LA's Ghost Kitchens Aren't An Illusion -- But Beware Of Phantom Branding
It was nearly midnight and Luther Chen, owner of Luther Bob's fried chicken, was already in bed when his phone rang. The kitchen at his business was still open and its phone number goes directly to his cell, so he picked it up and answered, "Hey, it's Luther with Luther Bob's."
The customer was stunned. According to Chen, all he could muster was, "Luther, like Luther Bob Luther?"
Chen laughs as he recounts the story, "He couldn't believe it for a second, and then he put it on speaker phone and he was like 'Yo, guys, it's Luther,' and I could hear like six dudes say 'Yo!'"
Luther is on the logo, his smiling face sketched in black and white on a blue sticker and attached to every order, but he's also a real guy, so maybe it shouldn't have surprised customers that the Luther would answer the phone. But it's not like you can dial up Trejo's Tacos and have a chat with Machete or call Chuck E. Cheese to complain about their unbalanced ticket-prize scale and get a giant mouse on the phone.
In fairness to Chen's stunned fans, it's easy to see why Luther Bob might seem out of reach. His restaurant functions as a ghost kitchen. It has no tables, no chairs, no brick-and-mortar storefront, just a minimalist kitchen designed for takeout and delivery in a large building full of nearly identical spaces. If you've ever opened a delivery app and noticed a bunch of nearby restaurants you've never heard of, there's a good chance several of them are ghost kitchens.
Although many of these are micro-businesses, founded by one or two people, prominent brands and big-name chefs have also jumped on the bandwagon, supplementing their restaurants with delivery-only kitchens to expand their reach. Chen, like a growing number of cooks, caterers and home chefs, chose a ghost kitchen because it allowed him to launch his business quickly, and without many of the expenses or regulatory hassles that come with a sit-down eatery.
During the COVID-19 pandemic, ghost kitchens have another advantage. Because they were never designed for dine-in service, they haven't been subjected to L.A. County's stop, start, stop rollercoaster of public health restrictions.
Food delivery accounted for an estimated $35 billion in industry revenue as of January 2020. Restaurant Hospitality projected that number would increase tenfold by 2030 -- and that was before the COVID-19 pandemic. Since March, as indoor dining has been curtailed and more customers turn to food delivery apps, eating restaurant meals at home has become more tightly woven into everyday life. That doesn't mean it's an easy game to win.
Chen, who opened Luther Bob's ghost kitchen in February of this year, runs the entire operation out of a tiny rented space in a retrofitted Pico-Union warehouse and has only two employees. Operating out of a 300-square-foot kitchen (less than one-third the size of an average commercial kitchen but normal for a ghost kitchen), they brine, dredge and fry hundreds of pounds of chicken each day. Luther also does the ordering, stocking and social media management.
Because of space limitations, his equipment is as basic as it gets.
"You really have to have technical chef skills. We don't have built-in timers, we don't have programmed friers," Chen says.
As sales have increased, Chen has invested five figures into kitchen upgrades to simplify and expedite the cooking process. He has also started outsourcing some of his prep work, sharing proprietary recipes with suppliers to save time.
Because he doesn't get to put up a sign or interact with customers, Chen tries to emphasize design and branding in hopes that Luther Bob's will become a recognizable entity. He recently shifted away from working in the kitchen so he can focus on administrative tasks as he negotiates with suppliers and prepares to launch new packaging.
Chen has done well with the ghost kitchen model -- he has built a loyal customer base and sales have grown steadily -- but between the massive cut that delivery companies take and the difficulties of increasing production in a tiny space, he doesn't see it as a viable long-term solution.
"I think of the ghost kitchen model as an incubator but as a scalable concept, I'm not sold on it," Chen says.
Instead, his current ghost kitchen is a way for him to field-test his product and refine his process while demonstrating high demand for his crisp chicken tenders and snappy sauces.
"In the long run, our future is not going to be limited to ghost kitchens," Chen says.
For some newer entrants into the ghost kitchen scene, the outlook appears a bit rosier.
Erik Black, owner of pit-smoked pastrami pop-up Ugly Drum, has only been in the ghost kitchen game since mid-September 2020 and things are going well. During the first couple of weeks, Black says, he was selling more of his smoky, Texas BBQ-inflected pastrami sandwiches than he could make.
Ugly Drum found success as a stand at weekly food market Smorgasburg L.A., where Black would pile thick slices of meat onto Bub & Grandma's sourdough. He was open just a few hours on Sundays and had time to chat with customers. With his Deli.Delivered ghost kitchen concept, he's now open for lunch seven days a week with an expanded menu of sandwiches, drinks and sides but without the face time. His work has shifted toward process and organization as he tries to perfect his system.
Black says of his small kitchen staff, "They're doing a really great job making the sandwich the way I'd make it, so I don't need to be there to hand-sell each sandwich," like he would at Smorgasburg.
Instead, he has been working on scaling up his matzo ball soup, making sure the recipe works in 60-quart and larger batches. "People don't realize how much work soup is," Black says. But, he adds, "I get into that kind of thing, figuring it out. That's been fun."
It took him awhile to find the right space and to outfit it for smoking pastrami. He has been bouncing back and forth between his North Hollywood smoking kitchen and his prep kitchen, which is connected to Bludso's Bar and Que on La Brea. Black says he enjoys diving into logistics as much as he liked slicing and stacking on the line.
For Black, the advantage of the ghost kitchen model is simple -- lower overhead and lower cost of entry. It has given him the room to fiddle with the menu and try out a few cocktails, time that can be hard to carve out at a brick-and-mortar. High buildout costs and permitting issues mean, "You have to have it all figured out when you open and if you don't, then you don't make it," Black says.
Here, though, he has the freedom to refine the concept without paying astronomical rent. Black knows how important creative freedom can be. Ugly Drum was supposed to be a hotdog stand. When he first popped up in July 2013, he threw his pastrami sandwich on the menu as a lark. Customers kept ordering it instead of hot dogs, so he switched gears.
Black would love to get customer interaction back -- either at a reopened Smorgasburg or in a brick-and-mortar space or both -- but he sees the ghost kitchen setup as a sustainable model, at least until indoor dining becomes feasible again. Even when that happens, he may stick with the concept.
Restaurants with established reputations like Ugly Drum or hot chicken superstars Howlin' Ray's, which opened a Pasadena ghost kitchen in September, are in an ideal spot to capitalize on the format. High-end chefs like Michael Mina, who just opened a new ghost kitchen concept in Glendale called Tokyo Hot Chicken, are also cashing in on the strategy to expand the reach of their brands.
There's another, perhaps less obvious, segment of the restaurant industry making successful use of ghost kitchens: medium-sized chains that want low-overhead footholds in high-rent areas.
Elevated sandwich shop Capriotti's, known for its roasted turkey sandwiches and cheesesteaks made with wagyu or Impossible beef, is a perfect example.
Capriotti's CEO Ashley Morris says he first heard about ghost kitchens two years ago and was immediately excited by the idea.
"We put it in our innovation pipeline and said we really want to be a leader in this space, because I totally thought it could work," he says. It took time to find the right real estate, but over the last several months, according to Morris, they "went after it hard and heavy."
Capriotti's has opened ghost kitchens in Pasadena and Koreatown, two areas where a full-size storefront might be prohibitively expensive. The added bonus of these delivery-focused spots is an expanded coverage area and customer base. Their Koreatown location is mostly geared towards downtown lunchers and hungry USC students.
"We've gotten to open and operate in this urban area where historically we can't," Morris says. Lower startup costs don't mean they've lowered their revenue expectations. In fact, Capriotti's expects its urban ghost kitchens to bring in the same returns as its traditional shops, and early results have been good. The Pasadena location is exceeding projections while business in downtown L.A. is growing, according to Morris.
He doesn't think ghost kitchens will replace brick-and-mortar restaurants but he is considering opening more of them and incorporating some virtual brands -- secondary concepts with narrow menus run by the same staff from the same location under another name. Cappriotti's is looking at a fully vegetarian virtual brand as well as one for breakfast sandwiches and another focused solely on beef.
As more chains and independent restaurants explore virtual brands, it has touched a nerve among some frequent app-based diners. Several readers have reached out to LAist to complain about restaurants repackaging themselves dozens of times as if they were new concepts, and about feeling tricked after they accidentally ordered from the same old spot down the block. A tempest sprung up in a teapot earlier this year when people discovered that Pasqually's Pizza in Philadelphia was run by a chef from the Chuck E. Cheese universe and that the pizzas from the two businesses were baked in the same ovens.
Yes, it would be disappointing if you thought you were ordering from a new, independent restaurant only to discover you had ordered a pie from a brand focused more on plastic ball pits than pepperoni. On the other hand, choosing a restaurant based on in-app recommendations from a delivery service is like forming your political opinions based on your sketchy uncle's Facebook links.
If you're concerned with the ethics of this branding tactic, take a minute to scroll through Instagram or Google. You should be able to figure out which restaurants are independent, single-focus kitchens and which are repackaged entities.
In fact, the lower barrier for entry with ghost kitchens is reminiscent of a trend born at another dire time for the food industry -- the fancy food truck craze that took root during the recession of the early aughts.
The best ghost kitchens, like the most popular food trucks, will probably leverage their success to move on to greener, more permanent pastures. As Morris puts it, if you don't evolve beyond a ghost kitchen, "Did you really build a brand? Or are you just offering a food service?"
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