Why have ghost kitchens struggled and what makes Nimbus different?

Nimbus was recently featured by CNBC, discussing the history and future of the ghost kitchen industry. The video emphasizes the challenges many operators face due to the operational demands of this business model.

While off-premise kitchens are a viable business model, three key issues often affect industry incumbents: 1) overemphasis on delivery operations; 2) rapid geographic expansion; and 3) premature vertical integration.

Many operators focus solely on providing kitchen infrastructure for delivery businesses, neglecting a large segment of the food industry that also requires affordable, flexible kitchen space. At Nimbus, our diversified rental models allow us to cater to a wider range of food businesses, such as catering, meal prep, and pop-up operations. This not only widens our total addressable market but also minimizes the risks associated with delivery market fluctuations and changing consumer preferences.

Growth is vital, but rapid expansion into new markets can stretch operational capabilities, affect service quality, and lead to premature opening and closure of kitchens. Commercial kitchen build-outs require substantial capital expenditure. Therefore, building facilities without fully understanding local regulations and customer preferences can be costly Nimbus has adopted a more cautious approach to growth and chose to establish a strong presence in New York City before expanding to other markets. This strategy enables us to refine our operating playbook and build confidence as we enter new markets, such as Chicago in May 2024.

Many well-funded players prematurely vertically integrate, handling commercial kitchen spaces, developing ordering platforms, and launching or licensing virtual brands. Commercial real estate, technology, and food businesses each require a unique operational focus and specific capital sources. Balancing these different business verticals has proven challenging for many ghost kitchen operators. In contrast, Nimbus prioritizes building a solid foundation with a keen focus on facility operations. By concentrating solely on managing kitchen spaces and ensuring smooth operations, we are well-positioned to navigate industry complexities before considering broader vertical integration.