Wendy’s, one of the most popular fast-food chains in the United States, plans to open up a ton of ghost kitchens in the upcoming years. Don’t know about ghost kitchens yet? Well, read on to discover this interesting fast-food development…
Wendy’s Commercial Success
So, what are “ghost kitchens,” also known as virtual, cloud, or dark kitchens? Well, they are kitchens created for the express purpose of meeting the demand of delivery and off-premise dining! In case you didn’t know, delivery apps like Doordash and UberEats saw a nearly 60% increase in usage during the pandemic. So these “ghost kitchens” do not have dining rooms, instead just making food for delivery apps. You can see why Wendy’s wants to open all these ghost kitchens. In fact, the company saw its digital sales increase by more than 10 percent in 2020.
Going forward, ghost kitchens will become the cornerstone of Wendy’s new development plan – the company plans on opening up more than 700 ghost kitchens by 2025. “This commitment is building on the successful test of eight delivery kitchens that opened in Canada. The company expects… to open approximately 50 delivery kitchens in 2021 with the remainder being opened in 2022-25.” Wendy’s CEO Todd Penegor stated. “If you look at the economics, it’s early to tell what we can do from sales out of each of those vessels, but we’re expecting the sales in the range of $500,000 to $1 million per unit.”
Penegor also believes the ghost kitchens programs could be a great way to recruit new franchisees. After all, ghost kitchens have a lower cost of investment and are easier to manage! Will this plan work out? Let’s take a look at the numbers…
Opening 700 Ghost Kitchens
Currently, McDonald’s, KFC, Chipotle, and Outback Steakhouse, among others, have opened at least one ghost kitchen. While ghost kitchens usually produce lower sales than regular locations, Wendy’s and others can still expect a decent return on investment. According to Penegor, it will allow them to expand into urban areas where they previously had no footprint. Franchisees will also pay a slightly higher royalty fee – 6 percent, compared to the 4 percent charged to regular franchisees.
To make the ghost kitchens a reality, Wendy’s will partner with logistics firm Reef Technology. Founded in the early 2010s, Reef started as a simple parking garage operator but has since branched into the ghost kitchens game. Most recently, they have raised more than $756 million in capital, including an investment from SoftBank. Previously, Reef has partnered with restaurants like Wow Bao and BurgerFi.
While the ghost kitchens have yet to make their debut, investors are already excited. Wendy’s shares rose 3.7% after the announcement, giving the company a market value of $5.02 billion. So, will the investment pay off? Only time will tell! But, if it does, expect more fast-food chains to follow suit!