With the arrival of Covid-19, the world of restaurants has been turned upside down. Restaurant product managers are scrambling to change their product development definition and find ways to keep the doors (virtually) open even as their customers are being urged to stay home. The good news, if indeed there is any, is that customers still like the food that restaurants serve and they would like to eat it. In our modern society with services such as Uber Eats, DoorDash, and Grub Hub home bound customers can simply order restaurant food online and have it delivered to them. However, this is starting to cause some problems for the restaurants themselves.
Restaurants Deal With The Need For More Space
Simply put, restaurants need more kitchen space in order to meet the surging demand for their food that online orders are causing. To meet this need property developers are building kitchens in empty mall space and parking lots to fill food-delivery orders. This is a new approach in the fast-growing business of getting meals to customers. The plan is to make restaurant food for delivery in former retail space and this melds two industries that have both been upended by e-commerce. This is happening while restaurants are struggling to find a cost-effective formula for meeting the growing demand for delivery of online food orders.
At the same time “ghost” kitchens can create new interest in retail and warehouse space vacated by merchants that have struggled to compete with e-commerce. Property developers are working to develop some 200 commissary kitchens to cook up restaurant-quality food for customers at malls and hotels as well as delivery for people nearby. The first of those are planned for New York, Chicago, San Francisco, Los Angeles and Miami.
A 5,000-square-foot ghost kitchen in a Brookfield Properties development will provide delivery for the nearby Hudson Yards and surrounding areas in Manhattan. At the same time delivery-only locations will be developed in mall parking lots, storage areas and unused retail space. This is causing a relooking at all real estate that is obsolete. Delivery now accounts for 9% of the $282 billion U.S. fast-food sector and is growing faster than dine-in and drive-through sales.
Restaurants are expanding their delivery offerings to generate sales despite the impact those orders often have on their operational efficiency and profits. The remote kitchens can reduce their real-estate costs while expanding their reach. Wendy’s Co., Chick-fil-A Inc. and Sweetgreen are among chains turning to remote kitchens that don’t serve customers to move delivery orders outside their existing restaurants.
How To Make Remote Kitchens Work
Restaurant product managers know that it’s about unlocking additional demand. If they can find a way to do this, then it will look good on their product manager resume. Some property developers and startups are seizing the opportunity to build and lease those “ghost” or “dark” kitchens. Some developers plan to build kitchens in empty space at properties such as Pennsylvania’s King of Prussia Mall, one of the biggest shopping centers in the U.S., along with Lenox Square in Atlanta and the Sanderson London hotel. Some restaurants and chefs will design menus for the kitchens.
The developers of these remote kitchens aim to open 85 kitchens this year and at least 100 more by the end of 2021. They anticipate spending about $60,000 on upfront costs at each location and reaching profitability in about six months if a kitchen manages to fill around 125 orders averaging $30 each a day. The kitchens will rely on established delivery companies to carry food to customers, such as Uber Technologies’ Uber Eats, DoorDash Inc. and Postmates Inc.
Due to the need for remote kitchen space, developers are building delivery kitchens and subleasing them to restaurants. Delivery companies, particularly Uber and DoorDash, are also creating their own leasable kitchens or online-only restaurants. A 230-square-foot remote kitchen site can be built in as little as two weeks at a cost of around $30,000,. A traditional 3,500-square-foot restaurant can cost $1 million to outfit.
What All Of This Means For You
As the Covid-19 virus changes everything, restaurant product managers are having to take a look at their product manager job description and then deal with having their customers stay home. In order to stay in business, restaurants have had to turn to fulfilling online orders. As the number of these types of orders has grown, restaurants have discovered that they are starting to run out of kitchen space.
In order to solve the problem of too little restaurant kitchen space, property developers are starting to use empty mall space and parking lots to create new kitchens. So called “ghost” kitchens are being built in retail and warehouse space that used to be occupied by companies that have been driven out of business by e-commerce. Obsolete real estate is now once again being looked at. Some developers are creating kitchens and then leasing them to restaurants. A new kitchen can be built in as little as two weeks for roughly $30,000.
They say that necessity is the mother of invention. In the case of restaurants needing more kitchen space, it sure appears as though there are creative solutions to this problem being created. The ability to create more kitchen space puts a restaurant product manager in a good position to meet the needs of more and more customers. The additional challenge of finding the right staff to fill these new kitchens will be a challenge that the restaurant product managers will have to deal with once the ghost kitchens have been created. However, that’s another problem for another day.
– Dr. Jim Anderson
Blue Elephant Consulting –
Your Source For Real World Product Management Skills™
Question For You: Do you think that a kitchen at a remote site can successfully fulfill online orders for a restaurant?
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What We’ll Be Talking About Next Time
Let’s face it: the Covid-19 virus has changed just about everything in our lives. Product managers for liquor have seen a dramatic change in their lives as bars and restaurants have had to close down. Customers who might have drunk their products at home have all been quarantined. As you can well imagine, this has been a big setback and the plans that these product managers might have had for the rest of the year have had to be shelved and new plans are quickly being put together.