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Ghost kitchens – sometimes called dark kitchens or virtual kitchens – can help restaurants run at a very low cost, and they’re reshaping the Canadian foodservice industry. According to Mordor Intelligence, digital ordering platforms and delivery services continue to surge in popularity, with nearly half of Canadians ordering food online at least once per week, which has fueled the success of business models like ghost kitchens.
Could operating a ghost kitchen help your restaurant survive and thrive in the years to come? Here’s a look at what ghost kitchens are and how they may (or may not) fit within your restaurant business.
What is a ghost kitchen?
A ghost kitchen — or a cloud, dark or virtual kitchen — is a commercial kitchen focused exclusively on delivery and takeout orders through third-party apps like Uber Eats, Skip and DoorDash, though some ghost kitchens also serve customers through their own website or app. Unlike a traditional restaurant, a ghost kitchen doesn’t have a storefront or dining room. But that doesn’t mean that no attention is given to branding, as ghost kitchens have distinct names, concepts and menus.
Sometimes, restaurants are born as ghost kitchens and will remain that way. Other times, ghost kitchens operate to serve the needs of existing restaurants with actual storefronts. For example, a restaurant may partner with a ghost kitchen outside its current delivery range and have that kitchen prepare food for delivery-only orders to expand its reach into that area.
Behind the scenes, a ghost kitchen may operate to serve a single restaurant’s needs, or exist as a shared production kitchen for multiple restaurants, like a co-working space where restaurateurs use the facilities but bring their staff, ingredients and menus.
History of ghost kitchens
The history of ghost kitchens in Canada is inextricably tied to the rise of online food delivery services in the 2010s. Consumers were used to calling restaurants for delivery or takeout, though some eateries offered online ordering through their own websites. The emergence of platforms like Just Eat, a European company that entered the Canadian market in 2009 and acted as a restaurant aggregator, made online ordering more accessible.
In 2012, brothers Josh and Chris Simair founded SkipTheDishes, now known as Skip, in Saskatoon SK, which marked another turning point in the food delivery landscape, giving restaurants an easy way to offer digital delivery services while providing consumers with a convenient ordering method. The company rapidly grew its network of restaurants and user base and was bought by Just Eat in 2016.
Meanwhile, both DoorDash and Uber Eats launched in Canada in 2015. Combine that with the fact that by 2016, three out of four Canadians owned smartphones and online ordering rose in popularity. According to an Agriculture and Agri-Food Canada report, online ordering grew by an average of 31.7% annually between 2017 and 2022.
Enter ghost kitchens, a business model born out of the growing demand for round-the-clock meals at your fingertips. Toronto-based Kitchen Hub opened in 2020, calling itself Canada’s first virtual food hall. The shared kitchen allowed customers to choose dishes from multiple local favourites in a single order placed through Kitchen Hub’s own app or third-party delivery apps.
Even big chains got in on the trend. That same year, Wendy’s partnered with REEF to launch its first neighbourhood kitchen in Toronto, a strategic move to grow through ghost kitchens versus brick-and-mortar locations.
These days, the online food delivery market continues to grow, showing that there is still plenty of opportunity for new ghost kitchen operators and existing ones looking to expand – according to Statista, revenue in the Canadian online food delivery market is projected to reach US$15.61 billion in 2025.
How do ghost kitchens work?
If you’re wondering how a ghost kitchen works in practice, think of it like a back-of-house powerhouse with a strong digital presence. You’ll want to streamline operations to prepare and deliver orders quickly without sacrificing the food quality that customers expect, while building and promoting your brand online.
To successfully launch a ghost kitchen, there are five key steps to keep in mind:
- Rent a ghost kitchen space
- Set up your virtual restaurant
- Receive customer orders
- Prepare and cook orders
- Deliver orders to customers
Whether you’re a first-time restaurant owner or an industry veteran looking to innovate, here’s more information about each step involved, from finding the perfect virtual kitchen space to building a brand that will stand out on delivery apps.
1. Rent a ghost kitchen space
Choosing a ghost kitchen space can be daunting, even if you don’t have a storefront. The equipment and appliances have to fit your needs and the rental model has to make sense with your operating budget and projected sales. To help you make the right decision for you, here are a few key factors to consider:
- Location: With a ghost kitchen, you won’t need to worry about foot traffic, but location still matters, since delivery app algorithms filter search results based on distance. Look for a densely populated area and think of delivery drivers and logistics too. Proximity to the highway and parking can affect how quickly orders reach your customers and how satisfied they’ll be, as fresh and warm food is always better than an order that has been sitting on a counter or in a car for a while.
- Rental model: There are shared virtual kitchens with flexible pricing models and standalone commercial kitchens for rent, which typically come with a more traditional lease. If you rent a standalone kitchen for your brand, you have more control over the setup, but it might cost you more in rent, utilities and equipment. With a shared model, you save on those things, but you could be asked to share a portion of your sales in commission. That said, you might benefit from perks such as visibility on delivery apps.
- Lease terms: Are you going to be charged hourly or monthly? Will you be able to adapt workstations and workflows to your unique needs? Can you end your contract at any time? What happens if equipment breaks down or if a competitor wants to set up shop in the same ghost kitchen as you? These are all questions to ask yourself as you shop around. Read the fine print and consider your short and long-term goals. It’s better to have the flexibility to pivot than to be locked into rigid terms.
2. Set up your virtual restaurant
Once you have access to a commercial kitchen, it’s time to set up your virtual restaurant and build your brand, whether you choose to exclusively operate on third-party apps or launch your own website or app.
Choose your concept
Strong branding can make or break your success, so be strategic when choosing your name, concept, menu and visuals. All those elements impact whether a customer will choose you when scrolling through an array of options, whether they’re looking for a late-night treat to satisfy their sweet tooth or browsing healthy lunch options at the office.
Let’s say that you want to create a dessert restaurant and niche down by specializing in cookies. Putting “cookies” in the name of your brand can help you come up in search results on delivery apps. Writing enticing product descriptions for each cookie type and putting appealing photos of your products can encourage customers to add items to their cart.
Set up delivery app accounts
Having a presence on all major Canadian delivery apps maximizes your reach without a physical storefront. Sign up with Uber Eats, DoorDash and Skip. The process varies depending on the service provider, but you’ll usually have to create your account and verify your business by providing your contact and banking information, business licence, proof of ownership and tax details like your GST/HST number.
You’ll need to set operating hours and a delivery radius, which should be informed by your concept as well as your capacity. If you have a team willing to work the night shift, for instance, you can offer burgers at 3 a.m. when some of your competitors are closed. You’ll also have to provide branding assets like your logo, as well as a detailed menu with images of dishes — again, this matters to encourage click-through and conversion, so put yourself in the shoes of your customers to make the best choices.
Promote your brand
Once your business is set up, it’s time to promote your brand. Even though some ghost kitchen operators focus exclusively on optimizing their presence on delivery apps, nothing stops you from creating your own branded website. Square Online lets you launch a mobile-friendly site in minutes, complete with the ability to accept and manage orders.
Meanwhile, you can leverage Square Marketing to target customers with personalized promotions, like a discount code for the next time they place an order directly on your site. And you can grow your social media presence on platforms like Instagram and TikTok to expand your reach and build brand recognition.
3. Receive customer orders
When you manage multiple third-party apps plus your own channels, operations can get chaotic and mistakes can happen. Some ghost kitchen tech solutions let you consolidate orders from different apps into a single system, allowing you to serve more customers with less friction. For example, Square’s ghost kitchen POS integrates directly with food delivery apps, which means you’ll be able to manage everything in one place.
Imagine this: A customer places an order on your website. Meanwhile, your team is already working on 10 orders from Uber Eats and the DoorDash driver just arrived to pick up three more. You know all of this thanks to the Square Kitchen Display System (KDS), which gives you a clear visual of all orders. But you’re not stressed. You’re confident that customers will receive their orders on time and without errors.
In the kitchen, each staff member knows what to do next, as Square KDS dispatches order tickets to the right prep stations in order of priority, including information about menu modifiers. With streamlined operations that help you handle a high volume of orders, you’re even thinking of scaling by running multiple brands out of your ghost kitchen.
4. Prepare and cook orders
But what happens once orders are dispatched to the kitchen? In a ghost kitchen, every second counts. Delays can lead to poor online reviews, and while you can’t always control what goes on once an order is on the road, you have control over the cooking and prep process, which should be as tight as possible.
Your layout can keep workflows organized and save time. For example, you can have an assembly line where orders move from one end of the kitchen to the other in a linear manner, starting with prep and finishing with packaging. Keep in mind this might not always be possible in a shared kitchen, where each tenant typically has their own zone, on top of common areas like storage and dishwashing.
There are a few ways to approach prep and they all can impact operations:
- By production phase: This is an assembly-line setup where orders move through steps in a linear fashion. It’s straightforward and makes quality control easier, which is great for consistency, but it’s not the most flexible if volume suddenly ramps up.
- By menu category: This can speed up prep if you have a single-brand ghost kitchen with simple menu categories like fried items, burgers and salads. You can have one salad station, one grill station and one fryer station. That said, there can be bottlenecks if one category is more popular than others.
- By brand: If you run multiple brands out of the same ghost kitchen, you can divide work stations by brand, which prevents confusion and keeps staff focused. You’ll need a lot of space to pull this off though.
- By order channel: If you have an established ghost kitchen with lots of orders coming in from different channels, it can sometimes be a good idea to divide workstations by delivery platform e.g., DoorDash, Skip, Uber Eats and direct orders. It helps your team juggle different priorities and order timelines, but it’s not always the most efficient use of your ingredients or labour.
Ultimately, the right setup depends on your space, the number of brands you own, your menu(s) and order volume. But it should be intentional.
5. Deliver orders to customers
After a food order is prepped and packaged, it’s ready to be picked up. Most ghost kitchens rely on third-party delivery drivers to get orders in the hands of customers. If your kitchen display system did its job well to help staffers gauge timing, orders will get out the door while still fresh. There are a few other things you can do at the pickup stage to ensure things continue to unfold smoothly.
An easily accessible, clearly designated area for drivers to collect orders is a must. They will need to validate order numbers and pick packages up without wasting time looking for parking or trying to flag down a staff member. Even with a perfectly orchestrated flow in the kitchen, mix-ups can happen at this stage of the process, so it’s important to clearly identify orders (and brands when you have more than one).
Remember that packaging is part of the customer experience with online food delivery, as it keeps dishes looking — and tasting — appealing by the time they arrive. For example, you might need to prioritize temperature control if you operate a virtual sushi restaurant to keep raw fish fresh and cool.
Ghost kitchens vs traditional restaurant kitchens
So, what’s the difference between a ghost kitchen and a traditional restaurant kitchen besides the fact that there is no front of house? While there may be similarities in terms of workflows and staff roles, it all boils down to the format of the actual kitchen.
Traditional restaurant kitchens come with all the bells and whistles, from cooking equipment and ventilation to storage areas and prep stations, whereas some ghost kitchens are just sections of a bigger kitchen. Ghost kitchens may also be tied to different business models than a traditional restaurant kitchen.
Here’s what you need to know about the different ghost kitchen types.
Types of ghost kitchens
Incubator or pop-up
Some restaurants want to dip their toes into new food delivery concepts and try trends before fully committing to them. Enter incubator or pop-up ghost kitchens, which are tied to a restaurant’s main kitchen but focus exclusively on online delivery orders. This allows the team to stay focused and divide work efficiently instead of mixing all orders into the main kitchen, while also preserving the integrity of the original menu. This type of business model is similar to opening a stall with a different menu in a food hall or launching a food truck focused on a specific food category under your restaurant brand name.
Shared or commissary
This is the model most people refer to when they talk about ghost kitchens — it’s a big commercial kitchen shared by multiple tenants who each rent their own section based on a specific schedule. Shared or commissary kitchens tend to be owned and operated by third-party companies or entrepreneurs as opposed to restaurants, as they’re B2B solutions designed for restaurateurs looking to access kitchen space without investing in their own facility.
Kitchen pods
Did you know that there are mobile kitchen pods that come with pre-installed kitchen appliances, plumbing and prep space? These mobile containers are easy to transport and can be set up in a parking lot or behind a restaurant for those looking for a low-budget, quick-to-execute ghost kitchen option. A kitchen pod can help a restaurant test out whether delivery would be successful in a different part of town before committing to a more permanent setup. It can also come in handy during particularly busy periods when you might require more kitchen space.
Benefits of operating a ghost kitchen
Operating a ghost kitchen can benefit your bottom line and help you scale. Here are a few of the benefits of running a ghost kitchen, whether you’re doing it to supplement a more traditional restaurant business model or skipping the storefront altogether.
- Lower property costs: With a traditional restaurant, startup costs are higher because you’re either leasing or buying a space in an area with high foot traffic, which means that it’s prime real estate. Renovations are often involved too, especially if you’re building out a commercial kitchen from scratch. With a ghost kitchen, you can operate out of industrial facilities in lower-rent areas.
- Increased ongoing savings: With a ghost kitchen, you only pay back-of-house staff, so you save on payroll and with a shared model, you’re splitting the cost of rent and utilities too.
- Flexibility and scalability: Do you want to test a delivery-only concept as an additional revenue stream for your established restaurant? If it’s successful, you can ramp up operations and even launch spinoff brands. Or maybe you want to enter the online delivery space as a new entrepreneur with a part-time schedule in a commissary kitchen to minimize upfront costs and risk. As you grow, you’ll hire more staff and pay for more hours. Ghost kitchens offer flexibility and scalability, which makes them great for restaurateurs looking to innovate or new business owners building brands from scratch.
- Data-driven insights: Since you’re relying on online delivery channels, you get instant access to performance insights. You can know right away which menu items perform best and which ones underperform, so you can optimize your menu based on data to increase sales. For example, if your fried chicken sandwich is a best-seller, you can test another variation of the recipe as a new menu item.
- No need for a physical dining room: Dine-in restaurants have to manage reservations, squeeze in walk-ins and deal with no-shows. There are also more touch points involved in the customer experience, from the host stand to the bathrooms. With a ghost kitchen, you focus entirely on food prep, quality control and efficiency. It’s easier to create a consistent experience without the need to juggle front and back of house.
Disadvantages of operating a ghost kitchen
While there are plenty of upsides to operating a cloud kitchen, there are also downsides to be aware of to increase your chances of success.
- Limited customer engagement: Having access to immediate data is a perk, but customers can also start to feel like names and numbers behind a screen. You don’t get to have face-to-face conversations and address issues in person with a ghost kitchen. And you lose some of the human connection and community aspects that can make a restaurant business unique and authentic. That said, you can offset this with little touches like leaving notes on packages or nurturing an audience outside of apps with tools like Square Marketing.
- Reliance on third-party platforms: With a cloud kitchen, the majority of your revenue often depends on third-party apps like Uber Eats, DoorDash and Skip, which take commission fees. You can sometimes offset costs by negotiating better terms, especially if your restaurant is popular on the app, or by driving orders directly through your website with a platform like Square Online.
- Less control over delivery logistics: It can be frustrating when you get an order out the door fast, only for it to get stuck in a driver’s car because of a detour — and it can also lead to poor reviews. Delivery logistics can be unpredictable, but you can optimize your menu for delivery by creating dishes that travel well and using containers that keep them intact during transport.
- No walk-in revenue: A ghost kitchen means limited walk-in revenue, since there won’t be Friday night foot traffic to help people discover your brand. But focusing on strong branding and positive customer reviews can enhance your reach despite that obvious downside.
- Competitive landscape: Customers have hundreds of options to choose from whenever they scroll through a delivery app. You’ll have to compete with both virtual and traditional restaurants to cater to their tastebuds.
Is a ghost kitchen right for you?
If you’re thinking of incorporating ghost kitchens into your operations, there are different questions and considerations to keep in mind to determine whether it’s the right move for you.
- Consider the restaurant’s objectives: Are you looking to close your brick-and-mortar space to focus on delivery and takeout? Do you want to add delivery to your offerings or expand delivery and takeout to new geographies? How soon do you want the ghost kitchen to be operational? The answers will help you determine your goals and ask the right questions of potential operator-partners.
- Take into account your existing infrastructure: How effectively are your current point-of-sale and kitchen display systems serving the business, especially when it comes to takeout and delivery? A restaurant’s technology and payment solutions must be integrated with an effective online ordering infrastructure to support a ghost kitchen.
- Factor in potential costs and ongoing volume: Will your ongoing order volume offset your contractual costs to a ghost kitchen operator? What is your potential for profit? Since shared kitchen operators charge start-up costs and monthly fees to restaurateurs, smaller restaurants should run cost calculations to make sure a ghost-kitchen partnership makes financial sense in terms of expenses and delivery/order volume.
The future of ghost kitchens
The use of ghost kitchens across the restaurant industry is expected to grow in the years to come.
According to Bonafide Research, the Canadian cloud kitchen market is projected to reach USD$2 billion by 2029. Consumers want convenience and online food delivery apps like Uber Eats, Skip and DoorDash are fueling the growth of ghost kitchens.
As a restaurateur, you must decide if your business’s unique challenges or growth plans can be effectively addressed by opening a delivery-only location or pivoting to a ghost-kitchen concept.
Ghost kitchen FAQs
What is the meaning of ghost kitchen?
A ghost kitchen is a restaurant that prepares meals only for delivery and takeout, typically on delivery apps like Uber Eats, Skip and DoorDash.
How much does it cost to start a ghost kitchen?
The costs of starting a ghost kitchen in Canada depend on several factors, including your location and the rental model and pricing of the facility you choose. For example, in Toronto, one commercial kitchen rental listing is based on a sliding scale of $22.00—$38.50/hour, while another example costs $3,960/month.
Do ghost kitchens need licences like restaurants?
Yes, ghost kitchens need licences and permits in Canada just like any restaurant, even if you rent a space in a shared kitchen that is already compliant with local regulations. BizPal is the best way to figure out the exact licences and permits you need based on your business type and area.
How do you get customers with a ghost kitchen?
The best way to get customers with a ghost kitchen is to create an appealing brand and concept. Study the market to find gaps and opportunities, whether you think that a certain area could benefit from healthy delivery options during lunchtime or you want to offer round-the-clock dessert.
Once your menu, name and concept are dialed in, set up accounts on all major Canadian food delivery apps and include strong visuals of your dishes. Quality control and speed are key to start accumulating positive reviews, which will also impact your reach on those apps.
It’s a good idea to create your own ordering website with a tool like Square Online to have some control over your audience and revenue, as well as to market your business on social media to build brand recognition.
