What Are Ghost Kitchens: Everything You Need to Know

In case you haven’t heard: ghost kitchens are kind of having a moment.

Also called virtual, cloud, delivery-only, shadow, and dark kitchens, ghost kitchens are a relatively new concept that emerged in the past year or two. But in 2020 — thanks, in large part, to COVID — they’ve become a legitimate and even preferred alternative to starting up a full-fledged restaurant.

Here’s the lowdown on ghost kitchens: what they are, why they’re gaining momentum, and four basic steps to launching your own ghost kitchen.

What’s a ghost kitchen?

Ghost kitchens are essentially restaurants without the dining space. Their focus is to sell and fulfill online food orders for delivery using third-party apps like Grubhub, UberEats, and DoorDash, or with their own delivery operation. As a result, they typically have no visible storefront.

Because the concept is still evolving, there isn’t a hard-and-fast definition of a ghost kitchen.(It’s also worth noting that the industry hasn’t landed on consistent terminology, so phrases that fall under the “ghost kitchen” umbrella — e.g., virtual restaurants — could mean slightly different things, depending on who you ask.) With that being said, there are a few common ways ghost kitchens can be structured.

Using a shared commissary spaces

These ghost kitchen facilities that are not located within a restaurant, so they’re strictly for delivery-only purposes. Several independent brands may use a shared kitchen facility simultaneously, or there may be multiple in-house brands developed and operated by a single management team.

Launching virtual “spin-off” brands

Some dine-in restaurants are launching virtual, delivery-only restaurants, and they’re leveraging their current kitchens to do so. As an example: Chicago-based Frato’s Pizza has always made and served pizza to dine-in customers. But recently, the owner has launched four “spin-off” restaurants from the same kitchen, including a milkshake concept and a grilled-cheese concept. While Frato’s continues business as usual, the four virtual restaurants operate as delivery-only.

Renting out restaurant kitchens

Another trend we’re seeing: some restaurants are renting out their own kitchens to accommodate ghost kitchen brands that need space and equipment, creating an additional revenue stream for establishments that may be experiencing lower volume due to Covid.

Why ghost kitchens are appealing in 2020

Ghost kitchens are gaining traction quickly in 2020 for a myriad of reasons — with Covid leading the pack.

Even in pre-pandemic times, the average American orders out at least once a week, while more than 20% of Generation Z gets delivery more than three times a week. Those numbers are only going up as a result of Covid. Plus, restaurants are operating at reduced capacity, and patrons are more cautious about dining out. Ghost kitchens are a way that restaurants can take advantage of the boom in delivery orders without losing money on unused dining space (and all the costs that come with keeping it up).

Another factor driving the ghost kitchen trend is the rise of the gig economy, in which ghost kitchens can hire freelancers to make deliveries at a fraction of the cost of third-party apps like GrubHub, UberEats, and Postmates.

Rising real estate prices are also contributing to this trend. Why pay tens of thousands of dollars to open up a dine-in experience when you can rent out a much smaller space and hire delivery drivers for much cheaper?

Pros and cons of ghost kitchens

Here are a few of the pros and cons that both restaurant owners and their customers can expect from ghost kitchens.

Pros

Low overhead: As we mentioned above, not only is real estate often cheaper, but ghost restaurants don’t have to invest in the costs of hosting a dine-in experience like furniture, decor, and menu printing costs.
Faster opening times: Ghost kitchens can simply rent out space in existing facilities, so time-to-launch is dramatically decreased.
Convenience: Delivery-only makes it easy for customers to enjoy restaurant-quality food, especially during the pandemic.
Additional revenue streams: Established restaurants have the opportunity to generate additional revenue by renting out extra kitchen space to third-party ghost kitchen brands, or by launching delivery-only spin-offs from their own kitchen.
Flexibility: Ghost kitchens can adapt quickly as market conditions or customer preferences change.

Cons

Additional costs: If you’re an established restaurant adding on a virtual brand, there is an up-front investment involved, should you decide against running your own delivery operation.
Lower-quality customer experience: In the hospitality industry, building customer relationships and loyalty is all about experience. That’s harder to control when you’re running a ghost kitchen.
Brand awareness challenges: Though online visibility can help a restaurant, it also has to compete with the hundreds of other restaurant brands that can be found online. And because they all deliver, this means differentiators (like a prime location) won’t necessarily play into a customer’s decision.

4 basic steps to setting up a ghost kitchen

Interested in setting up your own ghost kitchen? While it’s simpler, in some ways, than setting up a traditional restaurant, it’s also a relatively new concept — which means there’s a lot of uncharted territory. Here are four things to do if you’re considering launching a ghost kitchen.

Do your research: There aren’t a lot of templates for starting up a ghost kitchen, so you may have to get creative when you’re looking for resources. Seek out advice from teams who have been there, done that and learn from their successes (and mistakes).
Define your concept: You don’t have to worry as much about location and ambience, which means your menu is really going to be the star of the show. Who are you competing against? How will you stand out? How will you make your food to-go friendly?
Find your space: When considering where to set up shop, so to speak, location may not matter as much since customers won’t be coming to you. But you do need to think about spaces that are suitable for cooking, whether it’s an existing kitchen space that you rent, a shared space, or your own facility. And if there are going to be multiple vendors using your space, is there ample room for comfortable cooking conditions and the supplies you need to start operation? You’ll also need to think about insurance coverage and safety inspections, among other things.
Create a marketing plan: Once your concept and brand are established, you need to form a marketing plan with a heavy digital focus. Social media, digital ads, and a polished website will all help with this effort.

If you’ve got your heart set on launching a restaurant but are worried about the up-front investment — or if you’re in the business but want to give a new concept a spin: the ghost kitchen model just might be for you.

Kickfin ranked in the top 3% of Inc.’s 5000 fastest-growing companies — and we’re leading the charge for tip management software.

Every year, Inc. identifies 5,000 U.S.-based companies that have seen the highest rate of growth over the past three years based on revenue — and this year, Kickfin was at the top of the top.

A few stats we’re pretty proud of:

🏆 Kickfin ranked 189th overall.
🏆 We’re the fastest-growing restaurant tech company on the list.
🏆 We’re in the 💥 top 3%💥 of all 5000 companies.
🏆 We ranked 24th in the Software category.

Since 2020 — in spite of a pandemic, supply chain disruptions, The Great Resignation, and record-setting inflation — we’ve grown by 2,066%.

Our Keys to Success

We’ll cut right to the chase: We owe our success to our customers. (It’s not cliche if it’s true, right?)

The bottom is that we know the way you pay your staff matters, a lot. Thousands of restaurants are trusting us to handle that for them, and we don’t take that trust lightly.

And of course, we might be biased, but we think we’ve got the best team and partners in the biz. Thanks to everyone who has helped build, support and evangelize Kickfin. This has been a big year for our small but mighty company — and there’s a whole lot more to come.

This kind of growth doesn’t happen overnight. We’ve been putting in the work to make Kickfin even better for the thousands of restaurants we serve. Here are just a few ways we’ve expanded to better serve Kickfin customers.

Integrations

We’re making it easier to access and use Kickfin by integrating with dozens of leading POS systems, including Toast and SkyTab. Using our integration, managers can pull tip data directly from their POS and Kickfin will handle even the most complex tip calculations in a matter of minutes.

Thanks to our POS partnerships, we’re able to bring a further simplified version of Kickfin to new and existing customers so they can kick cash to the curb. As an early adopter of our Toast integration, Bar Louie has already saved around 15,000 hours in labor annually by cutting their tip calculation time from hours to minutes.

>> See more customer success stories

Find out if your POS integrates with Kickin, and reach out to our support team to learn how you can activate the integration.

New Features

Kickfin is no longer just an alternative to cash tip-outs — we’re a holistic solution to your entire tip management system.

In case you missed it, 2024 has been a big year for our product. In addition to our new integrations, we’ve rolled out some exciting new tip management features, including:

Splitting large party tips
Increased security
Reallocating manager tips
Preventing labor cost mistakes

>> Learn more about Kickfin’s newest features

Each of these new updates is inspired by requests from operators, managers and restaurant employees who use our product daily — and that’s something that will never change. As we continue to innovate our best-in-class tip management solution, we’ll always be listening to and learning from our customers so we can ensure every need is met and every expectation is exceeded.

What’s next for Kickfin?

We’re not stopping anytime soon. Expect to see more POS integrations, more user-friendly features, and more guidance from our amazing customer support team.

Not a Kickfin user yet? Now’s the time to rise with us! Get a demo of our restaurant-revolutionizing product today.

We’ll see you next year on the Inc. 5000!

Product and Company News

Kickfin Announces New Integration with SkyTab

Exciting news: Kickfin has a new integration with SkyTab!

When SkyTab users activate the Kickfin integration in the Shift4 Marketplace, they’ll have the power to build custom tip pooling or sharing policies, calculate tip amounts, and send tip payouts directly to their employees’ bank of choice! Forget about hours of calculations and counting cash: your entire tip out process can be run in a matter of minutes.

“As an all-in-one restaurant platform, SkyTab has helped tens of thousands of restaurants modernize and optimize their operations,” said Jay Shavitz, Shift4’s SVP of SkyTab Product. “Kickfin is a valuable addition to our marketplace, helping SkyTab customers realize significant time and cost savings by simplifying and improving the tip payout process.”

What does this mean for SkyTab customers?

If your restaurant is going to take advantage of the new Kickfin integration, here’s what to expect:

For employees: You’ll be able to leave your shift as soon as you finish your side work — no need to wait around for your manager to count out your tips in cash. All of your tips will instantly hit your bank account, saving you the trip to the ATM and empowering your financial decision-making.
Managers: Put away the calculators and spreadsheets. Using Kickfin through your POS will automate all of your complex calculations, allowing you to send tips with just the click of a button. Your late nights in the back office are over!

If you’re already a Kickfin customer, don’t hesitate to contact our support team for help setting up the integration.

When will Kickfin integrate with my POS?

We’re ready when you are! Check out our list of current integrations to see if yours is on there. If not, reach out to us! We’ll let you know if your integration is on our roadmap.

And hey, even if your POS doesn’t support a Kickfin integration (yet), we have simple solutions to your tip management headaches that don’t require an integration. We’d love to tell you more — so drop us a line today.

For more details about the SkyTab integration, check out the full press release here!

Product and Company News, Technology and Software

Kickfin x MasterCard: How Real-Time Payments Drive Better Experiences for Businesses and Employees

We know how important same-day payments are for veterans of the service industry who are accustomed to quick cash — and we’re now seeing that same demand expand into other industries as well.

Kickfin co-founder Justin Roberts joined MasterCard’s InConversation Webinar series to discuss why immediate payment disbursal is key for the restaurant industry and the gig economy as a whole.

Watch the webinar here or read our recap for the highlights:

People live paycheck-to-paycheck

Not just some people are living paycheck to paycheck. Most people are.

That’s right: around 64% of U.S. consumers are just getting by. Even more shocking, 51% of consumers who earn over six figures are still living paycheck to paycheck, despite their higher tax bracket.

It’s a major reason why employees need access to their earnings sooner rather than later. The pressure of watching your bank account slowly drain in the two weeks between payday is putting a lot of pressure on people, leading to a much greater demand for instant payments than ever before.

Instant payouts are now table stakes

A PYMNTS study found that people of all ages prefer to be paid out immediately, as well as some other interesting statistics:

When given the choice, 68% of respondents said they would opt for an instant pay out
40% of gig workers surveyed were willing to pay a fee for an instant disbursement
81% of respondents were willing to switch jobs to an employer that offers instant access to earned wages and tips

It’s safe to say instant payouts are becoming the expectation for today’s modern workforce. But not all instant payouts are created equal.

Consumers are much more likely to engage with an instant payout system if they aren’t required to share their bank account and routing numbers and can access funds with just their debit card credentials. Why? It’s faster, more convenient, and feels more secure.

Instant payouts and tip management: a perfect use case.

Instant payout innovation has come at the perfect time for the restaurant industry, which is struggling more than ever with the hassles and cost of cash.

If you’re in the restaurant biz, then you know: Most consumers pay with credit cards these days, not cash. That means there’s rarely enough cash on hand to pay out tips at the end of a shift. But employees still want and need instant access to their tip earnings.

Enter: instant payouts. Offering employees the option to receive their tip earnings directly to their bank of choice, the second their shift ends, can go a long way in improving employee satisfaction and ensuring their financial security.

But instant payouts are more than a work perk for employees. The operational benefits for employers range from reduced administrative burden and significant time savings to stronger compliance and streamlined reporting.

Modernizing your tip management strategy: 5 best practices

There are three key components to your tip management strategy:

Tip pool policy: How are you divvying up tips among your staff?
The payout method: How are you distributing those payments?
The systems and tech: What are you using to facilitate those payments?

Under the current circumstances, restaurant operators are under immense pressure to bring their tip management into the future.

5 best practices for tip management

Based on our experience working with restaurant operators across the country, we’ve found that these five practices are the perfect recipe for building a successful tip management system.

Determine the right model and method for your restaurant, based on your location and tech stack
Get a written tip policy (and get it legally approved)
Solicit employee feedback in a structured way
Leverage technology for efficiency, accuracy, and compliance
Don’t over-complicate (but do over-communicate!)

Tip management solution must-haves

When seeking a new tip management solution, make sure you carefully vet each system to see if it really meets your needs, or if it’ll be just as frustrating as cash. Here are a few suggestions for what should be on your checklist:

Instant payouts
Direct to bank of choice
Availability of employee funds
Payroll option
Integrations
Simple implementation + onboarding process
Around-the-clock customer service

Big emphasis on strong customer support teams. Restaurants and bars don’t have “typical” business hours, so neither should your tech support.

Bar Louie automates payouts with Kickfin

In a recent case study, we took a deep dive into our partnership with Bar Louie, a chain with over 60 locations that took advantage of our new integration with Toast. They made the switch from cash payouts to Kickfin’s instant, direct-to-bank payouts and haven’t looked back.

Two-minute tip-outs

Before Kickfin, managers spent an average of 45 minutes per shift working through Bar Louie’s complex tip out policy and counting cash. The tip pooling rules were important to them — it’s what makes the entire staff feel like they’re getting their fair share.

Using the Kickfin Toast integration, Bar Louie was able to automate the tip pool calculation process and send tips straight to employees in under two minutes – a potential annual savings of 15,000 labor hours across all locations.

>> See more customer success stories

Do you want to see these kinds of cost-saving results at your business? Let’s talk. Get a demo of Kickfin and see why restaurant owners and employees alike trust us to manage their tips.

Product and Company News

New Tip Calculation Features You Don’t Want To Miss

Big news: Kickfin’s best-in-class tip calculation tool has some exciting new bells and whistles.

If you’re already using Kickfin’s tip pool calculator, then you know how much time and hassle you’re saving by automating everything. (And if you’re not? Head over to our tip pooling software page to see how it works!)

As we partner with more restaurants to bring their tip management into the future, we’re continuing to innovate our product so we can address their biggest pain points.

In this case, that means enhancing our tip pooling features so you can auto-calculate tip amounts even for the most complex tip pool or share policies.

Check out a few of our latest features that will make tip calculations easier than ever.

🕺 Splitting large party tips

If your restaurant often hosts large parties, you know that the tip share can get confusing. Say one server is taking care of a party of 40 with a bartender assigned to only make drinks for that party. Meanwhile, the server has a few other two-top tables that are getting drinks from the main service bar. At the end of the night, how do you ensure that the large-party bartender gets their fair share of the tip out (without spending an hour on your phone calculator)?

Kickfin can now automate that process for you, alleviating questions from your event bartender and saving time and effort on the part of your managers.

📲 Seamless POS integrations

Kickfin is partnering with the top POS systems to integrate seamlessly with your existing restaurant tech — including Toast, Heartland, Shift4 and more.

DID YOU KNOW? Kickfin integration users get access to new product features first, like our new tip-out transparency tool — which allows your staff to log into their Kickfin accounts and see exactly how their tips have been split between team members. An added layer of visibility can go a long way in cultivating trust (and eliminating those pesky tip disputes).

💸 (Re)Allocation of manager tips

We’re always listening to feedback to improve the Kickfin experience, and this one goes out to all of our restaurant partners who asked us to streamline the manager tip reallocation process.

>>Learn more about managers and tipping laws

In most cases, managers are not allowed to earn tips since they are salaried employees. But we all know that managers often step in and take care of tables to help servers get out of the weeds. Well-meaning guests will most likely leave a tip, not knowing that the manager technically can’t accept them — so where does that money go?

Kickfin now features a default pool, where tips “paid” to a manager are automatically redistributed to tipped staff based on your restaurant’s tip policy.

🤓 Improved labor data accuracy

We all know how easy it is for an employee to forget to clock out after a long shift. And sure, they aren’t going to get paid for a 16-hour overnight shift, but when payday comes around, those extra hours create a nightmare for your payroll team.

With Kickfin, all employees are required to be clocked out in order to finalize payments — so you’ll catch the labor data mistake long before your payroll team has to sort it out.

🔑 Even better security

We’re committed to protecting your business (and your employees’ hard-earned money), so we’re adding an extra layer of security for certain transactions.

You can now enable double approval of payments that meet certain conditions:

First payment for new employees
Employees getting their first payout in X number of days
Employees receiving more than X payouts in a 24-hour period.

With these extra guardrails in place, you can always be sure that the right money is going to the right person. Reach out to our support team to configure your custom security measures.

Using Kickfin is a win-win for operators, managers, and employees alike. Restaurateurs save on cash delivery and labor costs, managers shave hours off their workload, and servers have the same instant payment that they’re used to — without the hassle and uncertainty of cash.

Want to learn more about Kickfin? Let us show you the ropes with a 10-minute demo!