The rise of the ‘ghost restaurant’

Since it first launched in Auckland at the start of 2017, Uber Eats has gone from strength to strength. Surprising even the vice president of Uber, the uptake of the food delivery app in New Zealand has proven so popular that there are now a growing number of restaurants operating entirely in the virtual realm.

Jasper Maginot is no stranger to the Auckland restaurant scene. Maginot, along with partner Celeste Thornley and brother Ludo, opened L’Oeuf and Chinoiserie in Mt Albert (although both have since been sold), Kiss Kiss and Love Exposure on Dominion Road and Happy Boy in Royal Oak. However, Maginot also runs three other restaurants – although you won’t find any on a map.

Donburi Fury, Thunder Burger and Kimchi Power were launched intermittently over the last four months, all operate exclusively on Uber Eats out of the Happy Boy kitchen and can bring in as many as 180 extra orders every week. Maginot said that the appeal of the format was that they already had everything they needed in place – a kitchen, staff and ingredients – and Uber took care of the rest. While the current restaurants have reached capacity for Happy Boy’s kitchen, Maginot isn’t ruling out starting a satellite kitchen for his Uber Eats orders.

When it launched in July, Tennessee-style chicken and cauliflower restaurant Hot Lips laid claim to being the first ‘ghost restaurant’ in New Zealand. Created by Californian-born Conor and Tyler Kerlin, founders of Mexicali Fresh, Hot Lips operates out of Ha! Poke, formerly the site of Rocket Kitchen. While the kitchen is mainly used for Hot Lips preparation, Ha! Poke operates primarily in the second kitchen behind the store counter.

“We had been following some trends in the States with the virtual kitchens, and, owning around 40 restaurants already we know that the cost of leases is just going up and up and up,” said Kerlin. “Even staffing and everything – the cost of labour – it makes it really difficult to make a dollar.”

Operating solely through UberEats means that they bypassed the volatile Auckland real estate scene, the process of hiring wait staff and saved on advertising.

“The problem with the restaurant business these days is wherever there is inconvenience there is opportunity, and people want things quicker and when they want it, and so Uber Eats really has caused a bit of destruction in the regular sit-down restaurants,” said Kerlin. “People would rather pay a bit more and get it sent to their front door.”

Uber Eats New Zealand country manager Andy Bowie said that he expects virtual restaurants to increase in frequency over the coming months and years.

“We are actively helping restaurants fill specific cuisine gaps in neighbourhoods around New Zealand cities, which also enables them to test new concepts without investing in a whole new restaurant,” he said. “Chefs and restaurateurs can be more creative than ever before, experimenting with new trends and cuisines using their existing kitchens.”

Canada is a hotbed for virtual restaurants, with Uber Eats estimating about 50 ghost kitchens around the country. George Kottas owns 15 restaurants in and around Toronto, but hardly any of them ever have any customers walk through the doors.

“I never thought in my wildest dreams not having a store presence would work. Now I have 15 stores open,” said Kottas, who owns restaurants which serve Mexican, Chinese, Middle Eastern and Greek food, among others. Kottas stumbled across the ‘ghost’ concept by accident, after he forgot to put a closing time on his restaurant’s UberEats profile. Forty orders were submitted after the restaurant had closed.

“A lightbulb went off instantly,” he said. “Within a week or so I started getting my staff to stay from 3 p.m. to 9 p.m. Within two or three weeks, I had staff staying until midnight and within a month, I went 24 hours. I am just about to launch in Calgary, Vancouver, Montreal and Ottawa. My goal is to have a store every four-kilometres across Canada.”

Restaurant Association CEO Marisa Bidois said that the rise of virtual restaurant was an exciting development, and predicted that more would appear around the country as a response to high rent and high wages.

“These virtual restaurants have really taken off, especially say, in California, Chicago and a few other places around the States. A number of different businesses may be sharing a space in those cases to produce the virtual restaurants.”

Uber's vice-president and head of UberEverything Jason Droege said that the company was surprised with the uptake of the food delivery service in New Zealand.

“When we launched [in North America] back in December 2015, it was hard to imagine the success that we've had so far,” he said. “We're really pleased with the success we've had here. There's no way I could have imagined it was going to be as successful or connect with eaters or restaurants in the way it has.”