Introduction to Dark Kitchens
Written By
Partner
UK
I'm the global head of our International Retail & Consumer sector group. As a partner in our international Commercial group in London, I work primarily with retail & consumer focussed businesses on their domestic and international growth and expansion strategies.
Whilst it feels inappropriate to talk about the “winners” of the COVID-19 pandemic, the UK food delivery and takeaway market continues to grow at an impressive pace, in part due to the expansion of online delivery concepts such as Deliveroo, Just Eat and Uber Eats combined with a tech enabled and technology hungry consumer base but also as a result of the restrictions imposed in response to the pandemic. Just two years ago – pre-pandemic, the market was valued at £8.5 billion in the UK, with projections showing that this could almost double by 2023[1].
As a result, restaurant kitchens are under increasing pressure to balance the needs of their eat-in clientele against the increasing demands for takeaway, whilst maintaining high quality food and service. Many restaurants are now using dark kitchens to service their takeaway customers so as not to interfere with the smooth operation of their restaurants. Whilst dark kitchens are clearly a key component in the food delivery and takeaway market supply chain, for businesses wishing to use or adopt them there are some significant reputational and legal issues which need to be considered.
Sometimes known as ghost kitchens or cloud kitchens, dark kitchens are food preparation hubs set up solely or pre-dominantly for the purposes of servicing takeaway orders. The name derives from the fact that the kitchens are usually situated inside windowless shipping containers on industrial estates or car parks, often in undesirable (and definitely lower rent) areas. Several start-ups have capitalised on the dark kitchen space by purchasing and renting out kitchens to restaurant chains across the UK. Delivery companies are also making use of their existing relationships with restaurants by setting up dark kitchen hubs from which their partners can operate and distribute.
The opportunities offered by dark kitchens have become more evident as struggling restaurant chains, such as Jamie’s Italian, have been forced to shut their doors for good. This trend of decline in the traditional restaurant space – particularly casual dining - has been seen in other brands such as Carluccio’s, Strada and Giraffe which have been forced to scale down significantly in recent years. Many point to the shifting demand for greater speed and convenience and the rise in takeaway offerings as a key cause of this downturn. With dark kitchens offering a low-cost alternative to these expensive high street restaurants, an increasing number of brands are recognising the opportunities they present to either diversify into the takeaway market[2] or to add an alternative channel for engaging in an increasingly competitive consumer market.
Who is using dark kitchens?
There are various supply chain models in the dark kitchen market in the UK, with the key players usually falling into one of four categories as follows:
- Large restaurant chains that have set up their own network of dark kitchens exclusively for their brand whilst still relying on third party delivery partners such as Deliveroo for delivery e.g. McDonald’s and Wagamama.
- Virtual start-up restaurants with no physical premises preparing food for delivery only e.g. French start-up, Taster, and German start-up, Keatz – both recently expanding into the UK market.
- Delivery companies that have set up their own dark kitchen networks as a spin off from their main brand, offering restaurants the benefit of their delivery fleet and online ordering platform e.g. Deliveroo Editions.
- Companies set up for the sole purpose of buying and renting out dark kitchens to other brands with the possibility of multiple brands sharing one kitchen e.g. FoodStars and Karma Kitchen.
The legal angle
Nuisance complaints, enforcement notices and food hygiene inspections are all common occurrences at dark kitchen sites across the UK and the legal landscape behind dark kitchens remains something of a grey area[3].
Claims of poor food hygiene in kitchens operated by the likes of Just Eat and Deliveroo have brought consumer protection law and the associated issues of brand standards and reputational risk to the forefront, as it is difficult to harmonise the consumer’s desire for transparency with the “out of sight, out of mind” nature of dark kitchens[4]. Deliveroo Editions state that they maintain the highest standards, with the business operating from the dark kitchen being required to have a 4- or 5-star rating under the Food Hygiene Rating Scheme operated by the Food Standards Agency (FSA) rating[5].
The Food Hygiene (England) Regulations 2013 require that businesses register each establishment with the local authority at least 28 days before food operations commence. If the premises are not selling direct to consumers, they may also need food premises approval from the local authority and a licence if they intend on providing a delivery service between 11pm and 5am[6]. These factors should all be taken into account by businesses seeking to establish dark kitchens.
The temporary nature of many dark kitchen sites has also led to disputes with councils over planning law and regulation, with many operators failing to obtain the necessary permissions for a change of use. Businesses should be encouraged to seek permissions early to avoid problems arising further down the line. Noise complaints have also been an issue for companies such as Deliveroo as kitchens are often located in residential areas. Many sites are therefore relying more heavily on bicycles rather than motorised scooters to overcome this[7].
It is likely that as a result of the publicised disputes between Deliveroo and local councils, regulations will tighten up in this area as the number of dark kitchens increase and necessitate greater legal clarity.
Low labour costs and the demand for frantic efficiency combined with the physical reality of working long hours in a dark windowless space has also led to criticism over working conditions in dark kitchens – adding further reputational issues for brands using dark kitchens. Concerns over employee welfare are likely to gain publicity as dark kitchen networks expand and the problem of exploitation within the gig economy becomes more widespread[8].
Data protection law is also likely to become increasingly relevant as delivery companies are using customers’ order histories to identify their eating habits and preferences, in turn allowing them to identify suitable locations for dark kitchens[9].
In conclusion, with increasing demand for home delivery – a trend that is unlikely to reverse even post the pandemic, dark kitchens are undoubtedly a key part of the supply chain for businesses offering food delivery and or takeaway BUT the incorporation of such a model in a business is not without both legal and reputational issues and consequences that need to be carefully balanced and thought through.
[1] https://www.statista.com/topics/4679/food-delivery-and-takeaway-market-in-the-united-kingdom-uk/ and https://www.bighospitality.co.uk/Article/2020/01/28/The-future-of-restaurant-delivery
[3] https://www.highspeedtraining.co.uk/hub/what-are-dark-kitchens/
[4] https://www.bbc.co.uk/news/uk-48705066
[5] https://www.eastlondonlines.co.uk/2020/04/behind-your-dinner-deliveroos-dark-kitchens/
[6] Licencing Act 2003
[8] https://www.eastlondonlines.co.uk/2020/04/behind-your-dinner-deliveroos-dark-kitchens/
