“CEO James O’Reilly in front of Smokey Bones”

Anyone following the restaurant industry in recent months has undoubtedly heard the terms “ghost kitchen” and “virtual brands”. Both concepts are primarily based on off-premise consumption, making them similar in nature. But because of this similarity, they can often be mistaken as essentially the same thing. In an interview with James O’Reilly, CEO of Smokey Bones, we were able to clarify the key distinctions between “ghost kitchens” and “virtual brands” and learn a bit more about the unique advantages of each.

O’Reilly defined ghost kitchens by outlining some of their distinct properties. “We define ghost kitchens,” he said, “as off premise-only locations for a brick and mortar restaurant brand that have lower initial costs/less capital requirements and can make sense in different situations”. He described how ghost kitchens can complement brick and mortar stores by “adding points of off-premise only distribution” as “in-fill opportunities in existing trade areas”. Smokey Bones operates this model of distribution, for example, in their Chicago ghost kitchen.

O’Reilly defines virtual brands, on the other hand, as “restaurant concepts that exist only on digital (virtual) platforms and do not have brick and mortar locations”. The two virtual brands that Smokey Bones is currently operating are the Wing Experience and the Burger Experience. Although distinct, virtual brands are not totally separate from ghost kitchens, because as is the case for Smokey Bones, the virtual brands “can be operated out of traditional brick and mortar and also ghost kitchen locations”.

The main differences between ghost kitchens and virtual brands are the unique advantages they offer to restaurant brands. Ghost kitchens are primarily advantageous because initial costs are lower than those of operating a traditional brick and mortar location, and they can help restaurants to expand distribution to customers. O’Reilly said, “We intend to utilize ghost kitchens as a way to grow points of distribution in situations where an off-premise only location will work for Smokey Bones … There will always be a place for our core dine-in value proposition, and increasingly we will look for ways to compliment it with ghost kitchen locations”.

He also commented that the ghost kitchen strategy has especially high potential now, “as the pandemic has accelerated the trend toward off-premise consumption of casual dining menu offerings”. When asked if he thinks ghost kitchens will be the “new normal,” he simply responded, “Yes”.

Virtual brands are distinct from ghost kitchens because of the function they serve. “We intend to utilize virtual brands,” O’Reilly said, “as a way to better spotlight menu items (such as burgers and wings) that we are proud of, yet we are not as strongly associated with when consumers are searching for specific menu items when online”. The virtual brands allow those items to stand out.

He also commented on some of the limits to operating a virtual restaurant as a casual dining brand: “There is a likely limit to the amount of complexity that can be added by virtual brands to a casual dining operation. Our approach to managing this question and ensuring consistent culinary execution has been to offer virtual brands in product categories that our teams have ample experience in executing”. The experience of restaurant teams allows them to offer menu items which are not as complex as those typical to a casual dining restaurant. For Smokey Bones, those items are their burgers and wings. O’Reilly has full confidence that his team is “highly capable” of delivering these products consistently well.

Starting a ghost kitchen can also pose unique difficulties. O’Reilly commented that the most challenging aspect of opening a ghost kitchen is the “learning curve”. Restaurants must learn to adapt to a new way of operating with the unique equipment and management needs that come with a running a ghost kitchen. O’Reilly says, “We have climbed that curve at Smokey Bones which will enable us to accelerate our progress on this strategy”.

Smokey Bones continues to demonstrate restaurant resilience as it plans on opening 122 virtual restaurants in the coming months. Although the pandemic has caused devastating complications, it has also led people to engineer new ways of thriving. Such is the case with Smokey Bones and other restaurants that have utilized the ghost kitchen concept. James O’Reilly said he has taken advantage of the pandemic at home, too. When asked what aspect of his life has changed for the better, he responded confidently, “I have become a better cook at home!”.