at expanding your customer base and fill in the gap between demand and supply.

With an in-house delivery system, it is possible to meet the needs and expectations of only a limited number of customers, depending on your resources. Oppositely, third-party platforms can deliver your food to a larger number of consumers and increase your revenue. 

Should Your Restaurant Avoid Using Third-Party Delivery Platforms?

While many franchises and chains are affiliated with third-party delivery vendors, it doesn’t mean that this is the right decision for you!

It is important to consider the risks associated with this investment, to avoid overlooking other essential factors of your business, such as customer loyalty.

The Price

An analysis of the costs associated with third-party delivery systems has found that it can be a significant investment to undertake for a restaurant.

Often the platforms are charging between 15 to 30% commissions for their services, in addition to a delivery fee for the customer. This can limit the budget of daily operations and be a burden for smaller companies.

Limited Control Over Your Customer Service

If you are using an outsourced delivery service, the only personal interaction a customer would have when buying from your restaurant is with the provider’s personnel.

This can limit your control over the customer service you are wishing to offer and affect your customer loyalty. Outsourced delivery systems are convenient for the customers but, providing a fast-paced service, often don’t meet consumers’ expectations.

Difficulty in Retaining Customers

If you are looking at retaining your clients and improving your restaurant’s customer loyalty, an external delivery service might not be the best option for your business.

Oppositely, with in-house promotions, offers, and contests it is easy to gather customer data, through which hospitality businesses are able to create personalized services. Moreover, often the data that could help you retain your best customers is passed over to the third party, which will use it in their favor.

Often the data that could help you retain your best customers is passed over to the third party, which will use it in their favor.

In-House Delivery Systems

This is a great option if you are hesitant about buying a third-party delivery service. While this could mean an initial large investment, your business would be able to maintain direct interaction with current and potential customers.

Moreover, the guests that have already been visiting your restaurants will see in your delivery staff a point of reference for constructive feedback.

Few Things to Consider 

The initial investment would be greater than the one required for an outsourced delivery service, but your business will have lower ongoing commission fees to cover.

The initial costs will have to cover the cost of vehicles, insurance, packaging, dedicated personnel, and food storage and transportation facilities. However, through budgeting an analysis, this has been proven to be more rewarding!

Bottom Line

The delivery service industry is continuously growing and offering unmissable opportunities for anybody in the hospitality sector. However, it is important to understand if using a 3rd party service makes sense to your restaurant.

While this is can be a major investment, it could lead to increased visibility and profitability, as well as being able to offer your product to a larger customer base. But, if you are looking at retaining your returning clients and better your customer service, an in-house personalized delivery system could be a better solution.

Was this article helpful? We’d love to know. Let us know by emailing info@longitudebranding.com


What is a Ghost Kitchen?

A ghost kitchen, also known as a ghost restaurant, a virtual restaurant, or a cloud restaurant, is a food business that exists solely to provide delivery. In these restaurants, food is intended for off-premise dining only.

In a typical ghost restaurant model, the food is made in a rented kitchen, while being ordered and delivered through a third-party delivery service.

Ghost kitchens are often found in high-rent areas, like college towns. Instead of drawing in foot traffic, virtual restaurants work well anywhere as long as their delivery service can easily access customers.

Ghost kitchens are a fairly new concept, although some pizza places have already had carry-out and delivery-only options for years, however, they still maintain a brick-and-mortar location, which ghost restaurants do not.

Why are Ghost Kitchens Gaining Popularity?

In most cities, the restaurant business is already incredibly cutthroat, meaning there is very little room for new players. Delivery is also increasing in popularity because customers want convenience.

In fact, in many areas, restaurants that don’t offer delivery are closing down.

Many traditional restaurants, start-ups, chains, and third-party delivery services are looking into ghost kitchens as a way to manage the demand for delivery while increasing market share.

How Do Ghost Kitchens Work?

Ghost restaurants typically operate through a third-party delivery platform.

From the customer’s perspective, he or she finds a restaurant to order from after browsing through a favorite third-party delivery app, such as GrubHub, UberEats, or DoorDash.

The customer places an order and receives the delivered food from the third-party vendor.

From the restaurant’s perspective, the restaurant receives the order and fulfills it in a kitchen that does not offer a storefront. It then hands the order off to the delivery partner.

The Pros of a Ghost Kitchen

There are many pros to the ghost kitchen model. The first is that the ghost kitchen model reduces the need for start-up costs and resources. This allows new players to enter the restaurant scene in a given location without as much of a barrier to entry.

For example, if one is attempting to open a food truck, there is a cost to secure a truck and procure the right kitchen equipment for the truck.

This also opens up more opportunities to experiment. If one model fails, it is fairly inexpensive to switch gears and try something different.

Ghost kitchens also do not require new restaurants to compete over high-traffic locations, since customers do not visit the location itself. This also means that these restaurants aren’t renting dining space that isn’t being utilized.

Another benefit is that the ghost kitchen model does not require an existing customer base. Your restaurant will find hungry customers through a third-party platform.

Ghost kitchens also have fewer overhead costs because the kitchen is rented. There can also be reduced labor costs because the only staff required is the kitchen staff.

Unlike a food truck or a traditional restaurant, there is also less variability based on the weather. A restaurant with a separated parking lot or a food truck may experience a decrease in sales if the weather is poor.

The Cons of a Ghost Kitchen

The biggest problem with a ghost kitchen is that these restaurants often have to pay a high fee to third-party delivery services, sometimes as high as 30%. There can also be additional costs associated with premium placements on the third-party vendor’s site or app.

Another factor against ghost kitchens is that they don’t have that brick-and-mortar or truck for visibility and brand recognition. This is why digital branding even more important for Ghost Kitchens.

It can also be a bit more challenging for these types of restaurants to receive licensing, especially if your business is the first of its kind in the area. Inspectors may not be used to this type of business model and maybe more reluctant to license the business.

Location can be a negative factor for kitchen staff and business owners because rentable kitchens are not always in the most easily-accessed locations.

Lastly, because it is such a new model, it is a major risk.

Getting Started with a Ghost Kitchen

If a ghost kitchen sounds like a venture you’re interested in trying, there are a few key steps you’ll need to take. There’s a lot that needs to be considered when opening a new restaurant, even a ghost kitchen.

Gain access to rentable commercial kitchen space

What many new-to-restaurant-owning entrepreneurs fail to realize is that food that is sold to consumers must be produced in a licensed commercial kitchen. This isn’t the major hurdle it once was as there are now many shared-use kitchens or commercial kitchens you can rent by the hour, day, or month. Think of this as a coworking space for chefs, caterers, food trucks, and other food producers without traditional kitchen spaces.

You’ll need to gain access to a rentable commercial kitchen in your area before you begin. Prepare for a somewhat lengthy process when it comes to starting out, as the kitchen will want to vet you and your business before agreeing to rent to you.

Apply for inspection

Once you’ve locked down your kitchen, you’ll need to apply for your inspection with the health department. Many health departments will need to visit you in the commercial kitchen space before you start selling your food.

When the health inspector comes for the inspection, they will want to see your production methods, food storage areas, and general flows. You will also need to have these written out for your final inspection and to receive your license, so it is best if you can provide that to the health inspector when they visit as well.

The most important thing to communicate with your inspector during your inspection is that you are producing food safely and legally. Walk them through your menu, your production process, how you plan to hold time and temperature, and what third-party service providers you plan to use. This includes any national or local food distributors and suppliers, as well as your delivery service.

Select your third-party service provider

There are many third-party service providers to choose from. Tech-enabled ordering platforms will charge you a fee in exchange for providing one of the most critical aspects of your business – so you need to choose wisely.

When looking at providers, you should find out what your options are and evaluate them based on the average delivery times, reliability, and customer service. Look at their customer reviews and interview your top contenders. This should be a partnership, and it will be an incredibly painful process if you select the wrong vendor.

Sometimes these delivery services charge a painful commission fee – as much as 30% of the order. However, it is still going to be considerably less cost than trying to deliver yourself, and your customers will be able to find you through their platform, instead of you having to find all of your customers through your own marketing efforts.

Plan for delivery

One of the biggest cons for chain restaurants who are starting to offer delivery is that their food is not made for that type of distribution. It doesn’t hold up well to being transported.

As you plan out your menu, make sure your food is temperature-controlled and holds up well to travel. You don’t want your food to arrive cold, soggy, or overly messy. If it does, you’re almost guaranteed to lose customers quickly.

As you think about your menu, keep it simple – especially to start. Consider reusing the same ingredients in different ways to keep costs down.

You’ll also want to train your staff to make sure quality is consistent.

Have a loyalty plan in place

Loyalty is critical for the success of any local operation – especially food service. Check with your third-party delivery provider for the ability to add a loyalty program or coupon codes. Then you can distribute these codes to your customers when their orders are delivered.

Loyalty is critical for the success of any local operation – especially food service.

You can also build up loyalty on your social platforms. Perhaps run a contest for customers who post pictures of your food where they can earn a discount on their next order. Contest or not, be sure to reward customers for formally reviewing your business or even sharing it on social media. Word of mouth and referrals are just as critical to your ghost restaurant’s success as loyal customers are, if not more so.

Identify your niche

Again, this applies to nearly any type of restaurant, not just ghost kitchens. You need to have a niche – whether that means you are appealing to an underrepresented demographic in your area (like working parents or the elderly) or filling a void for a specific type of food (Thai in a city that does not have many Thai restaurants, for example.)

If you’re feeling stuck, have conversations. Chances are, your friends, neighbors, and relatives have ideas for what they “wish they could have” in your area. Once you come up with a concept, test it conversationally as well. One person’s opinion may not mesh with the overall landscape.

Digital branding is king

Since you don’t have a brick and mortar or a truck for customers to immediately identify with, you will need a strong online brand. You might even consider hiring a marketing consultant or firm to help you get started if this isn’t something you are already familiar with.

Since you don’t have a brick and mortar or a truck for customers to immediately identify with, you will need a strong online brand.

One of the most important brand components is a strong name. Make sure it isn’t too similar to another restaurant in your area, and it should also align with your menu and the type of cuisine you offer. If “Buckey’s Burger Palace” only sells tacos, that is probably not a model that will be set up for success.

You’ll also need a solid website. Make sure your site looks professional, and functions well. Include a lot of pictures of your food, and a unique logo that is clear to read.

A strong social media presence is also critical. Facebook, Instagram, and Snapchat are the most common platforms for food companies and restaurants to connect directly with customers. Again, make sure your social media accounts have a lot of high-quality pictures of your food so that these channels showcase what you have to offer.

Make sure your website and your social media channels direct your potential customers to order from your chosen third-party vendor, so your potential customers can easily locate you. Because ghost kitchens are a relatively new concept, this may be a new process for your customers too, so walking them through it can set you up for success.

You should also include your menu on your website and your social media channels. This will entice customers to order from you, even if they are unfamiliar with ghost restaurants or your chosen third-party vendor.

In closing

Ghost restaurants are certainly worth considering if you’ve been interested in getting into the restaurant business but start-up costs and capital have been a barrier for you. However, you should know that as a new concept, these types of businesses are still risky and may not be immediately successful. It may also be too new in your area, and therefore you may not have access to a rentable kitchen space in your area at this time.

Be sure to choose a great name and focus a lot on your restaurant’s branding

However, if you do decide to give it a try, be sure to choose a great name and focus a lot on your restaurant’s branding. It is also critical to choose an excellent third-party ordering and delivery service.

By taking these steps, it is possible to see success through this new restaurant business model. To help ensure your new business venture is successful, it may be worth hiring a restaurant marketing agency. These types of professionals will have a much better idea for how to appeal to your target audience as well as what will be successful and what may not be.

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