Dark Kitchens: How the pandemic has changed food delivery in Russia

Contents:

• What is a dark kitchen and how does it work?
• Transformation of the food delivery market
• Key factors for a successful ghost kitchen business
• How pizza became the basis of a successful business
• The pandemic: Lessons for the food delivery industry
• The future of the ghost kitchen segment: where are we heading?

What is a dark kitchen and how does it work?

A dark kitchen, or "dark kitchen," is an innovative restaurant business format that has been actively conquering the market in recent years. Also known as a "ghost kitchen" or "cloud kitchen," this concept focuses exclusively on food delivery. Customers are not able to see the kitchen itself or visit the establishment, interacting only with the courier, which gives this format its mysterious name. Dark kitchens allow restaurants to optimize costs, minimize risks, and focus on the quality of dishes while offering a diverse menu for delivery. Thanks to this approach, many entrepreneurs can more quickly adapt to changing consumer demands and experiment with new concepts without the need for large investments in physical space. Dark kitchens offer numerous advantages for entrepreneurs. First and foremost, restaurant owners can significantly reduce their expenses by avoiding high rents. These kitchens are typically located in less-trafficked areas, which also helps reduce maintenance costs. Furthermore, dark kitchen models do not require traditional staff, such as bartenders and waiters, which further reduces costs. These factors make the dark kitchen an attractive model for food service businesses, allowing them to focus on product quality and customer service while optimizing costs. Ghost kitchens offer significant benefits for customers. One of the main advantages is the high speed of delivery. While traditional restaurants can experience wait times of up to two hours, ghost kitchens optimize processes, reducing wait times to 60 minutes or less. These kitchens aim to maximize coverage, and some offer a refund for the next order if delivery is delayed by even one minute. This approach significantly increases customer satisfaction and makes ghost kitchens an attractive choice for those who value fast, high-quality service. The high speed of service in cloud kitchens is achieved thanks to several key factors. First, the delivery zone is typically limited to a few kilometers, allowing couriers to deliver orders quickly. Second, cloud kitchens emphasize rapid food preparation: many ingredients and even ready-made dishes are pre-prepared, significantly reducing the time required to fulfill an order. This allows us to provide prompt service and meet customer needs in the shortest possible time.

Transformation of the food delivery market

The COVID-19 pandemic has significantly Accelerated the development of the food delivery sector. A Tinkoff Data study published by Skillbox Media found that delivery sales in Russia quadrupled in 2020. This shift has fundamentally transformed consumer habits and drawn attention to new business models in the industry. The emergence of new services and expanded product ranges responded to growing demand, which in turn contributed to market development and improved customer service.

Restaurants who traditionally operated in a brick-and-mortar format have begun exploring the online market. A unique project, Ghost Line DC, a ghost food court created by restaurateur Aaron Gordon, has opened in Washington. This project brings together several chefs, each offering dishes from their own national cuisine. This approach preserves authenticity and avoids mixing different styles and recipes, highlighting the diversity of culinary traditions. Ghost Line DC exemplifies how new formats can successfully combine tradition and modern technology in the food service industry.

Despite the originality of the idea, the concept was not well-received by consumers. Gordon failed to convey to customers that they were paying for unique dishes, not standard service. As a result, Ghost Line DC has become a generic food court with inflated prices and entertainment programs. This case highlights the importance of a deep understanding of the target audience and its needs for the successful promotion of unique concepts in the food service industry.

How to achieve success in the rapidly changing food service sector? The creators of the "Local Kitchen" project believe that simplicity and accessibility are key. "We focus on fast, high-quality food for residents of large cities who value their time. Business lunch has become an important ritual, but it requires a significant investment of time," notes Alexey Kolesnikov, co-founder of Rocketbank. Given today's realities, it is important to offer solutions that save time and ensure high quality service.

Today, "Kitchen on the District" is actively expanding its network in Moscow and other regions, offering A varied menu that changes weekly. This is especially important, as even classic dishes can quickly become boring. A specialized team of analysts analyzes demand for popular items, such as cutlets and borscht. This allows the company to quickly adapt to customer preferences, ensuring high-quality service and meeting customer needs.

Key factors for a successful ghost kitchen business

Modern changes in the restaurant business require new approaches, which has led to the growing popularity of the ghost kitchen concept. This model shifts the emphasis from the traditional restaurant format to innovative solutions that optimize processes. A striking example of the successful implementation of this concept is the Carrots Kitchen project. This project unites six unique restaurant concepts and has been successfully operating in Russia for three years, demonstrating the effectiveness and demand for this new format. Ghost Kitchen offers the opportunity to significantly reduce costs while maintaining high service quality and menu variety, making it attractive to both entrepreneurs and customers.

We chose the dark kitchen model because it offers significant advantages. First of all, we significantly reduce rent and staffing costs, allowing us to offer restaurant-quality dishes at lower prices. Secondly, a single kitchen serves multiple concepts simultaneously, optimizing the use of space and resources. This also allows us to quickly test and implement new ideas. Maria Mazo, CEO of Carrots Kitchen, notes that this model fosters flexibility and innovation in the restaurant industry.

The main driving force behind Carrots Kitchen's success is the personal brand of founder Ilya Varlamov, a renowned Moscow urbanist. He launched the company's first project, the "Varlamov.Est" service. Although his prices are higher than those of competitors such as "Kukhnya na rayon," today's audiences appreciate the concept of fast, high-quality food and are willing to invest in this experience. The unique combination of quality and convenience makes Carrots Kitchen an attractive choice for consumers seeking effective nutritional solutions.

Ilya's brand played a significant role in our early days, attracting our first customers. However, to retain them, we focus on the high quality of our dishes. This has become the foundation of our successful development, notes Mazo.

How Pizza Became the Foundation of a Successful Business

In the food industry, where innovation plays a key role, ghost kitchen startups are gaining popularity. One successful example is FoodBand, which began with pizza—a popular dish beloved by many. Founded in 2013, this service became one of the first foodtech companies in Russia, offering convenient and high-quality delivery. FoodBand continues to develop its services, adapting to changing customer needs and introducing new recipes, making it a significant player in the food delivery market.

Artem Khalimonenko, founder of the FoodBand food delivery service, shares his experience in the restaurant industry. In 2007, he began developing websites for delivery services in St. Petersburg. Recognizing the potential of this segment, he decided to launch his own project. He chose the dark kitchen model, which requires less investment. Opening a traditional restaurant costs 10-15 million rubles, while launching a cloud kitchen can be done for as little as 6 million. This approach minimizes risks and allows for a focus on food quality and customer service, which are key factors for success in the delivery industry.

Currently, FoodBand operates 14 kitchens, offering a wide range of dishes, including pizza, wraps, Hawaiian poke, salads, and desserts. The franchising model allows the business to easily scale, facilitating geographic expansion and meeting the growing demand for high-quality and varied food. FoodBand is committed to improving service quality and introducing new culinary solutions, making it an attractive choice for customers and potential franchisees.

Artem Khalimonenko emphasizes that having our own technologies and IT systems allows franchisees to focus on customer service. We ensure high quality standards, including the production of pizza dough at our own plant. This ensures that every location in the network will provide the same high level of service and taste. Our quality control system and franchisee support contribute to the creation of a successful business, making our offer attractive to new partners.

FoodBand is actively working to expand its network throughout Russia, considering new formats, including mini-cafes that will not offer pizza. This decision will significantly simplify the process for franchisees to meet ventilation requirements in confined spaces. The company has many ambitious plans aimed at improving the availability and quality of service for customers.

Pandemic: Lessons for the Food Delivery Industry

The impact of the pandemic on the delivery sector, especially the ghost kitchen concept, raises many questions. Research data does confirm significant growth in this area. However, the answers to these questions are not as clear-cut as they might seem at first glance. The complexities and variety of factors influencing the development of this segment require detailed analysis and understanding. Ghost kitchen, as a new model of the restaurant business, demonstrates its attractiveness for investment and adaptation to changing market conditions.

Photo provided from the personal archive of Maria Mazo.

The pandemic has significantly accelerated the development of the food delivery sector, but has also created a number of new challenges. Today, restaurants and dark kitchens are finding it difficult to find qualified personnel. Many workers have left Moscow, and those who remain are not always willing to comply with vaccination requirements. Competition in the market has intensified due to the emergence of a large number of dark kitchens and restaurants offering delivery services. In this environment, businesses must adapt, improve service quality, and find new ways to attract customers to remain competitive.

The pandemic has led to significant changes in the business environment, one of which was the loss of orders in the city center. With office workers switching to remote work in April 2020, there was a sharp decline in demand for delivery services. This change had a negative impact on many retail outlets and services focused on urban traffic. In this new reality, businesses must adapt to the changed conditions to restore previous order levels and attract customers in the post-pandemic world.

In 2020, we did not record significant growth, as most of our customer base consisted of office orders, including orders for birthdays and corporate events. With the departure of office workers, we faced a drop in demand. However, thanks to the high quality of our food, customers began to order home delivery. By the fall of 2020, we saw a 40% increase in demand, although this process was complex and time-consuming. Local Kitchen faced significant production challenges. In response to the decline in orders during quarantine, they developed a special offer—the "All-Day Social Set." This set includes breakfast, lunch, and dinner and is offered at the attractive price of 492 rubles. The company's founder emphasized that this project is not profitable, but its goal is to support customers and preserve jobs for employees.

The Future of the Ghost Kitchen Segment: Where Are We Heading?

The ghost kitchen segment continues to grow rapidly, driven by growing investor interest. In the summer of 2020, 85% of the shares of the Kitchen company were acquired by O2O, a joint venture between Sber and Mail.ru. That same year, the Carrots Kitchen project raised over 100 million rubles, with a significant portion of the investment coming from third-party investors. This underscores the high potential and attractiveness of this market for investment. Ghost kitchens are becoming a significant player in the food service industry, offering new business models and growth opportunities.

Russian companies are actively seeking opportunities to enter international markets. For example, Yandex is developing the e-grocery sector, offering delivery services for prepared meals, groceries, and everyday goods. The Lavka service already operates in major cities such as Paris, Tel Aviv, and London, under the international brand Yango Deli. However, according to Andrey Paramonov, President of the Russian Association of Gastronomic Tourism, the success of this project in foreign markets remains questionable. It's important to note that competition in the food delivery segment abroad is fierce, and companies must consider local preferences and consumer demands to succeed. Paramonov emphasizes the differences between Russia and other countries in the ghost kitchen industry. While the United States has approximately 1,500 such businesses, in Russia the number barely exceeds a few dozen. The reasons for this gap lie in different approaches to high technology and manufacturing. The United States and Western Europe are actively implementing innovation, while China and Southeast Asia are focused on mass production for the global market. Russia, in turn, remains primarily a raw materials economy. Our legislative and economic policies, as well as our mentality, do not contribute to significant changes in this area, which hinders the development of new business models and technologies.