They haunted delivery apps in the pandemic. But do 'ghost kitchens' still serve new food businesses?

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You've likely come across a few on food delivery apps like Uber Eats or SkipTheDishes.They're the food businesses that pop up sometimes seemingly overnight, offering delivery, takeoutor catering services, but never the option to dine in.

Of course, they're not an entirely new phenomenon so-called "ghost kitchens"gained in popularity during the early days of the COVID-19 pandemic.

But perhaps because hungry diners rarely step inside, small business consultantNina Barango found that for a lot of curious foodies, herself included, they're still shrouded in mystery.

It wasn't until she interviewed a couplewho works in oneon her podcastThe Business Mindset that she began to feed her curiosity on what motivates businesses to opt for this model, with both its ups and its downs.

"Depending on how you look at it, it could be a great opportunity or it could be like a money sucker," said Barango, whowanted to know more about how these startups are faring as the pandemic recedes and more people return to restaurants.

"I kind of wanted to take people [behind the scenes] and give them a raw, real perspective on what happens in the food industry, especially with small businesses," she said.

She visited three food entrepreneurs at a west end Ottawa ghost kitchen,getting an inside look and documenting the experience in a video for CBC Ottawa's Creator Networkcalled Food Futures.

WATCH | How 3entrepreneurs are bringing their food dreams to life in an Ottawa ghost kitchen:

Food dreams realized, without a helping of risk

1 month ago

Duration 5:12

Small biz consultant Nina Barango visits an Ottawa ghost kitchen to find out why these food entrepreneurs still say shared spaces are a good way to launch their business, even as more people return to restaurants and dine-in. This piece, called 'Food Futures' was put together by CBC Ottawa's Creator Network.

No half-baked concept

According to the couple behind Mills Kitchen, their business was born from a pandemic craving for Nigerian meat pies.

Because they didn't know anywhere locally to buy the pastry they lovefrom home, Marilyn Azichoba and her husband Kennedy Anyanwuhad to buy the ingredients and make itthemselves from scratch. That led them to experiment with making more Nigerian dishes that they eventually started selling.

When they generated enough dough from online sales, they decided to expand the business. But they said dreams of opening a full-blown restaurant were still out of reach, so they rented out space in Cookhouse Community Kitchens on Boyd Street.

"We settled for a commercial kitchen of an independent space because we wanted to curtail our overhead expenses and save cost as much as we can," Anyanwu explained.

Now, to prepare their meat pies and suya they have access to industrial freezers, convection ovens and storage space, which they share with eight other businesses.

Ottawa Public Health inspects each of the businesses within the shared space to ensure food safety regulations are being followed.

"You essentially just bring your food ingredients and you start cooking," explained Charles Moir, the building's owner, adding that because it takes away many of the big startup costs, the shared space can be a low-risk way for fledgling chefs or home cooks to get a taste of the restaurant business.

"[It's] kind of like the middle ground for a lot of people to be like, 'OK, I have access to all the big machines and all the industrial things that you need to meet demand and scale, but I'm not forking out tens of thousands of dollars every month to cover overhead,'" Barango said.

Delivery apps eat into profit

So far, it's been an ideal model, sayAnyanwu and Azichoba, who moved into the space in February 2023and built a customer base offering takeout through their website, third-party delivery apps and occasional walk-ins.

According to Nara Sok, who's been involved in a number of Ottawa restaurants and currently co-ownsthe sushi restaurant Tomoin the ByWard Market, those in-person customers are where the majority of the profit lies, especially as people are more willing to leave the house to eat now that the lockdowns have been lifted.

Sokstartedhis first ghost kitchen,a delivery-only convenience store called Instasnacks, out of Tomo's basement in 2019.

Since then, he's opened up several other ghost kitchens across the city, some in warehouse spaces, others out of spacesshared with other restaurants.

But Sok says there are challenges with the model, includingthird-party delivery apps thateat into a chunk of the revenue.

"It makes the whole concept very hard to be profitable," he said. He recently moved hisDalhousie Streetpho restaurantParleout of a ghost kitchen and finds walk-ins now account for more than half the revenue of that business.

"The margins are pretty slim for a restaurant or any brand that's trying to do digital only," Sok said.

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Still, he agrees that there's value in starting off in a shared space before making your next move.

"It's good to build your brand to start it off but you're probably not going to get ahead [without your own storefront]," Sok said.

Parkins Iduborsays he was taken aback by the cost of delivery apps when he launched his new food business earlier this year.

After looking into the costs of openingabricks-and-mortar dine-in restaurant in Kanata, the owner of Mamma's Amalaalso decidedto lease a shared space to make andsellhisNigerian flavours, including the amala dumpling he grew up with,out of the same ghost kitchen as Anyanwu and Azichoba.

He says he now relies almost exclusively on delivery apps for his orders.

"We got into third-party delivery because we cannot actually service the whole of Ottawa by ourselves," he explained.

Butbecause of the cost, he hopes to attract more walk-in customers.

In a statement, Uber Eats said the cut they take from food businesses starting at 20% for delivery orders and 10% for pickup goes towardcovering delivery and drivers' earnings, which would be expensive and inefficient for individual businesses to pay for. It also coversmarketing, allowing new businesses to be discovered.

"The Uber Eats platform gives small businesses flexible options and transparent pricing to help grow their storefronts," said spokesperson Keerthana Rang. CBC Ottawa also reached out to SkipTheDishes, who did not respond.

For Starr Vanlier, whose business model doesn't rely on delivery apps,the shared space has more pros than cons.

The founder of Sugar Tarts Bakery is known for her butter tarts and other sweets, baked twice a week in the Boyd Street commercial kitchens and soldat farmers'markets and through catering.

Vanlier, who also works as a hairstylist, says when COVID shut down salons, her baking side hustle became a lifeline. For her, there's a realupside inbeing part ofthe communal space of the shared kitchen.

"I get to meet different people, I get to taste different foods. It's just a lovely place for me to come in," she said.

The takeaway

Despite the challenges of launching a new food business froma ghost kitchen, Moirbelievesthe model has a future, even aspandemic eating habits fade.

He says the minimal startup risk explains why demand for his commercial kitchen space remains high,and he argues that businesses who establish a brand, consistently produce quality food and maintain the cleanliness of cooking facilities can find success, storefront or not.

"That's about all you can do to have a chance," he said,though he adds he does see turnover.

"It's a tough industry," he admitted.

For Barango, the takeaway is that there's stillhope for new food businesses looking to use ghost kitchens either as home base or as a stepping stone to launch their food dreams.