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November 4, 2019

Ghost Kitchens. Are They Friend Or Foe?

Tony Treadway

If you aren’t aware of the issue, go back to sleep. The advent of delivery beyond pizza is the rage. 

Much like the days that banks promoted online banking and lost the loyalty of their customers ghost kitchens could do the same for restaurant chains. Big data held by third-party delivery companies can be damaging to your health.

Case in point is DoorDash who announced the opening of their first “kitchen”. The San Francisco Bay Area kitchen offers customized kitchen space for five restaurant operations that offer delivery and pickup services though their DoorDash app. Filled by The Halal Guys, Nation’s Giant Hamburgers, Rooster & Rice and a local ice cream concept, Humphry Slocombe, the kitchen is staffed by employees of each brand using the space within the kitchen. DoorDash handles janitorial services in the shared space, delivery and a store front for pick up.

This concept is a twist to other ghost kitchens in major markets and operated by localized delivery services. Their model is to create up five or six bogus online restaurant brands, market them as if they really where a restaurant and marketing them to different demographics. A value-priced pizza might be marketed as offering $6 pizzas delivered and a $20 gourmet pizza delivered to a higher income demographic. It’s basically the same pizza – using the same ingredients and baked in the same oven and by the same level of care. The pizzas are delivered by the same delivery guy or girl, just in a different branded box!

Big data held by national third-party delivery services is like Google knowing your search history…how much is the customer willing to pay?

The second model is an outrage to any operator whose blood, sweat and tears are in their brand around the block from the “ghost kitchen”. The Doordash Kitchen model has some merit, especially to an emerging chain seeking brand penetration in a new market and lower cost of entry. The fallacy in believing either model is big data.

While you know the address of your delivery customers, third-party delivery companies know everyone’s address, including your competitors.

Fuad Hannon, DoorDash’s head of new business verticals says it best. “This isn’t high-level data. Here’s what restaurant demand looks like in this area,’” says Hannon. “Here’s what a burger concept has done in this area’—it’s that specific.” His four partners in the DoorDash Kitchen were chosen because data indicated that users of DoorDash’s app were looking for products like the group’s respective specialties.” That’s great for this test kitchen and let’s believe that it is a great new model for young, emerging brands that can’t afford the rent of a brick and mortar store front. Others could view the DoorDash Kitchen model as something more sinister. 

In fact, an article by Peter Romeo of Restaurant Business noted that a number of other initiatives are in the works by DoorDash. While Hannon declined to be specific, he admitted that DoorDash intends to make the “kitchen” concept a “signature point of difference”.

Big data held by national third-party delivery services is like Google knowing your search history…how much is the customer willing to pay?  For Amazon your search histories and collective geo, demo and purchase history-based data – multiplied by the millions, tells them that if you like running shoes that you might light running socks, shorts, a treadmills and a  vegan pizza in February if you live in Michigan.

Here is the takeaway for something that can keep you up at night as a restaurant chain or independent operator whose grandad opened his pizza joint in 1932. Own your own data. Even if you are Starbucks, McDonalds, Subway or Uncle Buddy’s BBQ never stop building your own brand as quick as you can. Who wants their destiny in the hands of someone who owns YOUR big data without you involved?

Need some help in building your brand? We are not DoorDash but we are pretty smart and know how to build even stronger brands that can take on big data.