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26/04/2022 – HoReCa Focus / Dark Kitchens / Food Delivery / Takeaway

The Darker Side of Dark Kitchens

Turbocharged by pandemic-induced lockdowns across the globe, the concept of the so-called ‘dark kitchen’ – a unit fully equipped to prepare food for delivery orders – has retained its appeal even as the world’s hospitality venues have opened up once more. While some industry observers believe these set-ups to be the next direction for the sector, Sam Martin – COO and Co-Founder of Peckwater Brands – explores the various issues surrounding the dark kitchen phenomenon, what the future of F&B preparation will look like, and what alternatives already exist.


A common theme in articles covering hospitality businesses and the rise in home delivery has been the rise of ‘dark kitchens’. While this new style of food preparation facility may sound somewhat otherworldly, in reality it is a space fully equipped with the kitchen equipment and staff necessary to prepare food and drink for delivery orders – often for multiple different brands at once – without a public-facing counter or restaurant to go with it.

 

There has been a significant rise in the prevalence of dark kitchens in recent years, fuelled in part by the massive increase in demand for home food and drink delivery during the pandemic. Restaurant closures and bored consumers stuck at home meant third-party delivery platforms like Deliveroo and Uber Eats saw massive growth in order volumes. 


In the UK – a country responsible for approximately 40 per cent of all European takeaway revenue – the total number of delivery app users increased massively during the pandemic, increasing by almost 25 per cent from 2019 to 2020 (19.9 million to 24.8 million). This was at a time when high street restaurants relied heavily on delivery to stay solvent – Peckwater’s own survey amongst 250 decision-makers within UK hospitality businesses revealed that 75 per cent of hospitality businesses surveyed were relying on takeaway services to survive.


The role of the dark kitchen in the future of the hospitality industry is a topic of much debate, with some believing them to be the next direction of the sector, and others believing that dark kitchens live up to their names by casting a shadow over the industry’s reputation.


With this article, we will explore the many questions and issues surrounding the dark kitchen phenomenon, explore what the future of food and drink preparation will look like, and explore the alternatives that already exist.


The pros and cons of dark kitchens


When considering the problem of a food service brand’s delivery order volume exceeding its own kitchen’s capacity, then the dark kitchen might seem like a logical solution – simply increase kitchen capacity at a secondary site, without opening and fully staffing a new restaurant. Much like an external generator can provide extra power to a facility, a dark kitchen can provide extra preparation capability. 


The key issue here, however, is the attached cost. While fulfilling more orders through a dark kitchen will result in increased revenues, doing so will require that the dark kitchen be fully equipped with the same equipment, materials and capable staff as the original restaurant – which carries a massive upfront cost. The necessary equipment for a commercial kitchen can total between £60,000 and £80,000, and that doesn’t even factor in the cost of the space. Any third-party dark kitchen will have to sustain that cost, which will be reflected in their fee. 


That fee is reduced, however, by the advantage of their location. Footfall and prestige are both important factors to consider when placing a restaurant or takeaway – many businesses rely on their appearance and their ability to attract impulse customers, so having a premium location is important. 


For dark kitchens, however, the only location concern is being within reasonable distance of residential areas, although dark kitchens themselves can be placed anywhere. Industrial estates, lorry parks – isolated areas such as these are much cheaper real estate than the high street. 


But being hidden from sight is not always a good thing; another issue to consider is that of food standards and safety ratings. In the early days of the dark kitchen, horror stories abounded about cramped, windowless sites where food was being prepared in unsavoury conditions. Councils today are more aware of dark kitchens and ensure that they follow the Food Law Code of Practice (FLCP), which is an essential element of any food preparation establishment, and ensuring the necessary standards and safety precautions is a further challenge that dark kitchens must rise to.

 

For hospitality business owners, another concern is quality control – allowing their own branded food and drink to be prepared in a dark kitchen requires relinquishing control to other cooks, and losing the ability to monitor for sub-standard orders before they reach customers. Running the risk of losing their rating on delivery sites can be a matter of tremendous importance today, which might dissuade some decision-makers from pursuing dark kitchen operations.


Finally, businesses that decide to operate through dark kitchens will have to make some sacrifices: specifically, some of their profits, and some of their insight into their customers. More often than not, dark kitchens are reliant on third party delivery services to ensure their products reach their customers. However, including another party in the production chain means having to give up a greater share of profits. Given the large percentage taken by delivery apps and the razor-thin margins many restaurants operate on already, this may be untenable for some.

 

What’s more, understanding consumers purchasing habits and preferences is vital to the hospitality trade, and surrendering that data to other actors can put businesses at a disadvantage.

 

What else can restaurants do?


If the ultimate goal of embracing dark kitchens is to increase revenues and improve profitability for hospitality businesses, it must be stated that this is not the only way these objectives can be achieved. There is more than one way to crack an egg, just as there is more than one way to improve profitability in hospitality. Before turning to dark kitchens, there are other approaches hospitality businesses of all sizes should consider first. 


Improving customer experience is always worthwhile, and rather than trying to scale up operations (and potentially risk consistency in the process), businesses should ensure that their order process is efficient and convenient, and that they are doing all that they can to increase customer loyalty and retention. Expanding their menu with affordable options and incorporating promotions can boost revenues and ensure that businesses are operating as efficiently as possible. 


There are other ways in which restaurants, bars and cafes can look to boost their profits and increase order volumes that do not require them to participate in or even set up dark kitchens.

 

The virtual brand – a new food and drink delivery concept that offers its wares on third-party platforms without its own storefront or physical location – might seem similar to dark kitchens at a glance. In reality, however, they are entirely separate: through delivery franchising, virtual brand’s wares are prepared in the kitchens of existing hospitality businesses, rather than in dark kitchens.

 

In the case of the dark kitchen, order preparation is removed from existing kitchens, necessitating the creation of new kitchen facilities off-site. The advantage of operating in existing kitchens’ facilities is that they are already fully equipped and compliant with food standards. Just as the busiest restaurants might be exceeding their preparatory capacity at the busiest of times, less busy restaurants rarely meet their limit for operational capacity, so are already able to prepare excess orders for other enterprises.

 

The benefits are shared too, more orders are fulfilled, and overall kitchen output is increased. Figures from Peckwater’s partner businesses show that kitchens that embrace virtual brands report an average increase in delivery orders of 823 per cent, resulting in increased revenue of between £12,103 and £45,823 a month.

 

According to Peckwater’s aforementioned research, 67 per cent of the businesses surveyed said that they have the capacity – be that in terms of human resource and/or space – to increase their output significantly, if they had the demand. Delivery franchising and virtual brands are a means of spreading out demand more evenly between businesses, increasing efficiencies and workflows throughout, and increasing the available variety for the end-consumer in the process.


The future is bright (not dark) 


Dark kitchens are not without their positive qualities. They may have already offered a lifeline to some beloved (yet beleaguered) local restaurants during the pandemic, but this does not mean that they are the absolute future of the industry. For one thing, the dark kitchen approach does little to the safeguard the future of existing high street restaurants, many of whom were sadly lost to the pandemic and whom the success of dark kitchens would do little to benefit. 


There may be a place for dark kitchens in the future, but hospitality owners should be aware of the potential drawbacks and issues that this phenomenon brings with it. Instead, business owners who are looking to increase their capacity should consider that existing kitchens might prove a better alternative – in fact, by not taking advantage of them, their unused capacity might end up going to waste.


Sam Martin is co-founder and COO of delivery franchising expert Peckwater Brands (PWB). PWB helps restaurants and kitchens of all sizes benefit from the fullest demands of the market by streamlining the process of embracing virtual brands and multiple-franchise solutions. Working with partners across the hospitality spectrum, PWB can transform any kitchen into a multi-franchise operation, integrating with their existing operations and opening them up to vastly increased demand across different brands and cuisines. Sam worked in executive positions at Uber and Amazon prior to co-founding PWB in 2019. ww.peckwaterbrands.com

Latest issue – Vol 1/22
– Health & Nutrition focus
– GULFOOD SPECIAL
– Food and beverage trend predictions for 2022
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