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- Nathan's Famous has doubled its number of ghost kitchens since last June.
- It now has 223 worldwide after opening its first in 2019.
- Unlike many other chains, Nathan's Famous is targeting city-center locations for its ghost kitchens.
- See more stories on Insider's business page.
In just 13 months, Nathan's Famous has doubled the number of ghost kitchens it operates.
The fast-food chain, which also owns the virtual brands Wings of New York and Arthur Treacher's, now has 223 ghost kitchens worldwide, it said Wednesday – and it's targeting city center locations.
Ghost kitchens don't have dining rooms and cook food for delivery, and in some cases collection, too. Usually, customers can only get food from the locations when they order in advance on the restaurant's website or app or via a third-party delivery service like DoorDash, Grubhub, or Uber Eats.
Nathan's Famous opened its first ghost kitchen in 2019 but the concept only really gained traction during the pandemic, when dozens of other chains started opening them too.
Ghost kitchens allow restaurants chains to boost their delivery capacity with much smaller real-estate requirements. This is because they don't need dining rooms or customer-facing facilities like parking and restrooms, James Walker, senior vice president of restaurants at Nathan's Famous, told Insider.
While "location is everything" for physical restaurants, ghost kitchens don't need to be in high-traffic areas because they rely on delivery rather than dine-in customers. This means chains can open them in areas with lower real estate costs, Zenreach CMO Megan Wintersteen said.
But ghost kitchens have increasingly been moving into city centers and highly populated areas, Walker said. He said that Nathan's Famous had always focused on more densely populated areas, which makes delivery times faster and opens up opportunities for collection rather than just delivery.
"You want to go into these higher-populated areas because that's where the density of people are and to be able to do so at a rent that is workable from a business model," Walker said, adding that ghost kitchens have a much quicker time to market than full restaurants.
"What we're seeing though is that these ghost kitchens are morphing," he said. "They're changing, they're evolving to provide customers even more accessibility."
And alongside the lower real estate costs, ghost kitchens can save on other costs because they need less labor for waiting tables and cleaning the restaurant. Ghost kitchens can have double the margin of dine-in restaurants, Kevin Burke, managing director and member of the consumer team at Citizens Capital Markets, part of Citizens Bank, told Insider.
They also allow companies to operate multiple brands - including virtual brands, which exist only on delivery platforms - from one kitchen.
Nathan's Famous, for example, launched Wings of New York as a delivery-only concept last year, and is also relaunching seafood chain Arthur Treacher's as a virtual brand. Ghost-kitchen franchisees can choose to open one, two, or three brands, he said.
Nathan's Famous opened its first ghost kitchen in 2019 with Franklin Junction, a company that matches brands to restaurants with surplus kitchen capacity. The kitchen then becomes a host for the other brand, which they sell for delivery-only.
CEO Rishi Nigam told Insider that Nathan's Famous opened around a third of its virtual kitchens through host restaurants it found through Franklin Junction.
Nathan's Famous has also worked with Softbank-backed Reef Kitchens to launch in new markets in the Midwest, as well as Kitopi, which is helping it deliver across New York.