April 17, 2020

Is Ireland’s online meal delivery and dark kitchens about to evolve through this crisis?

Social distancing measures calls for innovation strategies among landlords and retailers through this most difficult time.

As most of us are aware, under a national effort to slow the spread of Covid-19, cafes and restaurants have been forced to close their doors to dine-in customers. For tenants, this means their primary source of cash flow has now been cut off, yet many are still locked into multi - year lease terms. For landlords, the risk of a tenant defaulting is now far greater.

What can landlords and tenants do to combat this crisis together?



Evoluton of Dark Kitchen - SM
  1. The shift in focus to meal delivery and takeaway


    Interestingly, there are many food retailers around Ireland who have rapidly adapted their business models to focus on meal delivery and takeaway: their only source of revenue for the foreseeable future. This was facilitated by a welcome relaxation of planning laws to enable retailers to adapt to online delivery and takeaways. This is likely to fuel demand in the online meal delivery market for 2020 and beyond.

    A great website offers direct links to local producers and suppliers of the best artisan food in Ireland. It has been specifically set up as a Covid -19 delivery scheme and is a super platform in providing revenue to retailers/ producers along with highlighting their individual brands and ability to supply people with the best food produce at our most vulnerable period. Suppliers such as Sprout, Avoca, Fallon and Byrne, FXBuckley, Little Italy, McCambridge’s and The Fruit Store, to name only a few have taken up the charge to innovate and stay alive as a business. Everything from veg boxes, pantry stables, butchers, fishmongers, cheesemongers, artisan bakeries, chocolatiers, breweries etc are all on there and looking to feed the nation.

  2. The possible rise of the Irish Dark Kitchens

Dark kitchens or ‘ghost kitchens’ as they are sometimes referred to, are essentially accommodation that is shared by multiple food preparation businesses that predominantly wouldn’t have a customer facing premises, developed and managed by a delivery provider such as Deliveroo/Just Eat or internally provided by the restaurateurs themselves.

A recent article on Manna Aero, an Irish start up that is delivering food through the use of a ‘Dark Kitchen’ and drones is also demonstrating innovation and embracing technology at its best. There is no doubt this is something which will evolve over the next 5 years.

To-date, the most popular and active online website platforms are Deliveroo and Just Eat in Ireland.

Most Chinese/Indian/Thai/Japanese/Mexican/Italian takeaways have use of one or the other of these platforms yet there is nothing for those that are trying to break through. Perhaps landlords can think outside the box and offer space to facilitate these users.

Worth noting the most established fast food restaurants and drive thru’s who have closed all their stores yet are using delivery services to boost sales include KFC, Burger King, McDonalds and Four Star Pizza. Dominos continue only to use their own app for orders. Boojum meanwhile have segregated prep areas to deal with orders from online so as not to compete with queues in store.

Other popular, innovative restaurant operations such as Mad Egg who are currently operating out of Dundrum Town Centre on an ‘advanced notice’ pick up basis have a current requirement for two ‘Dark Kitchen’s’ in inner City Dublin while Tolteca currently have a requirement for two ‘Dark Kitchens’ in North and South Dublin where they currently have no standalone presence.

 

3. The shift that landlords can get behind

Landlords can provide the infrastructure required for online meal production by fitting out retail or inner-city industrial units as shared kitchen spaces (Dark Kitchens) for use of multiple operators in fulfilling online orders. This allows operators to boost their output, brand coverage and revenue under flexible leasing arrangements which may lead to lower default risks by tenants or assist in bolstering their bottom-line balance sheets as an overall business.

Dark kitchens are becoming increasingly popular worldwide. Ireland is not very active in this space yet. However, this could be about to change.  At present there are alternatives that people are using for commercial food provision, known as ‘EHO-compatible’ kitchen space. A couple of examples of these are;

  • Spade Enterprise Centre – Designated kitchens for hire (we understand this is currently only for unemployed to launch a business - a great initiative!)
  • CKF Hire – Portable kitchens of varying sizes that can be installed anywhere.
  • New Market Kitchen – Designated kitchen space for hire
  • Hour Kitchen – Designated kitchen space available to hire

 

Within these examples, facilities that are offered include a sample of the following.

  • Access to in-house secretarial services
  • Wi-Fi
  • Fire alarm systems.
  • Use of conference rooms
  • State-of-the-art telephone system with high speed internet access
  • Waste disposal
  • Servicing and maintenance of toilets, common areas and car park.
  • Rates
  • Fire and public liability insurance on the building. [Landlords risk only]

A recent CBRE Research report on Dark Kitchens, shows that the number of these facilities is expected to double in 2020 and set to grow even further next year. Our US colleagues have also seen increased demand from food and beverage operators to use vacant retail units in shopping centres and retail parks as ‘ghost kitchens’ aka ‘dark kitchens’ to ramp up delivery capabilities during the last few weeks of Covid-19 lockdown. A recent IHS Markit report on Ireland retail sales indicated a 30% increase in food and beverage sales volumes during March. This is surely a clear indicator that food and beverage services are still an essential use and are a key factor in consumer demand.

Is this the start of a long run paradigm shift in online food retailing?

Beyond 2020, we may find that online food retailing will maintain a strong presence alongside a ‘dine-in’ option. We are seeing examples of this manifest already in Ireland.

This may require operators to increase their production capacity as the consumers expectations in efficiency and quality will increase.

Is this the start of the ‘Dark Kitchen’ era?


Written by: Bernadine Hogan

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