Wendy's Ghost Kitchen Strategy

On Friday, Business Insider reported that Wendy’s is planning to open 700 delivery-only ghost kitchens by 2025. The fast food giant is partnering with REEF Technologies in a ghost kitchen endeavor that could expose some traditional franchising inefficiencies and force franchising at large to adapt quickly.

“Wendy's new ghost kitchens will be spread across the U.S., Canada and the UK, with around 50 set to open by the end of 2021,” wrote ??Grace Dean of Business Insider. During a company earnings call, Wendy’s CEO Todd Penegor predicted that each unit could make up to $1 million in sales each year.

Partnership details

REEF is a logistics vendor that markets itself as the largest operator of mobility, logistics hubs and neighborhood kitchens in the United States. The company has trademarked the phrase “The Power of Proximity” and features a partner network that includes companies like Uber Eats, DoorDash, Postmates and Grubhub.

REEF logistics hubs have allowed companies to embrace a modernized approach for new audiences, and its partnership with Wendy’s suggests that a revolution in the brick-and-mortar restaurant space could soon follow the lead of the revolution in delivery service that is already well under way.

Urban centers are quickly embracing ghost-kitchen and delivery-based services after pandemic shutdowns, and as cities become more crowded, the demand for real estate could soon make urban costs unattainable for certain franchises. On their website, REEF highlights its “ecosystem of 4,500 locations and a team of nearly 15,000 people.” A network like this could become the preferred method for how a franchise establishes an urban presence.

Ghost kitchen benefits

If a franchise operates solely out of ghost kitchens, they don’t have to pay anywhere near the real estate or operating costs of a brick-and-mortar location. They don’t need to clean any dining tables or staff a crew to maintain property grounds, while online ordering removes the hurdles of long lines or customer indecision. A Wendy’s ghost kitchen requires space no bigger than a few city parking spaces, which can dramatically decrease company overhead.

Ghost kitchens will still have to operationalize effective delivery models, but companies like Reef are showing that step isn’t such a challenge after all. Reef’s “micro-distribution infrastructure” has already helped the brand establish an enormous partner network with industry giants, and it seems to be getting more cost-effective as its innovations become a greater reality over time.

The success of Wendy’s ghost kitchens could change the game for restaurant franchises everywhere, and it might change franchise investment strategy for good.