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  • Overview

    A few years ago, the casual dining market was seen as the saviour of a struggling high street and used to bolster the “experience” of out of town retail shopping destinations, such as Westfield or The Bullring. There have been many well-publicised problems of this sector recently, and well-known and loved brands have disappeared for those looking to eat out forever.

    However, recent developments in the food and beverage market are not necessarily all doom and gloom for agile operators who have been able to cash in on the revolution in take-outs and delivery services to our homes. Being able to enjoy your favourite dishes in your own home to brighten up a dull day in lockdown has obviously seen a huge growth in the market and been most welcome for restauranteurs. The BBC has quoted that the takeaway industry is currently worth in the region of £5 billion per year.

    So increasingly, operators are looking at the so-called “dark kitchens” to serve this market (also known as ghost/shadow/cloud kitchens).

    Restrictions caused by the global pandemic have boosted a model that was already providing popular for convenience to consumers, and which has been made more available by the rise of food delivery platform apps, such as Deliveroo and Just Eat. The Chief Business Officer of the former has been quoted as saying that they intend to launch in over 100 additional towns or cities in the UK during 2021.

    Even cafes/restaurants that operate at lower price points have been benefitting from supplying workers with the convenience of a delivery who were stuck in front of their screens at home wanting a “pick me up” who are prepared to splash out for a barista-prepared coffee with a bun for not only themselves but also their co-workers (a.k.a. spouse/children) to brighten up the day. One of our clients, Diljit Brar, a Costa franchisee with more than 60 outlets, has confirmed that, since the pandemic took hold, their average price point per customer has risen to £15 due to the large amount of deliveries they are now arranging from their units.

    Some operators are not even providing a fully cooked “takeaway” now, but rather a pre-prepared meal to be finished off at home, such as Cote at Home, which offers a nationwide delivery service, and even the better known high-end restauranteurs such as Rick Stein or Gymkhana and other Michelin starred establishments are doing similar offerings, at least while they cannot open their restaurants to sit-in guests.

    So, what is a “dark kitchen”? Well, unlike your typical restaurant that tends to solely cater for takeaway customers, these are based to take advantage of under-utilised urban spaces. At least initially, these tended to be set up on almost wasteland in containers or portable cabins hidden away from customers’ eyes and without any windows, hence the terminology. The popularity and, in particular, funding from operators such as Deliveroo has, however, meant that some businesses now operate out of more purpose-built warehouse styles on the outside of cities in large-scale commercial kitchens. In those circumstances, often several operators can share space, with the restaurant providing their own staff, cooks and ingredients but sharing shelving, refrigeration etc.

    So, the benefits are that they enable restauranteurs to cash in on the huge growth in such a business and enable them to set up at a much cheaper cost without larger capital costs. They can operate from cheaper locations that the customer does not need to visit and have no need for expensive fit-out for non-customer-facing premises.

    A business can, without those initial set-up costs, enter into a much more flexible letting on shorter terms so that they can exit if things do not work out or, indeed, take off if they need larger units.

    The larger established businesses can benefit from an economy of scale with the different brands operating out of the same kitchen, but producing the different offerings.

    In certain circumstances, such as with some of the Deliveroo Editions whereby the workspace provides for smaller restauranteurs to produce their delivery meal, the cost of running the premises is met by Deliveroo, who are paid by the operators on commission from their sales.

    The concept also enables eateries to try different concepts and experiment with the market in a more flexible way.

    Without the overheads of running and paying for the restaurant space and serving staff, an operator can competitively price its products in the market for the consumer.

    Businesses can, however, experience some difficulty in quality control if not carefully managed, with food arriving cold, soggy or dry.

    To produce great quality meals, the right chefs need to be attracted to work at the somewhat less glamorous locations, which might provide challenging.

    An operator will not be able to be so flexible with a menu relying on supplies or tweaking to cater for individual preferences or allergens.

    There can be a relatively high initial expense from a technical point of view to invest in also.

    Great care needs to be taken by anyone considering operating in a dark kitchen on the planning position, which is complex to say the least. With the smaller operations, there have been several cases with neighbours complaining about increased traffic from delivery scooters and cars etc. With the purpose-built operations, local planning authorities vary in their consideration of how the operation should be viewed and, indeed, the exact nature may vary from simply being some form of warehouse to having a sui generis specific use that would require a specific planning consent.

    This article first appeared in CLH News

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    Our Commercial Property & Development team give commercially orientated advice and ensure a speedily concluded transaction whether you are purchasing, selling or leasing commercial property.

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