The Reason Nathan's Famous Has Over 200 Ghost Kitchens

Nathan's Famous opened its first set of ghost kitchens in 2019. Less than two years later, the company has a global network of over 220 delivery/takeout-exclusive restaurants, spanning 18 countries. It is expanding its footprint into increasingly challenging terrain, with a recent focus on population-dense city centers that's left industry observers asking: What's a ghost kitchen, again?

A ghost kitchen is essentially a restaurant that only does delivery and off-premise dining, usually through online ordering and mobile apps. The lack of in-person dining allows the restaurant to save on real estate expenses (square footage, parking lots, placement in high-traffic venues) while greatly increasing its capacity for takeout and delivery orders. That's the condensed definition Nathan's Famous CEO James Walker provided Business Insider in a recent interview. Ghost kitchens are also a business strategy that's become increasingly common in the restaurant industry, with buy-in not only from the casual and fast-casual segments but fine-dining, too. The recent twofold growth of its network, as reported by Business Wire, distinguishes Nathan's Famous as a veteran in the ghost kitchen game — and even as in-person dining begins to return to U.S. restaurants (via New York Times), the company is doubling down on the strategy, with an increased focus on expansion into densely populated city centers.

Why city centers? If the benefit of ghost kitchens is to help restaurant owners save on rent, why set up shop in high-rent locations? It comes down to, among other things, a recent and ongoing transformation in the ghost kitchen business model, Walker explained to Business Insider. "What we're seeing...is that these ghost kitchens are morphing...they're changing, they're evolving to provide customers even more accessibility." Besides offering speedier delivery times, centrally-located ghost kitchens are also better suited to expand into takeout service, demand for which will grow over time, Walker believes, as the ghost kitchen "evolves" into something more than an order fulfillment center. With Nathan's Famous ghost kitchens now housing multiple company-owned brands (including New York Wings and Arthur Treacher's), Walker's envisioned take-out-compatible ghost kitchens begins to resemble a cleaner, more efficient version of a traditional quick-service-restaurant combo-unit.

In the meantime, delivery/takeout-exclusivity remains a hugely profitable business strategy for many segments of the restaurant industry, with ghost kitchens margins sometimes doubling those of in-person restaurants, Business Insider reported.