There are now approximately 750 dark kitchens operating across the UK with an increasing number of restaurant brands, delivery companies and start-ups investing heavily in the delivery and takeaway sector. This offers significant opportunities for franchise brands to improve their supply chains and customer engagement.
If you are interested in reading more about the background of dark kitchens, please see our article here.
Dark kitchens are thriving as the food delivery market is increasingly leveraging all aspects of the platform economy to meet the growing demand for takeaways. The COVID-19 pandemic has also increased demand for home delivery due to the restrictions imposed on dining out. Research suggests that dark kitchens are changing the restaurant industry as we know it, with traditional restaurant dining and the concept of “eating out” to be left in the shadows. Businesses can use dark kitchens at a fraction of the cost of restaurant retail space, offering an agile, flexible and low risk opportunity to expand takeaway and delivery offerings.
Many franchisors in the F&B sector are therefore investigating ways to utilise dark kitchens in order to efficiently service the increasing demands of takeaway customers and to capitalise on the benefits that dark kitchens can bring. Although critics suggest that dark kitchens are de-crafting cooking itself and taking the atmosphere and charm out of the dining experience, they are clearly a trend that is here to stay, even if they are unlikely to replace traditional restaurants altogether.
Brands and Business Models
The “traditional” dark kitchen
A number of large high street restaurant franchise chains have recently opened their own dark kitchens to meet the growing demand for takeaway. This is the standard operational model, with one brand using one kitchen and relying on delivery channels – either the brands own delivery channels or platforms such as Just Eat, Deliveroo and UberEats to handle orders and deliveries.
Pan-Asian cuisine chain Wagamama launched its first dark kitchen in 2018, with plans to open three to five more kitchens this year, whilst still using Deliveroo to deliver to customers. Wagamama is particularly looking to expand in areas not covered by existing restaurants in towns and cities with high demand.
Fast food giant McDonald’s opened its first dark kitchen in 2020 in Hanworth, West London, dedicated solely to Uber Eats deliveries. A statement from McDonalds said, “The opening will ensure that restaurants in the surrounding area can continue to provide the service and convenience that our customers expect, while ensuring that McDelivery customers have a great experience.” 
South African chain, Nando’s, has also opened several takeaway restaurants under the name “Nando’s Ninos” across London. Although these do offer some eat-in capacity, they are much smaller spaces with larger kitchens to meet the increased demand for takeaway, representing a hybrid model between a dark kitchen and a restaurant . Mexican chain, Tortilla, has similarly opened a mini restaurant and a backstreet kitchen to cater for residential online orders.
Multi-brand dark kitchen
Several start-ups have innovatively entered the dark kitchen space by creating a virtual “family” of restaurants – offering customers a marketplace of multiple brands to choose from which share one kitchen and operate under one parent company. This model can successfully use data analytics to supply the most popular meals based on local demand through its own delivery platform.
Tiny Cloud Kitchens has been operating virtual brands in London under this model since 2017. Created by Tootoomoo founder Philip McGuinness it comprises five different virtual restaurant brands which operate out of shared kitchens and is currently recruiting for franchise partners across the UK. It is proving to be an attractive opportunity for franchise brands as, compared to a traditional food franchise, the initial investment is minimal and the return on investment can be made much more quickly.
French start-up, Taster, and German start-up, Keatz are key competitors in this sphere, both recently expanding into the UK market.
Aggregator-owned dark kitchen
Well-established food delivery app aggregators are also using the dark kitchens model to offer partnering restaurants the ability to rent kitchen space from which delivery can take place . The key difference to the multi-brand model is that each brand usually operates in a separate kitchen and benefits from the delivery company’s existing fleet.
Food delivery company Deliveroo is at the forefront of the dark kitchens boom, with its “Deliveroo Editions” premises launched in 2017 as a spin off from the core Deliveroo brand . Since then, Deliveroo has expanded Editions into an extensive kitchen infrastructure throughout the UK, with plans to enter the European market soon. Each kitchen or “Roo Box” is strategically located using customer order data to ensure that delivery can be as quick as possible. Editions are currently operated in 16 locations across the UK, including nine sites in London, each of which typically consist of eight to ten kitchens with between five and seven chefs.
Editions has been popular with large high street brands such as Honest Burger and Dishoom, providing opportunities to expand into the takeaway channel and reach a wider customer base. Although Deliveroo charges operators commission on sales of up to 35% in addition to the delivery fee charged to customers, it provides all kitchen equipment, dishwashing staff and cleaning meaning there is no upfront cost to the operator. Deliveroo does not charge rent but usually requires that orders are taken exclusively through its platform.
Despite the success of Editions, other well-known delivery companies such as Uber Eats and Just Eat are not currently operating in the dark kitchen sphere in the UK.
Outsourced dark kitchen
Commercial kitchen start-ups which rent out kitchens to food business mark the most recent addition to the dark kitchen sphere. In 2018, Travis Kalanick, Uber co-founder and owner of the successful USA-based dark kitchen business, CloudKitchens, bought rival UK dark kitchen company FoodStars. FoodStars now has over 100 fully kitted out commercial kitchens across London and leases its real estate to a diverse array of restaurants and delivery-focussed brands looking for extra capacity.
Similarly, UK-based Karma Kitchen offers fully equipped commercial kitchens for private or shared use, with a recent funding round raising £252m in a bid to expand across dozens of sites in Europe . Equivalent concepts are thriving all over the world, with Reef Technology in the USA focussing specifically on transforming car parks into food logistic hubs and Dubai company, Kitopi, now operating 30 dark kitchens across the US, UK and Middle East. “Think of it as ‘Franchise 2.0’,” Co-Founder of Kitopi, Mr Ballout, said. “We are enablers to restaurants to plug in and scale up globally.”
Opportunities and Challenges
Dark kitchens offer many advantages to restaurants, with the low overhead costs being particularly beneficial to restaurants looking to expand or diversify without the financial commitment of buying or leasing a restaurant space. There are far fewer outgoings in general, with no waiting staff or restaurant maintenance costs. Dark kitchens also allow restaurants to capitalise on the demand for online ordering and reach a larger customer base through the use of third-party delivery services and their out-of-town locations. They are particularly appealing to entrepreneurs and franchise developers because they can be relatively easily abandoned with comparatively little cost to a public facing restaurant if they are not successful.
However, a key challenge for restaurants using dark kitchens is maintaining brand value. A retreat from the physical guest experience combined with lower prices offered by dark kitchens could lead to a dilution of brand value, especially at the premium end of the market. This could be exacerbated by a reduction in quality and consistency of the food as a result of the logistics involved in delivery. Restaurants are likely to need inventive marketing strategies to overcome this as well as giving careful consideration to who their delivery partner is and how they maintain a high quality service. Ultimately if food arrives late or cold it is the brand’s reputation that suffers.
Where there is third party involvement, for example through delivery or app providers, restauranteurs should be mindful to carefully negotiate and document how food industry standards and safety apply in food delivery and how liability is to be determined.
COVID-19 – accelerating the trend
The impacts of the Coronavirus and the associated closure of restaurants, bars and cafes across Europe have only advanced growth in the restaurant delivery sector. Out of necessity, restaurants have been forced to explore the concept of virtual restaurants to reach customers in different ways and experts suggest that the pandemic has accelerated the dark kitchens space by about five years.
In an interview with Will Shu, CEO of Deliveroo, Shu said that Deliveroo has seen a significant increase in new customers joining the platform and existing customers ordering more often as a result of COVID-19. According to Shu, Deliveroo plans to invest “aggressively” in expanding its global network of dark kitchens in 2021.
Although we are unlikely to be facing a future where restaurants exist only online, what we can expect to see is a continued shift in the restaurant landscape as dark kitchens provide the mechanics to bring dining further into the platform economy. Whether set up independently, through a third party intermediary or as part of a franchise business, dark kitchens will continue to grow over the coming years, with companies aiming to expand globally and an increasing number of start-ups appearing in the dark kitchen rental market.
As franchisors continue to wrestle with how franchisees are permitted to engage with third party delivery partners or aggregators (or not as the case may be), franchisors also need to consider how the dark kitchen model (and associated delivery channel) is integrated – or not – into their franchise system. With such integration comes additional challenges over the controls to impose on franchisees and the related legal (typically contractual) remedies that a franchisor will seek in the event it goes wrong.