Ghost Kitchens: The Billion-Dollar Business Behind Your Doorstep Burrito

Door-to-door food delivery has exploded in popularity since the beginning of the decade. It’s a compelling concept: You open your favorite delivery app, find your favorite restaurant, tap around a bit and place your order. Soon enough, your hot, fresh order arrives on your doorstep.

If you’re like most customers, you don’t spend much time thinking about how your burrito or sub sandwich or burger gets to your place. Or if you do, you make the reasonable assumption that it’s made by the same people who’d make it if you walked into the restaurant and ordered in person.

Your assumption could be right. But depending on where you live and where you’re ordering from, it could very well be wrong too. Your burrito or sub or burger might instead come from a ghost kitchen — a commercial kitchen that exists for the sole purpose of preparing meals for delivery, usually through third-party apps.

The more you think about it, the more sense the concept makes. The sheer volume of orders coming to any one location would overwhelm in-house business at peak mealtimes, compromising the customer (and worker) experience for everyone. Cloud kitchens are the perfect release valve for the hybridized world — part online, part offline — we all now inhabit.

The ghost kitchen story is not an ancient one. It began in earnest with CloudKitchens, a startup backed by former Uber CEO Travis Kalanick and EarthLink founder Sky Dayton, among others. Kalanick bought CloudKitchens’ parent company in 2018 and quickly scaled the business to dozens of U.S. locations and thousands of employees, meeting what in hindsight was clearly a pressing and near-universal need among busy Americans. By 2021, CloudKitchens was a $15 billion business.

“[Ghost kitchens’] rise in popularity can be attributed to a mix of technological innovation, shifting consumer behaviors, and the ever-evolving restaurant landscape,” says Kelsey Woolcott, head of new vertical sales at CloudKitchens.

Before we get too far ahead of ourselves, it’s important to note that CloudKitchens doesn’t have a lock on the market for ghost kitchens, which Woolcott notes also go by names like “virtual kitchens” and “dark kitchens.”

The company has a few scaled-up competitors and a greater number of regional or independent commercial kitchens that serve the food delivery market. To the extent that CloudKitchens is synonymous with the ghost kitchen business, it’s because Kalanick, Dayton and other early leaders landed on a lean and scalable model — enabling the Uber, if you will, of on-demand food preparation.

How do ghost kitchens work?

The concept of a ghost kitchen is straightforward. The details are, unsurprisingly, more complicated. And more interesting.

Unlike traditional restaurants that — depending on the location — fill a variable mix of in-house, takeout and possibly delivery orders, ghost kitchens fill online or app-based orders only. Some do allow takeout orders, but that’s not their primary business and may conflict with the efficiency of the delivery operation.

Because ghost kitchens don’t really cater to direct customers, they don’t have to deal with the hassle and expense of running a retail foodservice operation. They’re leaner, more efficient operations that can prepare food in greater volumes and get it out the door faster than their bulkier counterparts.

Ghost kitchens can and do work with established restaurants, including national and regional franchises. However, they’re especially valuable for newer restaurant concepts, Woolcott says. They allow them to “test their ideas in the market with minimal investment,” an extension of the “fail-fast” mentality that has helped countless tech startups iterate.

What’s behind ghost kitchens’ rise in popularity?

CloudKitchens launched before the COVID-19 pandemic temporarily disrupted global flows of people, goods, money and, yes, food. However, the story of the ghost kitchen is woefully incomplete without a nod to that very disruption.

As people retreated into their homes and “pods” in early 2020, the need for on-demand delivery exploded. Companies like Amazon benefited, of course, but so did food-delivery apps like DoorDash and Grubhub. As the rocket fuel behind those apps, platforms like CloudKitchens hitched a ride on the trends as well.

And, no surprise, early investors saw their stakes multiply. Kalanick’s initial stake of $150 million was worth considerably more than that by 2021. Early backers like Sky Dayton saw their investments grow as well.

The euphoria didn’t last; we know how the pandemic story ended. As the world went back to normal, food delivery volumes normalized, and some commercial kitchens downsized or closed. Still, the boom made it clear that hunger and convenience went hand in hand. The genie was not about to go back into the bottle.

Can ghost kitchens replace in-person dining?

It’s a fair question. The analogies practically write themselves: Kalanick’s Uber disrupted and soon enough demolished the traditional taxi-company business model; Dayton’s Earthlink helped accelerate the demise of the endlessly frustrating “DIY dial-up” era of the early Internet.

However, whereas transportation and Internet access are at this point straightforwardly commoditized, dining is more complicated. Sure, many of us prefer on-demand delivery to cooking at home, and there are plenty of apps (and commercial kitchens) for that. But apps, AI and even virtual reality can’t — yet — replace the experience of dining out with friends and loved one; possibly they never will.

Then again, mavericks like Kalanick do see a bolder future for the concept.

What’s next for ghost kitchens?

CloudKitchens has seen its share of ups and downs over the past decade, as has the wider food-on-demand industry. But app-based food delivery remains a popular and growing niche, boosted by a resilient economy and rapid advances in artificial intelligence. Neither the company nor the market it serves is going anywhere.

At a conference in early 2025, Kalanick spoke of an ambitious plan to build a “full-stack” company that could leverage AI to deliver fully optimized meals — not just off-the-menu standards — to everyone, not just the wealthy.

To do that, he said, CloudKitchens would need to build its own ecosystem, rather than relying on delivery app intermediaries for market access.

“On somebody else’s platform, they can squeeze you,” he said.