May 13, 2024

Are Northeast Ohio's ghost kitchens ghosts of their former selves?

In 2020, with in-person dining restricted or closed in much of the country, ghost kitchens, became lifelines for a struggling industry.

Ghost kitchens are restaurants that only serve carryout, and by default delivery through some of the many online food delivery services like Doordash or Uber Eats. The term ghost kitchen in its essence refers to the idea of a restaurant with no front facing location. They’ve always existed here and there, but only during the pandemic, when sit-down dining was restricted or completely cancelled in much of the country, did they spread across cities like wildfire.

Balaton’s, a Hungarian staple of the Cleveland dining landscape for over 60 years, is one of many restaurants that faced closure due to the pandemic. They stopped serving in-person diners at their Shaker Square restaurant and used the kitchen as well as the facility at St. Elizabeth’s, a Hungarian Church nearby on Buckeye, to fill carryout orders in a ghost kitchen format. In fact, they stayed so true to the ghost kitchen model, they didn’t even advertise or use any of the food delivery services. Those who knew were able to call and place orders for pick up on the weekends.

Owner George Ponti says they could have continued that model, but they never considered it a long-term solution to their challenges.

“We could ride that ghost kitchen for probably another two or three years, and then it's going to die out like every fad that dies and nobody will be interested,” said Ponti, firmly rejecting the notion of ghost kitchens as the future of dining.

Other restaurant owners who were pushed into the ghost kitchen model by the pandemic used it not only to continue working and providing jobs for their employees, but to incubate new ideas.

Doug Katz is well known in Cleveland’s restaurant scene. He’s the head chef at Zhug, a Middle Eastern restaurant and Amba, which features his spin on Indian cuisine. He also has a catering company and up until the pandemic, ran the critically acclaimed restaurant Fire in Shaker Square. Like Ponti, pandemic forced Katz to find new uses for his space and new ways to generate revenue.

“We decided to launch takeout and delivery at Zhug. And the success of that delivery and that pickup really inspired us to work on two other restaurant concepts that we had wanted to launch as brick-and-mortar restaurants,” said Katz.

Using the ghost kitchen as an incubator for future brick and mortar restaurant plans is the best way forward for the market segment, according to John Barker, president and CEO of the Ohio Restaurant Association, an industry group based out of Columbus.

“You start off making some product, you know, in an incubator and you learn and you work around the kitchen and all that,” said Barker. “That is actually, you know, thriving. We think that's a good idea."

However, ghost kitchens also became an attractive entry point for those who wanted to get into the business, perhaps without the experience or backing required for a full restaurant setup.

“You had to decide what your brand and food were going to be, put in a little equipment, but you could be up and running, you know, for $50,000 or less with a restaurant, which just caught a lot of people's fancy,” said Barker.

A 2021 report in the industry trade, “Hospitality Technology,” predicted that the ghost kitchen market would reach 71 billion dollars annually and as many as half of the large so-called “enterprise brands,” like McDonald’s, would launch ghost kitchen operations by 2027. The concept seemed poised to become the “new normal.”

But three years later the ghost kitchen concept is more of a specter.

CloudKitchens, is a company that bought up real estate nationwide and filled those spaces with kitchens to rent out to entrepreneurs. Their Cleveland location is the Carnegie Food Hub on Carnegie. It’s basically a cluster of ghost kitchens representing a variety of different ethnic and American food types. The location has seen pronounced turnover in its restaurants, which run the gamut from an outpost of the Ohio chain, Panini’s Bar & Grill, to a variety of smaller restaurants with no brick-and-mortar presence.

A story from December in another industry trade, “Restaurant Business,” looked at accusations that Cloudkitchens was misleading new entrants in the market. The common refrain of those with short-lived ghost kitchens at Carnegie Food Hub was that CloudKitchens had misled them about the level of business they would see.

Barker couldn’t speak to that, however he says newcomers do face challenges. One of the biggest simply being the overwhelming number of options the consumer has and the fast pace of changes to the industry. When stacked against a fledgling restaurateur, ghost kitchen or not, they can be fierce obstacles.

“At the end of the day, like CloudKitchens. I think it comes down to the food and the brand has to be on. You know, they kind of have to be on trend. They have to be good because sooner or later people will not order because it looks cool,” said Barker. “I think that's what's happening right now is that the consumer expectations have gone up.”

But if you’re a newcomer hoping to open a restaurant that wins the day based on your unique flavors or your innovative approach, the ghost kitchen is enticing and hard to pass up for some, despite the shifting landscape.

“In terms of the trends that are affecting this, I think, you know, we're just seeing everything changing so much right now and everybody's trying to figure this out. You know, there is a place for these commercial kitchens,” said Barker, “because when people are coming in to an industry, they're in love, they just want to be somehow in the food service industry, and you can't really stop people when they get it in their head.”

The CloudKitchens website still features new posts from May of this year touting the rise of ghost kitchens and the death of dine-in. But the posts only reference data from the peak of the pandemic, and notably don’t share any of the more recent developments in the ghost kitchen market, such as Wendy’s cancelling of their massive ghost kitchen expansion through Reef Kitchens, or popular YouTuber Mr. Beast’s ghost kitchen chain, MrBeast Burger, which is now the subject of back-and-forth lawsuits between the celebrity and the company charged with making his burgers.

CloudKitchens, which is backed by Uber’s co-founder, Travis Kalanick, had been beset by loss of investors and lawsuits. They declined to comment for this piece, as did every proprietor at the Carnegie Food Hub. But it’s hard to get a real idea of the health of the business there because many of the restaurants listed on their website are owned by the same proprietors, cooking out of the same kitchens, giving the appearance of a more robust restaurant presence within. Several of the restaurants listed recently on the website were registered to the same food company, operating under different names, making widely different styles and ethnicities of food. They have all recently been removed from the website.

“I very much like doing a lot with the little. So I like the idea behind it. I like that it's a possibility,” said noted chef David Kocab.

Kocab is the head chef at the popular West Side Japanese restaurant, Bar Oni. Like Katz, he tested a new restaurant concept during the pandemic by carry-out and delivery only. And similar to some of the entrepreneurs interested in multiple styles, his ghost kitchen, Conforti, didn’t deal in the same Japanese fare as his brick-and-mortar, it was Italian comfort food. But he recognized the food hub model of the ghost kitchen is a bit different.

“It's a very fly by night situation,” said Kocab, “obviously, I think especially in the Cleveland and the northeast Ohio market, like a notable face, especially in restaurants, is beneficial.”

Owners might want to avoid calling attention to multiple distinctly different restaurant concepts under one umbrella over concerns about authenticity, but Kocab says it can be done and even done well, provided the underlying product backs up the hype.

“There's no trickery going on. You know what I mean? As long as the food gets to them and it tastes good and it meets expectation about what they thought it was going to be… have ten brands, you know, if you can keep up with it. I think that's cool,” said Kocab.

John Barker with the Ohio Restaurant Association says it’s a tactic that some larger players in the industry have also used, particularly during the pandemic and particularly if their brand was less conducive to delivery.

“You know, you go on Ubereats or DoorDash and you would see a brand that would say, John's Tacos, right? You have no idea. But it looked pretty good. You ordered what was being made at an iHOP, you know what I mean? Or you know, a Chili's.”

Barker still sees upsides to the idea of ghost kitchens, but it will likely take a more focused format than what CloudKitchens is pursuing. He noted businesses like Maker Kitchens, out of Los Angeles, which opened a ghost kitchen facility in Columbus this past January. They have a model similar to CloudKitchens but focused on customers with more experience in the industry. They have their sights set on opening a Cleveland location next. Their website has a markedly different feel from that of CloudKitchens, and seems more directed to people with a foot already in the food service industry.

Meanwhile, Balaton’s is back open in their traditional form, now with a new location in Bainbridge, OH. Their grand opening this past spring, was packed; anyone without a reservation was turned away. Owner George Ponti was glad to have the pandemic and the ghost kitchen business behind him, and pledged to never go that route again, if he can help it.

“This is an institution. it cannot be closed. The Cleveland Opera, the Cleveland Ballet and the art museum can not closed, so Balaton restaurant can't be closed.”