Dine on demand:

Speaker 1 [00:03] I've never heard of ghost kitchens before.

Speaker 2 [00:07] Have ever heard of ghost kitchens before? Yeah, I have. Although, I have an idea of what a ghost kitchen is. But maybe it's incorrect. I'm not sure.

Speaker 3 [00:14] I learned about ghost kitchens through social media and online media, news articles like Daily Hive or something like local to Vancouver.

Speaker 4 [00:22] I have not heard of ghost kitchens before, but I'm sure that Ghostbusters will be looking for them.

Mariam Sobh [00:30] Welcome to Changing Places, brought to you by Avison Young. In Changing Places, we explore our continuing and complex relationships with the built world around us. I'm your host, Mariam Sobh. When you place an order on your favorite delivery app, you might think that the Thai restaurant a mile away is an actual brick and mortar location. Hey, it even has a real address! So you place your order, queue up your new bingeable series, and anxiously await your food. Little do you know but across town, someone else has ordered Chinese takeout from a differ-ent restaurant at the same address. Sounds impossible, right? Welcome to the world of ghost kitchens. As you'll hear in today's episode, ghost kitchens have had two lives, one before No-vember 7, 2019 and the other after. You see, on that date, the Wall Street Journal ran a story announcing that former Uber CEO Travis Kalanick made a $130 million investment into ghost kitchens via CloudKitchens. Needless to say, an otherwise quiet industry, which ran behind your favorite delivery apps, was thrust into the spotlight. In January of 2019, Saudi Arabia's sovereign wealth fund invested $400 million into CloudKitchens. However, there is so much more to this sector than one well-funded company. According to Quartz, the mobile ghost kitchen company Wonder recreates meals from famous restaurants, which are delivered to the customer's door on Route. Reef, one of the leaders in the ghost kitchen sector received a $1.5 billion investment from SoftBank. Meantime, Food and Wine reports that Impossible Foods has launched the ghost brand Impossible Shops using ghost kitchens and dog house kitchens. With so much innovation and investment the future of ghost kitchens remains bright, but can they take over the world while being ghosts to consumers? I want to dive into all things ghost kitchens with my guests Amrit Maharaj, Chief Operating Officer at Coho Collective Incorporated, and Martin Mikaitis, Associate Industrial Practice Group at Avison Young. I can't wait to get their opinions, thoughts about the sector their experiences as of late and what they see as the future of ghost kitchens moving forward. We'll begin in downtown Vancouver.

Speaker 3 [02:42] So for me, a ghost kitchen is a kitchen that runs multiple different restaurants under one kitch-en. So, let's say you have four different restaurants all running under one kitchen that doesn't have basically a front door open to any customers who want to sit in and dine.

Speaker 5 [02:59] Ghost kitchen refers to maybe moving into a spot that's already inhabited. And using their appliances and fixtures.

Speaker 6 [03:09] Have I heard of ghost kitchens before? Yes. First was when Travis Kalanick, the Uber founder, started CloudKitchens, and then more and more popping up around everywhere. But saw them first in the US, then starting to come out more here.

Mariam Sobh [03:23] Martin Mikaitis, welcome to Changing Places. Marty, there's been a rapid rise of what are called ghost kitchens around the world. And I think it's safe to say that the sector had one life before the Wall Street Journal's 2019 report about Travis Kalanick investing in Ghost kitchens and a different life afterwards. I'd like to know what it's been like in the sector and more im-portantly, what it's been like as we wind our way through this pandemic.

Martin Mikaitis [03:49] Yeah, absolutely. So, this has definitely been what I call is a probably hidden secret amongst the food delivery industry. I guess you can probably date it back to, you know, early 2000– 2004, 2005– when these GrubHub and these other delivery apps actually starting to come into form and really with restaurants really trying to transition to you know, how can they cater to the demand of recipients looking for delivery service. So, we definitely have seen a rapid in-crease. Definitely the dense cities, you do see a lot of this increasing, but it is starting to leak out, you know, into the secondary and third cities as well.

Mariam Sobh [04:24] Do you think the boom in ghost kitchens would have happened without the Wall Street Journal and the pandemic?

Martin Mikaitis [04:29] Yes, I think that even outside of the Wall Street Journal article, but the COVID alone has just basically increased this by about five years. So realistically, the demand has always been there. And the technology is only getting more and more better as we kind of go on each day. So with the younger generation, we're really kind of seeing them as the pinpoint, the ones that are really utilizing this type of service. They're the ones that are on the phones all day long. They really like the one click, and if they can get something fast, it's really something that's convenient for them. So, we only see this as a continuous loop.

Mariam Sobh [05:00] Were there any other factors in place two or three years ago, that might have led to what's happening right now at this moment?

Martin Mikaitis [05:06] Yeah, I definitely think the demand was there. And again, when you started to see these food delivery apps start to come into place that you definitely saw, how are we going to feature this or how we're actually going to deliver to this need and the demand. So you know, you had the brick and mortar stores where a lot of these restaurants were located and actually started to do delivery service out of, even if they didn't do it in the past. That obviously only had in-creased traffic flow and obviously caused a lot of congestion and problems in the kitchen to try to cater in the dining, as well as featured out to the delivery service. So you know, really, it started off with just a couple of test kitchens. And some of these actual private owners of these larger restaurant groups, really, were actually starting to put multiple restaurants in one kitchen and actually kind of combined menus to see if there would actually be a good feature. And it turned out to be actually a very good test pilot. So, you saw one come into place with a lot of these private owners that are now actually multiplying across the nation and major cities.

Mariam Sobh [06:01] Is it more cost-effective to put a bunch of restaurants in one?

Martin Mikaitis [06:04] Yes, yes. So, you're looking at, compared to a brick and mortar store, you're looking at the size, these kitchens are really only about 500 to 700 square feet, that really only have, you know, maybe one or two chefs in there that are really on an hourly basis, pumping out about 60 orders per hour. Whereas, you look at a brick and mortar store, I think that's about half of that. And so when you really can add on more features to the menu, more items, more attrac-tiveness to the to the user on the other end that can really, you know, one essence, order Chinese and barbecue all in the same order with the same delivery drivers coming at the same times.

Mariam Sobh [06:41] Can you give us an example of who the major players are in ghost kitchens and who's driving the demand?

Martin Mikaitis [06:47] Yeah, so a big one you hear about right now is Reef technologies. They're definitely the leading horse mainly because they are backed by SoftBank, so they have the capital to actually go ahead and gobble up these, you know, smaller technology firms that are actually, you know, building up these platforms that will cater to these ghost kitchens to the food delivery service in general. And so now what we're seeing is these restaurants seeing wait times before, that were no longer and actually couldn't meet their clientele because they didn't actually have the restaurant capacity or the locations to actually cater to those needs. Now this ghost kitchen is actually going to allow them to meet that demand.

Mariam Sobh [07:27] The pandemic, I would say, for my own experience, drove me to do more of these online or-ders as a way to support restaurants and be part of a solution somewhat. But I wonder though, if we go back to some semblance of in-person stuff and people are going to be craving socializing, do you think that demand will go down, but the consumer drive?

Martin Mikaitis [07:46] As of now, no. This is definitely a forecasted industry that is projected just to continue on the upward trend. You know, right now, globally, it's, I think, right around about $100 billion busi-ness. Within the next five years, we're actually looking to see that double in growth. and the US alone is is one of the lagging, I should say, countries that's actually behind in ghost kitchen space. You see China, parts of Europe that are actually accelerated in this need. So with that said, it's only going to be an increased boom, but you are still going to have the clientele that does enjoy going into dine. But this delivery services is not going away.

Speaker 3 [08:27] I think the choice between a ghost kitchen or a restaurant, like a sit-down restaurant, for me would be pretty immaterial. Made– like the ghost kitchen obviously has advantages in having a smaller footprint. But they also service people in a different way. Like you can't have a sit-down restaurant with a smaller footprint and service people in the way that they do. So, yeah, I think for me, I wouldn't make much of a distinction there.

Mariam Sobh [08:52] As this sector continues to grow and expand, do you think that ghost kitchens could be a real threat to traditional restaurants?

Martin Mikaitis [08:59] Yes, and no. I think, you know, one thing you, you have larger brands that are definitely taken advantage of this ghost kitchen space. I think the threat goes to the smaller mom and pop shops that are around. Local businesses that, you know, originally were dining only, and defi-nitely don't have the capacity or the workforce to actually do a delivery service. So with that said, I think you're gonna see a lot of these third-party apps that are going to help those small shops to cater delivery. But, but overall, I think, in general, I– they just have to implement this deliver feature to stay alive.

Mariam Sobh [09:33] Marty, where do you see the growth in the ghost kitchens space right now? What's the latest that's happening?

Martin Mikaitis [09:39] So right now, I think you're going to start to see the, the secondary cities that, compared– we'll compare the two. So, New York, you can have unlimited options of where you want to do fast dining or takeout service, and then you will get a suburb, we'll compare it to Denver, that really doesn't have those quite options. So what we see is a lot of these ghost kitchens are going to start going to those secondary cities that don't have the multiple food options that these larger denser cities have. Because overall, we had a service then, we have products that people want, and they want it now. And realistically that demand is not going away. We've offered that through e-commerce and everything else. So with that said, with, with the demand still being there, we're only going to see an increase of these type of ghost kitchen spaces to accommodate that.

Mariam Sobh [10:24] But speaking of the technology and using tech, with the ghost kitchen sector, how do you find where to operate a ghost kitchen and find customers? Is it data-driven? is it just, let me just plug this in here and see if it works?

Martin Mikaitis [10:40] And that is definitely been a work in progress from the early stage of this. You know, restau-rants were definitely taking out the hotspot locations around the dense cities where they weren't located. So they would put these, you know, ghost kitchens up, put the delivery ser-vice out there and really test the product to see who was coming in and out and who was ac-tually using their product. And so before they would actually go in and put a brick and mortar, this was really the test cycle for for where they chose to pick that location. And now, with the technology that we have and the cell phone usage and the cell phone data that we can use and track mostly through these third-party services, but realistically just to geo-fencing and tracking where, where customers are going to in from from certain brick and mortar spots. We can actually pinpoint exactly where to put these ghost kitchens, we can actually see where exactly these deliveries are coming from, the quantity, what it is they're ordering, the the age range that the person who is ordering it from. So we can really dissect to a certain demo-graphic and crowd and really pick a product and get it to that location to feature

Speaker 7 [12:49] I would order from a ghost kitchen, especially if I knew that it was something local. I'm all about supporting local.

Mariam Sobh [11:55] With so many ghost kitchens popping up from Reef to CloudKitchens, do you think consolida-tion will hit the sector? Or do you think it's immune to sort of a monopoly?

Martin Mikaitis [12:06] That's definitely a good question, right? Because, because Reef is definitely the big player in this and you know, again, just with the the capital that they have behind them, it is really hard to compete. So you might have, again, business groups or restaurant owners, private owner-ships, that are really going to want to maintain their own restaurants and create their own plat-form. Or you might have someone that wants to do something completely different, whether it's, you know, go a whole health route, which is obviously a big boom right now and actually hire on three chefs that actually make– are preparing the meals on a daily basis. It is fresh food, and then delivering it out that way. So I think you're going to start to see a definite change and shift as far as how this food delivery service goes. And it might not just be coming from a restaurant, or a very popular brand you've normally seen, but may start to get very unique as far as how it's going to go.

Mariam Sobh [12:56] Are you seeing any trends coming our way in the next five years or so?

Martin Mikaitis [13:00] You're going to start to see different type of people really trying to get into the business sec-tor. I think you're starting to see large capital investments come into place. I think you're gon-na see lots of third-party delivery apps that are going to start coming up, whether it's feature in restaurants, or they're really trying to go household items. But again, I think at the end of the day, you're really going to be able to look up a single product and want that within hours and you're going to be able to get it through one source or another.

Mariam Sobh [13:25] Marty, thank you so much for your time. It's been a pleasure to speak with you. In just a mo-ment, I'll be joined by Amrit Maharaj, Chief Operating Officer at Coho collective Incorporated, a company which specializes in ghost kitchens based in Vancouver. But first a quick reminder. You're listening to changing places, brought to you by Avison Young, a show that continues to explore and question our complex relationship with the built world around us. My name is Miri-am Sobh, and this episode is looking at ghost kitchens and how they are quietly upending the food delivery industry. If you like what you're hearing, I encourage you to tell your friends about us or hey, maybe leave us a quick review. We'd love to hear from you. So listen, does the thought of ordering anything you want from a ghost kitchen really excite you? Are you ready to plunk down $4,000 to rent space in a ghost kitchen and see if your ghost brand catches on? Do you wish you could just delete the delivery apps from your phone, put on your finest dinnerware and be waited on for three hours? Well, whatever your desire, ghost kitch-ens are here to meet your needs, whether you know it or not. We'll begin in Vancouver at Coho collective with my guest, Amrit Maharaj.

Amrit Maharaj [14:33] We're in East Bank River, so we're in a really cool area that's become the brewery district. And it's bordering a residential capacity, which is right next door. This is relatively new, we opened in March 2020. So in Canada, that was about two weeks before the first COVID lock-down. So a bit scary for us. But then we saw business just go through the roof. So it's been a great location for us. We provide all the heavy equipment. Our clients provide all the small wares. These are typical stations, a table shelves, everything else is there. So they bring in their own employees, they bring in their own ingredients, take care of deliveries. We provide dishwashing services, so they can concentrate on their business, they don't waste time. It's a great vibe when it's running full capacity. So, we're over 10,000 square feet in this facility alone. There's about 20 stations in this facility itself– 23 stations, sorry. Some of them are shared. So some of the customers share a station with other customers just to make sure that they have access to affordability for what they need. We put everything in all the sinks, there's multiple prep sinks, dishwashing area, the cooking lines, cold storage, delivery are in the back. And then all the rest is production for all the companies that we have. We have bakers that start early early in the morning. And we have take-out guys that do delivery until three or four AM. So this business– this, this place is always humming. It's, it's a really unique environment where 24 hours a day, companies are working.

Mariam Sobh [15:50] Amrit, welcome to Changing Places. From your experience running Coho Cllective in Vancou-ver, what has business been like before and after November 2019?

Amrit Maharaj [16:00] Interesting question. It's been great both sides. So when we started in 2018, ghost kitchens– the term wasn't there. Restaurants were actually using outsourced facilities before this article came out and before Travis was heavily involved. When we started in 2018, we had restau-rants that are already doing takeout only from our facilities. 2019 really– the article launched that into the stratosphere. That combined with COVID, everything just accelerated from there. So we work really did break down the barriers of a shared-space economy, people started to understand that could decrease their economies of scale, and increase your business reve-nue from sharing a business model. We just amplified it by using it in a kitchen,

Mariam Sobh [16:57] What about with the current pandemic, how is the sector adapting to changes right now

Amrit Maharaj [16:43] It's changing really quick. The delivery apps have really been a big push for these companies. They've been able to get people on the radar, whether you're a small business, that's just starting out your ghost kitchen or your large chain like Reef. These technology apps have been really great. They've also lowered the cost of delivery for people, they've gotten access to markets they wouldn't get to. Tther things that we've been doing is we've seen the sector adapting to that we do in our kitchens is that we offer group buying. So we lower the cost be-cause we have so many different restaurants and food producers within our spaces, we're able to go to the restaurant or the the food suppliers and talk to them and say, "Hey, look, we have 110 companies working within our walls, give us a group discount." So lowering the costs sharing– again, back to the sharing economy. And then even automated concepts that are coming out; beverage robots, automated delivery technology is just, it's here to stay. And that's been really how the sector has been adapting. They just embrace that technology, em-brace that shared economy, and run with it.

Mariam Sobh [17:36] How are ghosts kitchens different than in the past? Let's say somebody wanted to start a company and they have to go rent or find a kitchen where they can make something with up to standards and, you know, licensing and stuff like that?

Amrit Maharaj [17:47] They're are still similar. I mean, it is the same concept. The ghost kitchens just operate as a restaurant. We have again, out of our 108 members, we have people that are doing CPG, which is consumer products for grocery stores. We have people that are caterers, food trucks, and the restaurants doing their ghost kitchen. So the ghost kitchen is just the new terminology for the technology and the driving behind it. So we now create spaces that are shared, but have these ghost kitchen capabilities within them.

Mariam Sobh [18:11] When you look at Coho Collective, CloudKitchen, Reef, and the thousands of other small and large ghost kitchens, what are you seeing in the market right now with your stakeholders?

Amrit Maharaj [18:19] Our investors, the people that are backing us, they're really savvy in what's happening. Again, we were broke down a lot of barriers. People understand that a shared economy is the way to go. We really are able to help a lot of people so the investors are interested in our growth and they want to help, they want to support, they're connecting us with partnerships that help us scale across North America really fast. But the investors are really getting very smart about what our economy is.

Mariam Sobh [18:41] And what about folks that are driving this industry? Would you say it's investors or tenants or apps? Where does that come from?

Amrit Maharaj [18:49] It's a bit of everything. So investors, like we've described, people that are really savvy and really want to help push this into the new generation. Landlords are actually a big help as well. So a lot of landlords have been ravaged by COVID. They've had people drop out of leases, they've had people that are just canceling contracts. Whereas we can come into the stable model sign, a 20 year lease, they're very engaged in helping communities as well. So we can offer them the stability and the margins that they need to see. So landlords have been very, very supportive of us. And then tenants. We call them Members, we're very supportive, we create a community for our members around us rather than– they're a part of our community. They're not just a revenue stream. So it's really good mindset. But they are another big player behind this. They're the ones that tell us what they need, we want to listen to what they're do-ing. But we also want to offer them technology and advances that they don't know about, so it gives them a leg up, they're able to push smarter, faster, stronger, and then working on part-nerships with companies that are bigger than us that can help them expand across North America faster than what we're doing right now. But as we grow, they grow with us.

Speaker 2 [19:45] What comes to mind when you think of ghost kitchens?

Speaker 13 [19:48] Low barriers of entry for chefs. Don't have to start a restaurant, they could do a ghost kitch-en, build their brand that way.

Amrit Maharaj [19:57] When people come here and realize, "Oh, I can finally proceed with my restaurant dream with-out having the big overhead costs." So they start off here with one company and they start their own business. So it's been really cool to see.

Mariam Sobh [20:07] If a person with a few recipes can go into a ghost kitchen, get on all the apps in the area, and pretty much open a restaurant while paying, let's say $4,000 a month in rent, how does the restaurant across the street compete with multiple expenses from rent of let's say $20,000 a month, a staff, bills, etc?

Amrit Maharaj [20:24] Really good question. It's– restaurants are there to provide an experience, like the room, the ambience, the service, nothing's ever going to replace that. People want to go out, food brings people together. But now ghost kitchens are great for takeout and delivery, there's much more quick serve. For example, a family wants to stay home and order in for family on a Thursday night, or a special weekend, or occasion. Or then you want to go to a restaurant. So it's really nice to have that balance. There's room for both. Restaurants don't have the capaci-ty to do the takeout and the restaurant in-dining at their facilities. So they still have their bricks and mortar. And they come to somebody like us to do their takeout only because then they don't have delivery guys clogging up their wait rooms. Because these restaurants are built for their in-house dining. They're not built to have 3,000 orders a week on top of their regular in-house dining in there. So they really do complement each other and there's the, there's room for both.

Mariam Sobh [21:31] Do you think ghost kitchens will realign the restaurant sector at all?

Amrit Maharaj [21:16] I think they will. They're really enabling people to do more with less. There is a lot of opportuni-ty there for people to reduce their overhead, to reach audiences that they couldn't reach be-fore. A lot of these delivery apps work within a five kilometer radius. So a lot of restaurants or even just mom and pops that have started a ghost kitchen on their own, they're able to open multiple locations within the same city in different facilities and reach different audiences be-cause these, these delivery apps only have certain radiuses behind them. So it is really cool to see that come to fruition and growing.

Mariam Sobh [21:48] Do you think any of these ghost kitchens, like the smaller ones, are going to be squashed for lack of a better word, by bigger companies like let's say Chipotle or McDonald's deciding to open their own ghost kitchens?

Amrit Maharaj [22:00] No, I mean, there's– and one of the great trends we've seen during COVID is people really supporting local. There's always gonna be room for McDonald's and Chipotle, and they're very smart. They know their analysts, they know where there's gonna be opening, there's room for everybody to grow and grow together. And the more technology that comes into the place, the easier it is for those small mom and pops compete with those big Goliaths. But no, we see the opportunity for both. And both provide gainful employment. Yes, the small mom and pops, you want to help support them. But a lot of these larger brands like Chipotle, McDonald's offer huge employment for people that need it. And especially myself, like I come from an immigrant background, I know how vital those types of businesses are because a lot of times as an immigrant, you can't find jobs in other places that are supportive. So places like that do need to exist, but they can exist right beside the small mom and pops.

Mariam Sobh [22:42] What about where folks are going to be serviced by ghost kitchens? Will they be in suburbs do you think since a lot of people aren't going back to the office anytime soon? Or, you know, would they spring up in vacant restaurants? How do you think they'll have to be built to satis-fy the needs of the space or the clients?

Amrit Maharaj [22:59] It's a bit of both. So you can operate anywhere. You can be right downtown, you can be in the suburbs. With people not going back to the office, everybody's working home or they're work-ing from shared, shared workspaces. You can really exist everywhere. And like I was saying, these delivery apps have this radius. So whether you're at home or whether you're in the of-fice, it really does help cut down costs because you can have your meal delivered.

Mariam Sobh [23:19] What's the relationship between a ghost kitchen and apps like DoorDash?

Amrit Maharaj [23:24] The emergence of apps like DoorDash, SkipTheDishes, UberEats, that really help those kitch-ens had a wider audience, especially for the small business or new businesses. Before you'd have to put an ad in the paper, you'd have to get website hits, you'd have to go on Facebook, you'd have to do all this viral marketing. Now it's just you sign up on SkipTheDishes. You can get priority, you're in a really defined market, if you have a really cool concept. So it's just real-ly helped amplify those small businesses. And like we're talking about, they're right next to McDonald's, they're on the same page that McDonald's on SkipTheDishes and UberEats and all these types of delivery apps. So it's really helped push them out into the forefront. Like we have great restaurants that are just ideas that started and they're two people and now they have five full time employees. So being able to give them that stability on that basis with apps like DoorDash and SkipTheDishes, who can all amplify them, it's amazing to watch.

Mariam Sobh [24:11] Is it cost-effective to use an app if you're a ghost kitchen?

Amrit Maharaj [24:14] It's getting there. There's, there's some intricacies that still need to be worked out. But that's one of the benefits that we've been able to– as we grow in scale, we're able to bring those discounts to all our members. You don't have to worry if you're a small, just starting off busi-ness, we've already negotiated with you. So this really does help amplify it when you combine the ghost kitchen with the deals that we're able to get as a large facility across many multiple locations. It does work in their favor. During that COVID shift, we've seen a lot of people move to the online takeout delivery system. So we're now– we're developing all technology to help with that side of it.

Mariam Sobh [24:47] What are some of the trends good or bad that we may see in ghost kitchens in the next five years?

Amrit Maharaj [24:52] We're working– still there's kinks that are always in a rapid growing industry like this. The pro-jections are into the hundreds of billions of dollars over the next few years or by 2030. So there's always gonna be things that need to be worked out, but it's really heading in the right direction for everybody. And then for a few thousand dollars to start off with and really try and see what works and what doesn't, you tried. But for bigger companies, that economy of scale is massive. That you had mentioned before, like Reef, CloudKitchens, and us, we're able to do for the consumers is offer accessibility, drive down costs, just make it more fun. Like it's a re-ally cool industry to be a part of right now.

Mariam Sobh [25:56] Well, thank you so much Amrit. It's been a pleasure to have you on the program. I'd like to thank Amrit Maharaj and Marty Makaitis for giving us a deep dive into ghost kitchens. It's real-ly been a pleasure to speak about this dynamic sector as it continues to evolve, grow, and reshape the food delivery game. Join us next time as we leave ghost kitchens behind and dive into the fascinating world of flex space. It's not just co-working anymore. Flex space can mean anything and the industry is ready for its moment. I'm Miriam Sobh, and this is Changing Plac-es, brought to you by Avison Young. Thanks for listening. See places changing and evolving in your neighborhood? Share your evolving spaces with us on social media using the hashtag #changingplacespodcast. I'm Miriam Sobh, and this is Changing Places. Changing Places is brought to you by Avison Young. Our producer is Andrew Pemberton-Fowler. Our sound engi-neer is Patrick Emile. Our production assistant is Gabriella Mrozowski. Additional production support is provided by JAR Audio.