How Should the Industry Respond to Ghost Kitchens?

Several restaurants in Las Vegas have found themselves victims of identity theft on a popular food delivery app. Owners discovered their establishments listed on Uber Eats, a service they don’t use, with someone else fulfilling orders under their names.

This isn’t the typical type of theft that’s common in the food industry, rather, it deals with a practice of deception through the use of ghost kitchens, which rose to popularity during the global pandemic and have been evolving into “shared kitchens.”

The owner of Manizza’s Pizza noticed the issue when a customer inquired about an order placed via Uber Eats. She found 15 restaurants falsely listed on the platform, all linked to a single address. Similar complaints came from other local eateries, including Brooklyn’s Best Pizza & Pasta and Gaetano’s Ristorante.

Joseph Gonzales of Brooklyn’s Best Pizza & Pasta reported changes in food quality due to these false listings. Nick Palmeri of Gaetano’s Ristorante voiced concerns about potential liability if customers fall ill from the imposter’s food.

Chef James Trees of Esther’s Kitchen, a James Beard Award nominee, found that someone had slightly altered his restaurant’s name to deceive customers. They added “Italian pasta kitchen” to Esther’s name on the app.

Consumers expressed dissatisfaction with the hidden nature of ghost kitchens, and many food delivery apps have closed numerous virtual kitchens. Uber Eats responded to the situation, stating they regularly review restaurants for authenticity. Upon finding impostors, they issue cease and desist letters and remove the offending listings.

To avoid falling victim to these scams, restaurants advise customers to order directly from them or visit in person. This incident serves as a reminder to remain vigilant when ordering food online and to verify restaurant details before placing an order.

The Future of Ghost Kitchens?

The rise of ghost kitchens, digital-only food preparation spaces, has stirred controversy due to concerns over consumer safety and ethical business practices. Virtual Dining Concepts (VDC), a tech startup, pioneered this model, allowing for the creation of branded food businesses with minimal overhead. Initially conceived as a response to COVID-19 lockdowns to help struggling food establishments generate income, ghost kitchens have now evolved. Major restaurant chains and mobile kitchen trailers are adopting this model, sometimes operating under pseudonyms on delivery apps to increase business.

This practice raises quality and safety concerns, with reports of inconsistent food quality, health hazards for workers, and difficulties in regulation and inspection by health authorities. Additionally, it poses unfair competition against locally owned food establishments, as ghost kitchens can dominate search results on food delivery apps, overshadowing legitimate businesses. As the ghost kitchen trend continues to grow, fueled by collaborations with celebrities and influencers, the debate intensifies regarding its potential negative impact on the food industry and public health.

Despite predictions of a $1 trillion market size by 2030 and substantial investment from big brands like Wendy’s and TGI Fridays, the industry hasn’t met expectations. Evert Gruyaert from Deloitte noted that the impact of ghost kitchens was overestimated, leading to their decline. A shift back to traditional restaurants led to investor withdrawals and closures of many ghost kitchens.

To survive, the remaining ghost kitchens are exploring new models. Some are diversifying into catering and events, not just delivery. Nimbus Kitchen, a New York City-based co-cooking space, is one such example, aiming to change the negative perception associated with ghost kitchens. Co-founder Camilla Opperman believes that shared kitchens are the future, catering to a variety of food businesses that require kitchen space to legally sell to consumers.

Finally, Sam Nazarian, founder/CEO of SBE and C3, recently acquired Kitchen United, expanding his virtual restaurant empire, Everybody Eats, which already includes Nextbite. This move further consolidates the ghost kitchen industry, leaving Virtual Dining Concepts as its main competitor.

Despite being associated with the ghost kitchen trend, Nazarian clarifies that Everybody Eats is not merely a delivery-focused business but a platform connecting audiences through diverse platforms like food halls, digital brand partnerships, and nontraditional locations like airports and stadiums. The company aims to differentiate itself by collaborating with strong partners.

Nazarian highlights the unique strengths of each acquisition: C3’s culinary focus, Nextbite’s digital technology, and Kitchen United’s expansion through grocery channels. Meanwhile, Virtual Dining Concepts emphasizes its omnichannel strategy, aiming to be flexible and relevant across various platforms.