By Damon Shrauner, Contributor
Venturing into the restaurant business is a daunting task. It takes up a lot of your time and financial resources and requires detailed planning. However, recent trends suggest that ghost restaurants are a unique and low-cost opportunity for investors looking to enter the food industry or existing operators looking to expand their business into other cuisines.
Ghost Restaurants and Their Increasing Popularity
Ghost restaurants (or “ghost kitchens”) are businesses that render services by cooking food for orders placed online or over the phone and delivering the food to the customer but without any dine-in options. These restaurants may operate from a non-commercial or commercial location, such as your own home, a low-rent premises, or an existing restaurant’s kitchen. This allows the business to work with lower financial investments than a conventional restaurant.
In a conventional restaurant business, you will need to invest in a prime location, appliances, and furniture, create the perfect ambiance, hire qualified waiting staff, pay operating costs, and so much more. Expenses like these are eliminated in a ghost restaurant, where only a good chef and minimal staffing are required.
This allows for improved focus on the quality of food, variety in menu items, better packaging, and improved delivery services.
The Importance of Financing for Starting a Ghost Restaurant
Although the start-up costs for ghost restaurants are comparatively low, opening a ghost restaurant is still a crucial financial investment. It is important to take note of all the expenses needed to start a business, such as the cooking equipment, raw cooking materials, marketing costs, skilled staff, delivery personnel, etc.
Once your financial plan is strategized, the next step is securing an investment. It is critical to make sure you find the right type of investment before you open your ghost restaurant for business. Let us explore the various aspects that are needed for a successful start-up in the ghost restaurant industry.
Assessing Start-Up Costs
Begin your estimation by determining the type of ghost restaurant you want, including the cuisine you want to cook, the location, and unique ideas that set your restaurant apart. Based on the above decisions, the necessary equipment can be procured. For example, cooking Chinese food requires woks, ladles, sauces, oils, etc.
This should be followed up with hiring and training experienced and skilled staff in all relevant departments, such as cooking, packaging, maintenance, and delivery.
Once the organization is established, creating an online presence through an official website, social media marketing, and if desired, a delivery partner, is very important. The costs of all these tasks should be assessed in the primary financial drafts.
Identifying Funding Sources
Seeking investors is the main foundational step of setting up your business. Whether you invest independently or take up a line of credit depends on your personal preference. However, if you are seeking external investors, there are a few types of investors to look for:
Venture capital investors: These individual or organizational investors pool in and invest their money in potential startups and take equity in the business in return. It is to be noted that venture capital investors are likely to have a say in the operations of the establishment.
Angel investors: These investors are people with high net worth who invest in businesses in return for a percentage of the equity. These investors can be anyone from your friends, family, or people across the world. Unlike venture capital investors, angel investors only invest in early-stage companies.
Crowdfunding: This is a relatively new method of acquiring capital, where entrepreneurs convince the population to invest in their business. Though often difficult, a successful crowdfunding venture pays high dividends. Just like the above two methods, each crowdfunder receives an equity of the business proportional to their investment.
Crafting a Business Plan
A good business plan includes several key characteristics, such as a unique variety of menu options, interesting packaging, scouting the market for needs, and targeting the right population before opening a restaurant.
The business plan must also involve a targeted marketing strategy and assess a financial target projection for the first year, the second year, and so on. It is beneficial to establish expectations for the workforce to achieve optimum performance.
Pitching to Investors
Investors seek a business that has a high potential for return on investment. Thus, formulating a compelling pitch that includes the passion behind the project, the financial projections, the investment needed, profit margins, the uniqueness of the business, and the potential risks expected is crucial.
Additionally, presenting the pitch with the utmost confidence while targeting potential investors’ expectations will ensure a successful result.
Managing Cash Flow
As a successful business owner, you must create a profitable environment for the business. For example, building better relationships with vendors to negotiate cheaper prices, monitoring expenses, and implementing adequate financial controls can help ensure your long-term success.
However, expenses may need to be reviewed and updated from time to time to ensure sustainable cash flow. This allows you to stick to your budget, provide the best possible services, and retain a considerable profit margin.
Leveraging Technology
A ghost restaurant is based on the principle of digital ordering. It places telecommunications at the center of the establishment. Anchoring the many platforms of digital marketing creates excellent outreach to the targeted population.
Use computer and mobile software programs to streamline your day-to-day operations, such as collecting, processing, and delivering orders. Leverage technology to stay ahead of the competition. Making informed decisions by using data analytics to optimize your business model according to customer needs and changes in the market.
To Wrap Up!
Ghost restaurants are an upcoming revolution in the restaurant industry. While reducing extra costs, they ensure improved quality of food and increased variety delivered to customers in the comfort of their homes.
Although the investment is low, it still requires considerable financial capital. Thus, thoroughly planning, budgeting, creating new and unique ideas, and optimizing cash flow with the use of technology are very important for a successful ghost restaurant.
