Ghost kitchens and virtual restaurants: Elusive extensions of Spokane kitchens spurred by pandemic continue boosting business

Next time you order food online, it might come from a restaurant you’ve never had the chance to visit. And in the case of ghost kitchens, you never will.

A ghost kitchen is set up to employ as much of a brick-and-mortar restaurant’s resources as possible. The pre-existing restaurant’s supplies, storage space and employees are used to make online orders for the virtual restaurant, Shawn O’Donnell’s Irish Pub and American Grill owner Chase Van Cotthem said.

Food services at Van Cotthem’s restaurant just north of the Monroe Street Bridge follow a traditional model: You can dine in or order online. But for Molly’s Garden, the only option is delivery, yet the food is prepared in the same kitchen, by the same staff, and under the same license as the food from O’Donnell’s.

Van Cotthem said the setup can cause confusion.

“We have DoorDash drivers who come in: ‘Is this Molly’s Garden?’ ”

“Yeah,” Van Cotthem said he responds. “And I kind of explain the story of it. We have a little sign next to the door; it says ‘Molly’s Garden.’ ”

Business benefits

Van Cotthem sees ghost kitchens and virtual concepts as a successful way of expanding restaurants. By renting out kitchens and selling with an online presence, Van Cotthem said restaurants can try a concept in a new location without the risk of losing a huge investment.

A ghost kitchen could either serve food from a separate branch of an existing restaurant with an exclusive online menu, or from a completely different business.

In the case of Molly’s Garden, the food is made in O’Donnell’s yet sold online under a different name.

There aren’t any exclusively virtual restaurants in Spokane renting kitchens to test their concept. Instead, businesses like O’Donnell’s, Denny’s and the Eat Good Group are extending their services by creating new concepts that exist only online.

That’s the model that Brian Predmore, manager of three Denny’s locations – including one on Division Street in Spokane – leaned into.

“They’re all just virtual kitchens inside of our kitchen,” Predmore said, describing the online-only Burger Den and Meltdown. “The Burger Den pretty much offers the same burgers that are on our menu, just with a different name; some of them might have a little different twist to them. Meltdowns the same way.”

“They might not even know it’s a Denny’s restaurant,” Predmore said.

Some national-chain virtual restaurants such as MrBeast Burger and Hot Ones operate almost entirely out of other companies’ kitchens. They’ve both tried to set up their virtual brand based out of local restaurants but have struggled to find a host kitchen, Van Cotthem said.

Adam Hegsted, the owner of Eat Good Group, said that several years ago, MrBeast Burger requested to set up a ghost kitchen in a restaurant owned by his company. Eat Good Group is a collection of eight restaurants in Spokane and its surrounding areas.

Hegsted said he didn’t want to take on a ghost kitchen from a separate company.

“I didn’t feel like it was right for what we do,” he said. “We try to make everything from scratch and keep it really authentic, and it would feel weird to just buy some premade stuff and cook it and throw it out there.”

But Hegsted wasn’t against the idea of a ghost kitchen if it could serve food from an Eat Good Group restaurant.

In 2019, on a technology campus in Liberty Lake, Incrediburger and Eggs, which also had a physical location in downtown Spokane, started a ghost kitchen out of a cafe also owned by Eat Good Group.

This gave the company more control over the quality of the food, Hegsted said. “We got pretty good traction when we had Incrediburger.”

That was, up until 2020, when Hegsted said everyone stopped going to work and instead worked remotely.

“We shut it down because our regular operation wasn’t running because of COVID, and so there just wasn’t enough business to keep it going.”

Incrediburger and Eggs’ newfound virtual-only kitchen wasn’t strong enough to survive on its own. Yet since then, Hegsted said, “Everyone went crazy with delivery and DoorDash and all those things … we may end up going back at some point,” explaining how DoorDash and Grubhub have grown in popularity enough for this virtual strategy to work again.

National chains

Earlier in the summer, Hot Ones – a food show and virtual restaurant brand that offers spicy wings, sandwiches and hot sauces for delivery – reached out to Van Cotthem, wanting to use O’Donnell’s as a host for their ghost kitchen.

“They called a few weeks ago saying, ‘Hey, we’re coming up with a brand of chicken wings and boneless chicken … do you want to host a virtual brand for that?’ ” Van Cotthem said.

Just as Hegsted was opposed to preparing food for a separate company, Van Cotthem didn’t think the idea would be right for O’Donnell’s.

“I just don’t have a passion for someone else’s concept. I’d rather do my own,” he said. “I like the food that we do.”

Two more virtual restaurants in Spokane are Meltdown and The Burger Den, both of which are ghost kitchens owned and operated by Denny’s. Because these two virtual restaurants have been so successful, Denny’s will soon be starting its third online-only virtual restaurant under the name Banda Burrito.

Pandemic trends

Predmore said these virtual restaurants have been an effective pivot toward the online market, especially during COVID.

“That’s the only way we survived.”

During COVID, virtual restaurants were the solution to customers staying at home.

“It was something we came out with when COVID happened,” Predmore said. “In order to try to generate more sales into the restaurant because you couldn’t get butts in the seats. So we had to get butts coming to the door to get the orders.”

Van Cotthem said a lot of restaurants created some sort of virtual extension of what they were already doing to stay afloat during COVID.

“We had all sorts of virtual concepts where in-house brands were just having to adapt,” he explained.

Logistics

These adaptations spanned from a new sales model to a new internal company structure adding ingredients and drivers, along with leveraging existing employees.

If the workload gets too heavy, more storage space or employees might become needed, but Van Cotthem specified that there aren’t separate employees who make food for the online restaurant. Rather, the same chefs and staff add some extra recipes to their repertoires.

Often, this additional work going into virtual orders is exactly what the pre-existing restaurant needs to have a balanced workflow.

“You’re not always busy, so you got to have something else for your staff to do,” Predmore said. “That’s the best thing about it, is it helps offset labor costs, because you’ve already got the employee standing there. They’re not cooking for a guest inside the restaurant; might as well cook for an online guest.”

While it may be a hassle for staff to memorize recipes for an additional menu, Predmore explained that Banda Burrito will primarily use ingredients that are already in the Denny’s kitchen.

“We only have … basically one new ingredient, which is the carne asada for the carne asada burrito. Everything else is already product that we have in the house. We just kind of repurposed it and made burritos out of it,” Predmore said.

Molly’s Garden is able to repurpose most of the regular ingredients of O’Donnell’s as well, Van Cotthem said.

A unique challenge of virtual restaurants is that they have to work hard to make sure that their food is even visible to someone scrolling through a delivery service’s website.

Predmore explained that restaurants with good ratings are usually at the top of the list, making it easier for customers to find them.

“If you’re doing a (poor) job and missing items on orders and all that … your name’s not gonna be at the top, your name’s gonna be at the bottom,” Predmore said. “We try to make sure to do a great job, and we’ve got great placement.”

Respect the drivers

Predmore explained that timeliness and quality are important boxes to check for online orders, but he also stressed the importance of treating the drivers who will be delivering the food as well as if they were fellow employees of the restaurant.

“If you’re gonna make them wait for an order, offer them a cup of coffee, a glass of water, a soda. Try to make sure the driver’s taken care of. That’s the one that’s delivering the food, and that’s important.”

Sometimes, working with delivery services can have its challenges. Predmore explained that occasionally a DoorDash order might come in, but then no driver comes to pick it up.

Though Predmore thought about buying a van to solve this problem, he said that drivers from an external company are a better option.

“If I have an employee inside my four walls, I can control what the environment is like,” he said.

“What happens if I have a driver that’s going out delivering food? I can’t control traffic, I can’t control any of that, so then that’s some liability.”

Predmore added that delivery services are set up in a way that prevents the restaurant from losing money. “The customer will call and cancel the order because there’s no driver, but we still get paid,” he said.

Marketing benefits

Another benefit to using a third-party delivery service is that it allows for these virtual restaurants to be marketed as different from their brick-and-mortar counterparts on a delivery service’s app or website.

In fact, the increasingly complex business model of ghost kitchens is driven by its marketing benefits.

“People don’t really think of an Irish pub for healthy food,” Van Cotthem said.

He tells the story of Shawn O’Donnell’s daughter-in-law, Molly O’Donnell, and her desire to introduce more healthy options to the restaurant.

“She said, “Let’s just come up with a virtual restaurant, and we’ll call it Molly’s Garden salads and wraps, and we’ll do healthy food online only,’ ” Van Cotthem said. “This is even before we heard the words ‘ghost kitchen.’ ”

In addition to the initial repackaging approach taken by Denny’s, Predmore talked about Banda Burrito, coming out “hopefully by the end of the month,” he said in July. “But the burritos you can’t get in the restaurant; that’s strictly online.”

“The whole idea is to try to get them to say, ‘Oh, this sounds good, I’m gonna try this,’ ” Predmore said. “It’s to get peoples’ attention.”

Denny’s is also using Banda Burrito as a test. “ As we see which ones of those sell, we will probably take a few of those and incorporate them into our menu,” Predmore said.

This is something O’Donnell’s has done.

“In Seattle, there’s a lot of vegetarians and vegans, and so … Molly’s Garden, the virtual restaurant, some weeks will outsell Shawn O’Donnell’s on the delivery services,” Van Cotthem said. “We have a couple of those items we’ve added to the O’Donnell’s menu.”

For Denny’s, Predmore doesn’t want to just stop there.

“Will we roll out another virtual restaurant? Probably. So what will it be? I’m thinking pasta,” he said.

Predmore said that virtual concepts capitalize on the recent wave of online ordering.

“We’ve seen the growth in it over the last couple of years; it’s just phenomenal.”

Predmore thinks that the convenience a model like this offers is great for busy college kids.

“Today’s generation doesn’t like coming in and sitting down at a restaurant,” he said.

Denny’s may be a special case since it’s open 24/7, so virtual concepts “keep revenue flowing through the restaurant all the time, especially at night,” Premore said.

But he still thinks it would be a smart addition to many restaurants.

“Why most companies aren’t doing it, why Red Robin did away with theirs, I couldn’t tell you; wouldn’t make sense to me,” Predmore said.

“They see a risk involved with it instead of seeing the future and where the future is going, because it’s going that way. You can’t stop progress, trust me.”