Ghost Kitchen Business Overview

Ghost kitchens are food preparation facilities that create meals exclusively for delivery, with no dine-in or customer-facing areas. These streamlined operations allow entrepreneurs to enter the food service industry with significantly lower startup costs compared to traditional restaurants. Without the need for prime retail locations, dining furniture, dishware, or front-of-house staff, ghost kitchens can focus resources on food quality and efficient kitchen workflows. Many ghost kitchen operators can launch with 60-80% less capital than a conventional restaurant, making this model particularly attractive for first-time food entrepreneurs or established brands looking to expand their delivery footprint. The facilities often feature specialized layouts designed for rapid food preparation and packaging, with dedicated pickup areas for delivery drivers to collect orders quickly without disrupting kitchen operations.

The most common types of business models in the ghost kitchen industry include:

• Commissary Kitchen Model: A shared kitchen space where multiple food brands operate under one roof, dividing costs for equipment, utilities, and facilities.
• Brand Expansion Model: Established restaurant brands using separate kitchen facilities to expand delivery reach without building new full-service locations.
• Virtual Restaurant Model: Food concepts that exist only in digital form, with no physical storefront or brand presence outside of delivery apps.
• Dark Kitchen Model: Standalone facilities housing one or multiple brands owned by the same company, optimized purely for delivery operations.

Related: Checklist To Start A Business

How Do Ghost Kitchens Make Money?

Ghost kitchens generate revenue through a delivery-focused business structure that maximizes kitchen efficiency while minimizing traditional restaurant overhead costs. By eliminating dining rooms, host stations, and table service, these operations can dedicate their entire facility to food production. This allows ghost kitchens to process more orders per square foot than conventional restaurants. The delivery-only model also enables ghost kitchens to operate in lower-rent industrial or warehouse districts rather than expensive commercial retail spaces, dramatically reducing one of the largest fixed costs in food service. Many successful ghost kitchen operators report 30-40% higher profit margins compared to traditional restaurant models due to these reduced overhead costs, despite typically paying 15-30% commission fees to third-party delivery platforms.

The common ways ghost kitchens generate income in this industry can include various revenue streams that appeal to different market segments and business objectives.

• Delivery Sales: The primary income source for most ghost kitchens comes from direct food sales through delivery platforms. This typically represents the largest portion of revenue because delivery-only operations can reach customers across wider geographic areas than traditional restaurants while maintaining lower operational costs.
• Multi-Brand Operation: Ghost kitchen operators often run multiple food concepts from the same kitchen, allowing them to attract different customer segments through various food types and price points.
• Kitchen Rental Fees: Some ghost kitchen facilities rent kitchen space to independent chefs or food brands on hourly, daily, or monthly arrangements, providing fully equipped commercial kitchens without requiring long-term leases.
• Subscription Models: Some ghost kitchens offer meal subscription services where customers pay a recurring fee for regular meal deliveries, creating predictable revenue streams.
• White Label Production: Ghost kitchens may produce food for other brands or businesses that want to offer food without operating their own kitchens.
• Platform Fees: Ghost kitchen companies that operate their own ordering platforms may charge commission fees to the food brands operating in their facilities.
• Catering Services: Many ghost kitchens supplement their delivery income by offering catering options for events and offices, leveraging their production capacity during off-peak delivery hours.

Industry Statistics

Ghost kitchens fall under the NAICS code 722513, which is classified as Limited Service Restaurants. Despite this classification, ghost kitchens represent a distinct operational model within the food service sector. Here are some statistics that highlight the current state and trajectory of the ghost kitchen industry.

Ghost Kitchen Industry Size & Growth

The ghost kitchen industry generated approximately $43.1 billion in revenue in the last year, demonstrating substantial momentum in the food service marketplace. Over the past 5 years, the sector has experienced an average annual growth rate of 8.7%, significantly outpacing traditional restaurant growth. This expansion is projected to continue with an estimated annual growth of approximately 12.4% through the next five years.

This acceleration is driven by changing consumer preferences favoring delivery convenience, reduced overhead costs compared to traditional restaurants, and technological advancements in food delivery platforms. The COVID-19 pandemic dramatically accelerated adoption of the ghost kitchen model, creating lasting shifts in consumer ordering habits that continue to fuel industry expansion. (IBISWorld)

Number of Ghost Kitchens

There were 7,594 ghost kitchen businesses operating as of the last year, representing an increase of 2.3% from the previous year. Over the five-year period between 2018 and the last year, the number of ghost kitchen businesses grew at an average rate of 2.3% annually.

The market remains relatively fragmented, with the largest operators including Kitchen United, CloudKitchens, and REEF Technology collectively controlling approximately 25% of market share. The remaining market consists of independent operators, restaurant chains utilizing ghost kitchen models for expansion, and regional ghost kitchen networks. Many established restaurant brands have launched ghost kitchen divisions to capitalize on delivery demand without the expense of new storefronts. (IBISWorld)

Ghost Kitchen Profit Margin

Ghost kitchens typically maintain gross profit margins between 25-35% and net profit margins ranging from 10-30%, with the average settling around 15%. This profit potential exceeds traditional restaurant margins by approximately 5-10 percentage points due to significantly reduced overhead expenses.

Without dining areas, front-of-house staff, and prime retail locations, ghost kitchens can allocate more resources toward food quality and operational efficiency. Profit margins vary considerably based on cuisine type, with some food categories offering higher margins due to lower ingredient costs and faster preparation times. Well-optimized ghost kitchen operations focusing on high-margin menu items and multiple virtual brands from a single kitchen can achieve net margins approaching the higher end of this range. (UpMenu)

Costs To Start a Ghost Kitchen

Starting a ghost kitchen may cost between $30,000 and $300,000, depending on several factors including size, location, equipment needs, and whether you’re building from scratch or converting an existing space. The wide range reflects the flexibility of the ghost kitchen model – from minimal home-based operations to large commercial facilities serving multiple food concepts.

Here are some of the main costs to consider when starting a ghost kitchen:

Kitchen Space: The physical location for your ghost kitchen could initially range from $10,000 to $100,000. This includes first and last month’s rent, security deposit, and any necessary renovations to meet health department requirements. Many ghost kitchen entrepreneurs start by renting space in existing commissary kitchens or food incubators to reduce this cost, while others convert underutilized restaurant kitchens or industrial spaces.

Commercial Kitchen Equipment: Commercial-grade cooking equipment, refrigeration, food prep stations, and ventilation systems might cost between $15,000 and $80,000. The exact amount depends on your menu requirements and whether you purchase new or used equipment. Many ghost kitchen operators start with basic equipment and expand as their business grows.

Technology Infrastructure: Point-of-sale systems, order management software, and delivery integration platforms could cost $3,000 to $10,000 to implement. These technologies are vital for ghost kitchens as they manage incoming orders from multiple delivery platforms and coordinate fulfillment efficiently. Some platforms charge monthly subscription fees rather than upfront costs.

Permits and Licenses: Food service permits, business licenses, health department certifications, and other regulatory approvals might cost between $500 and $5,000. These costs vary significantly based on location and the complexity of your operation. Most jurisdictions require ghost kitchens to meet the same safety and sanitation standards as traditional restaurants.

Initial Inventory: Food inventory, packaging materials, and cleaning supplies could require $2,000 to $10,000 upfront. Delivery-only operations need high-quality, insulated packaging to maintain food temperature and quality during transport, which can be more expensive than standard restaurant takeout containers.

These estimates represent approximate startup costs and will vary based on your location, concept, and business model. Urban locations typically have higher costs than rural areas, and certain cuisines require more specialized equipment than others.

Things To Consider Before Starting a Ghost Kitchen

Starting a ghost kitchen offers an innovative way to enter the food service industry with lower overhead than traditional restaurants. However, success in this growing sector requires careful planning and consideration of several factors that differ from conventional food businesses. Understanding these considerations before launching your ghost kitchen can help you avoid common pitfalls and position your business for long-term success.

Market Research

Conducting thorough market research is the foundation of any successful ghost kitchen. Look at what food delivery options already exist in your area and identify what’s missing. For example, if there are five pizza options but no healthy bowls, that might be an opportunity. Check local social media groups to see what people complain they can’t get delivered. A common mistake is assuming your food preferences match your potential customers’.

Health Department Regulations and Food Safety Compliance

Ghost kitchens must meet the same food safety standards as regular restaurants. You’ll need proper permits, food handler certifications, and compliant facilities. For example, many cities require separate sinks for handwashing, food prep, and dishwashing. A beginner mistake is waiting until the last minute to contact health officials. This can delay your opening by months.

Delivery Platform Relationships and Commission Structures

Delivery apps like DoorDash and Uber Eats will be your storefront, but they charge fees that impact profits. For example, a $15 meal might only net you $10.50 after a 30% commission. Many new owners fail to factor these fees into their pricing strategy. Consider offering special menu items only on your website to encourage direct orders.

Menu Engineering for Delivery-Friendly Foods

Not all foods travel well. French fries often arrive soggy, while stews and curries maintain quality during delivery. Test your food by letting it sit in packaging for 20 minutes before eating it. A costly mistake is creating a menu based on what you like to cook rather than what delivers well.

Location Selection for Delivery Radius Optimization

Your kitchen location determines who can order from you, as most delivery apps limit radius to 3-5 miles. A location near apartments and offices maximizes potential customers. For example, a kitchen between several apartment complexes might reach thousands more potential customers than one near single-family homes. Many owners overlook delivery driver parking needs.

Technology Integration for Order Management

You’ll need systems to manage orders from multiple delivery apps. Without proper technology, orders can be missed or delayed during busy times. For example, a tablet for each delivery platform quickly becomes unmanageable as you grow. Beginners often underestimate the chaos of managing multiple ordering systems simultaneously.

How Much Can a Ghost Kitchen Make?

Ghost kitchens have emerged as a profitable business model in the food service industry due to their streamlined operations and lower overhead costs. By analyzing industry data, we can develop a clearer picture of potential earnings for ghost kitchen operators.

While the industry average revenue is approximately $5.7 million annually (calculated by dividing the $43.1 billion industry size by 7,594 businesses), this figure is heavily skewed by large multi-location operators. For independent ghost kitchen entrepreneurs—which make up the majority of new entrants—annual revenues typically range from $250,000 to $1 million in the first few years.

Let’s look at a practical example: A single-concept ghost kitchen in a mid-sized city might process 50-75 orders per day with an average order value of $25. This would generate daily revenue of $1,250-$1,875, translating to approximately $456,250-$684,375 annually. This represents a realistic target for a well-run independent operation.

Profit margins for ghost kitchens typically range from 10% to 30%, with an average of about 15%—significantly higher than traditional restaurants that often operate on 3-5% margins. Using our example above, a ghost kitchen with $500,000 in annual revenue might expect to earn $50,000-$150,000 in net profit, with $75,000 being the average.

Most ghost kitchens reach profitability within 10-18 months, compared to 3-5 years for many traditional restaurants. This faster path to profitability is primarily due to lower startup costs and reduced overhead expenses.

Regional economics play a major role in potential earnings. The same ghost kitchen concept might generate 30-40% higher revenue in dense urban areas compared to suburban locations, though operating costs will also be higher. The five states with the highest concentration of ghost kitchens (California, New York, Texas, Florida, and Illinois) generally report higher average revenues.

Revenue growth typically follows a pattern of 20-30% increases year-over-year for the first three years as brand recognition builds and operations become more efficient. Ghost kitchens that introduce multiple food concepts from the same facility often see their revenue double within 12-18 months of adding new brands.

To estimate your own potential profit, start with projected monthly sales, subtract food costs (typically 28-35% of revenue), labor (25-30%), delivery commissions (15-30%), rent/utilities (5-15%), and other expenses like packaging and marketing (5-10%). The remaining amount represents your potential profit margin.

Conclusion

The ghost kitchen industry offers an innovative entry point into food service with significantly lower barriers than traditional restaurants. With reduced overhead costs, flexible operational models, and the ability to adapt quickly to market trends, ghost kitchens present an attractive opportunity for culinary entrepreneurs. However, success requires careful planning, technological savvy, and an understanding of delivery dynamics that differ substantially from conventional restaurant operations. Before jumping in, ask yourself if you’re comfortable operating without the direct customer interaction of traditional restaurants, if you’re adept at digital marketing, and if your culinary concept translates well to delivery. The ghost kitchen model isn’t for everyone—those who thrive on face-to-face customer relationships might find the delivery-only model challenging. But for entrepreneurs who embrace technology, value operational efficiency, and are passionate about creating delivery-optimized food experiences, a ghost kitchen could be the perfect recipe for business success.