Ghost kitchens haunt Miami’s dining scene. You may be eating from one and not know it
Ghost kitchens are not as spooky as they might sound.
Instead, they’re a new concept designed to reduce restaurants’ operating costs by catering only to delivery and, occasionally, takeout diners.
And in Miami’s cutthroat dining world — with real estate and labor costs soaring — they may be poised to become the future of affordable eateries.
The “ghost” part of ghost kitchens is simply that a passerby wouldn’t realize they have come across a kitchen cranking out orders for hungry residents living nearby. With few exceptions, customers cannot come and eat at a ghost kitchen. The idea is to set up kitchens in places with high frequencies of delivery orders, like urban centers or central business districts, while cutting out the costs of in-house dining.
“They’re quicker to open because there’s no front-of-house to deal with,” said Jaime Sturgis, founder and CEO of real estate firm Native Realty Corp. “The concept is, you can get them open sooner. It’s kind of an interesting phenomenon.”
And the future of ghost kitchens now matter much more to Miami, thanks to playing home to a billion-dollar ghost kitchen firm, REEF. Backed by SoftBank and Emirates-based Mubadala Capital, REEF has its sights set on a global expansion alongside a new, ambitious plan just announced to hire 1,000 employees locally, including among under-served populations. REEF recently signed a deal with Wendy’s to open 700 ghost kitchens for the burger chain across the country.
But some South Florida restaurateurs say they are hesitant to take a bite.
“Are they able to deliver the same product if it was me running it? That I don’t know,” said Pilar Guzman, CEO of Half Moon Empanadas.
Guzman said the idea of ghost kitchens sounds good — and indeed, she said she is currently exploring opening Half Moon ghost kitchens in downtown and Wynwood.
“We don’t need a big footprint,” Guzman said. “In the case of my business, 500 square feet is all we need, and that’s hard to get right now. ... Access to labor and locations — [ghost kitchens] solve those two problems.”
Guzman also notes that large ghost kitchen companies help provide a key ingredient that many Miami-area restaurant owners lack: the savvy to maximize their digital presence. Companies like REEF use customer data to triangulate locations for food concepts in neighborhoods where they are most popular. Think a burger concept on a college campus, or quicker, healthier options for office workers in a central business district. And, they can improve a restaurant’s search optimization on a delivery app like Doordash.
“For most businesses like us, it’s a big learning curve,” Guzman said. “I always tell people most of this community is non-tech businesses, and it’s a challenge for most of us.”
For now, Guzman said, sales continue to be brisk through existing delivery channels and through its ventanita on 79th Street — though closing Half Moon’s dining room there resulted in layoffs.
Meanwhile, other restaurateurs are building out their own ghost kitchens inside their existing ones to better monetize their real estate. Abe Ng, founder and CEO of Sushi Maki, relaunched the Chinese concept his parents created, Canton, out of one of his kitchens.
“That [food] is going out back door of our kitchen and being picked up by a [delivery] driver,” Ng said. “So we are engaged in that — it’s a great way to expand the footprint, the audience.”
Ng also distributes Sushi Maki through Whole Foods — another opportunity to grow revenue streams and compete with the proliferation of digital offerings now found on delivery apps.
Those moves — plus continued interest in its traditional takeout and delivery options — have allowed Sushi Maki to “hold serve,” Ng put it, even as his business faces new competition both from delivery apps and restaurateurs descending from other parts of the country with innovative food concepts.
Yet while Ng has taken a look at larger players in the ghost kitchen space, he is opting out for now, while continuing to “keep an eye” on what they’re doing.
“Sometimes you can be too early to a trend,” he said. “It was the same thing with the food truck trend 10 years ago.”
Brokers say restaurants seeking space within Miami and South Florida are finding competition for a limited amount of space, especially from the aforementioned newcomers to the market. In a statement, Brandon Isner, leader of market research and insights for CBRE in South Florida, said that as seated diners return to 2019 levels — and in some cases, surpass them — used restaurant space is now at a premium.
“The second-generation spaces that became popular for new-to-market concepts to lease within 2020 have essentially dried up, leaving first generation space as the only option,” Isner said. “Landlords are holding firm on rents, and are offering [fewer incentives] than in previous years, which is forcing some creativity in making deals work. In addition, the competition for industry labor is stiff, which can make it a challenge for concepts wishing to expand within the market.”
As a result, the trend toward limited-access kitchens is well underway. Stephen Bittel, founder and chairman of Terranova Corporation real estate group, says he is in discussions with REEF about opening a ghost kitchen in Coral Gables. Concepts like REEF, he said, are “bringing South Florida into the modern era.”
“While ghost kitchens rolled out in advance of COVID, the delivery obsession it brought has now become part of our world,” Bittel said. “That, coupled with delivery services, puts the pieces of the puzzle together. The chefs want to be able to try out their products and develop them without having to deal with the capital investment of a dining room, while still having a direct connection with their customers through delivery.”
And REEF is not the only game in town. Travis Kalanick, founder of Uber, has launched his own ghost kitchen company, CloudKitchens, that has opened in Wynwood and downtown. Sturgis, of Native Realty Co., said he sold a ghost kitchen space converted from a former Chinese restaurant just two weeks after it hit the market.
Sharon Allen, a chef, is also founder and CEO of Blue Tree Café Virtual Dining, a ghost kitchen now under construction in the fast-growing Sistrunk neighborhood of Fort Lauderdale.
“We all think we have the best idea or food item — [but] it’s not until we have spent tons of money, time and commitment that we find out that the trend has changed,” she said. “So you spend more money and time further getting yourself into debt. But if you had a short-term program where you could test the waters without costly leases and agreements, this would be a life-saver.”
Allen, who received $225,000 in incentives from the city’s Community Redevelopment Agency, is gearing up to host three concepts at Blue Tree: vegan, healthy soul food and Asian. She hopes to create as many as eight new jobs in the project’s initial period of operation.
“We believe in sustainability, fresh food — our concept is more community-based, and just conscious overall,” Allen said. “We want to help entrepreneurs that are like-minded who want to put together a product with the potential to sell.”
This story was originally published August 29, 2021 at 6:00 AM.
