The food delivery industry has seen unprecedented growth in Europe over the past few years owing to the COVID-19 pandemic. This has also led to the rise of commercial kitchens without dining areas, commonly known as dark kitchens or ghost kitchens, across major European cities. These kitchen-only facilities allow restaurants to focus on delivery and takeaway orders by eliminating the costs associated with dining spaces. As per industry estimates, the number of dark kitchens in Europe has grown by over 30% since 2019.

Emergence of Cloud Kitchen Companies

Several tech-enabled cloud kitchen companies have emerged to cater to this growing demand. Pioneering brands like Karma Kitchen, Kitchen United and REEF have raised substantial funding to build large commercial kitchen facilities across Europe. These companies operate on the asset-light model, renting out fully equipped miniature kitchen spaces and supporting infrastructure to third-party restaurants and delivery brands. This allows both incumbents and startups to rapidly expand their delivery footprint without costs of building their own brick-and-mortar outlets. Cities like London, Paris, Berlin and Madrid have witnessed the launch of multiple large cloud kitchen facilities by these operators over the last year.

Rise of Delivery-Only Brands

Along with enabling existing restaurants, cloud kitchens are supporting the proliferation of delivery-only brands as well. Brands without any dine-in presence are leveraging these shared facilities to test new cuisine concepts and delivery zones. Popular virtual brands like CloudKitchens, HungryPanda and Kitopi now operate out of dark kitchens with double-digit outlets each across major European metropolitan areas. Their streamlined operations focused only on off-premise orders allow such brands to keep costs low and prices competitive. Food courts within these commercial facilities give consumers access to a diverse portfolio of delivery cuisine without any physical restaurant footprint.

Growing Adoption Among Established Chains

Even traditionally dine-in focused restaurant chains are recognizing the potential of a delivery arm running out of dark kitchens. Brands like Pizza Hut, Burger King and Starbucks have partnered with multiple Europe Dark Kitchens Ghost Kitchens Cloud Kitchens operators to launch delivery-exclusive outlets across Europe. For them, ghost kitchens provide an opportunity to penetrate new markets, housing clusters and delivery zones without significant real estate investments. The unit economics of such delivery cloud kitchens have been found favorable compared to conventional high street stores. This model allows chains to test demand for delivery-only stores with lower risks, before committing to longer term high street leases.

Rise of Municipal Dark Kitchen Hubs

In a bid to promote local food businesses and culinary entrepreneurship, some cities are developing dedicated dark kitchen hubs as well. For instance, London-based startup Taster has partnered with various local authorities to set up municipal dark kitchen facilities housing 10-15 individual branded cloud kitchen spaces each. Similar hubs are being planned in cities like Amsterdam, Milan and Lisbon with the goal to provide affordable, turnkey commercial kitchen infrastructure to local Foodpreneurs and solo entrepreneurs. With lower rentals and shared overheads, these hubs aim to level the playing field for smaller local brands to scale up delivery operations.

Challenges on the Road Ahead

While the dark kitchen model addresses issues of high real estate costs and delivers scale advantages, it does face challenges as well. Consumers lack the physical experience of a restaurant space which can impact discovery and recall of delivery-only brands. Ensuring consistent food quality, managing complex delivery logistics and maintaining a distinctive brand identity without any dine-in presence remains tricky. Further, the widespread proliferation of dark kitchens has led to concerns around their environmental and public health impact through increased vehicle movement and packaging waste generation. Striking a balance between growth, experience, sustainability and regulation will determine the long term success of this new commercial real estate model.

Dark kitchens and cloud kitchens have emerged as the backbone of Europe’s booming food delivery industry, allowing both incumbent chains and startups to scale operations and expand footprint in a capital-efficient manner. While opening new opportunities, their growth also brings challenges around discovery, experience, logistics and sustainability. How restaurants, commissary owners and cities balance these opportunities and challenges will shape the future of this new commercial realty segment.

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1.  Source: Coherent Market Insights, Public sources, Desk research
2. We have leveraged AI tools to mine information and compile it