‘Ghost’ Restaurants That Rely on Mobile-App Deliveries, Pickups Are Changing Real Estate

CoStar | Lou Hirsh | February 27, 2019

Eateries Turn to More Space for Cars, Less for Diners

The restaurant chain dining room is dying so fast it’s already becoming a ghost.

Quick-service restaurants such as Chipotle Mexican Grill are adding more drive-up lanes and online ordering options, transforming restaurant real estate to tap technology and customers’ growing desire to eat anywhere but a chain dining room. And independent “ghost restaurants” that make food just for delivery, with no dining rooms and little or no customer interaction, are on the rise.

The long-term effects could change the way restaurant companies or developers choose sites, locations, designs and staff. The move may even affect what it costs to build, lease and operate those eateries.

“There are many types of restaurants now that are seeing more demand for their food, but don’t have the space at their current locations to increase production of that food,” said Jerry Prendergast, principal in restaurant development consulting firm Prendergast & Associates in Los Angeles.

Fast changes are coming thanks to two mobile tech-enabled trends that are drastically altering how customers interact with restaurants. One is the rise of dedicated restaurant company apps — widely deployed by national chains such as Starbucks Coffee and McDonald’s Corp. — that let customers order and pay for food before arriving to pick them up, letting them skip waiting in line.

The number of mobile orders placed at U.S. restaurants rose 50 percent in 2017 over the prior year, according to Business Insider Intelligence, which also predicted last year that the order-ahead segment will account for 10.7 percent of all quick-service restaurant sales by 2020.

The other trend, growing even faster in terms of adoption by consumers and the restaurant industry, is the rise of third-party services — like DoorDash, GrubHub and Uber Eats — that deliver food from participating restaurants directly to homes, offices and other gathering places.

Financial services firm Morgan Stanley projected that direct delivery could account for 40 percent of annual U.S. restaurant sales or $220 billion by 2020, compared with about $30 billion annually or 5 percent of overall sales as of mid-2017.

Direct delivery is extremely convenient for customers but costly for most restaurant operators, who typically shell out 30 percent of meal tabs to those delivery companies, according to industry consulting firm Foodservice Results. Simultaneously, restaurants are challenged to establish their own direct delivery services because of labor, fuel, insurance and other rising costs.

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