The Hybrid Ghost Kitchen Model: How to Navigate a Permanently Changed Landscape
Andrew Martino, Founder/CEO for Ghost Truck Kitchen, the world’s first digital food truck lot, shares the lessons he learned in his first year of opening GTK. We dive deep into how to run a successful hybrid ghost kitchen model, adapt to current market disruptions, harness consumer power, and approach the current labor shortage.
1. Be willing to let go of some things and realize that customers are really going to determine what works and what doesn't.
2. Restaurants that make a great experience for their guests, make them feel welcome, and make them feel heard, will have a long-term advantage
3. If you're going to invest in anything, invest in yourself.
Andrew Martino: I think it's a fact to say the landscape has permanently changed. I don't think that's debatable.
Matt Levin: Inspirational stories, actionable business tips, and real-world strategies.
Join us as today's guest shares how you can make your business more resilient in an unpredictable world.
Hi everyone. I'm Matt Levin and you're listening to The Resilient Restaurant podcast.
Today we have Andrew Martino, Founder and Operator for Ghost Truck Kitchen, the world's first digital food truck lot. He joins us to speak about the hybrid ghost kitchen model, current market disruptions, and how to approach the current labor shortage.
Andrew, thank you so much for joining us today, really appreciate it.
Andrew Martino: Absolutely, glad to be here.
About Andrew Martino
Matt Levin: So let's kick it off and if you could start by just telling us a little bit about your background and your business.
Andrew Martino: Sure. I've been in hospitality for the last 18 years, which makes me feel very old. Started off as a college student working in a bar. Kind of quickly moved up the ranks, realized this is what I love to do. Took several hospitality roles over the past 18 years, but for the last few years, I've been the Founder and Operator for Ghost Truck Kitchen. We have our first location here in Jersey City. We're a hybrid ghost kitchen that operates 12 different virtual food trucks, all optimized for takeout and delivery.
Matt Levin: So let's dive in a little bit to the mechanics of your business. Is your particular model a kind of hybrid ghost kitchen, where you have multiple owned brands under a single location like a brand new concept to the world, or is this something that's part of a larger, bigger trend?
Andrew Martino: I like to think that we're very unique in what we do. We're in our third year of operation here.
Obviously, there's been a lot of ghost kitchen concepts that have come on the scene over the past 18 months. We still feel that we're much more unique in that everything is private label for us. We utilize one traditional brick and mortar space, one kitchen line, and we create all of these options out of one kitchen with one team and we have the option and opportunity to be located within a neighborhood and be a part of a community, and get to know our customer spaces as well.
Matt Levin: That's pretty awesome. So without revealing any proprietary secret sauce, do you think that this is a model that you've innovated on? Or is this something that's going to be adopted more broadly? Do you see yourself as a vanguard for how the ghost kitchen model is going to evolve?
Andrew Martino: Yeah. I definitely feel that I've been a first-mover in this situation. I can say that the more well-funded concepts have definitely moved more into this type of role, which is: whether it's multi-vendor or multi-concept all available on one check. I think you're going to start to see that much more frequently.
I think just integrating and having that top-down vertical integration where we're creating the food, we're creating the brands, we have complete control. I think that's a lot easier to manage than let's say having 12 or 20 concepts all under one roof with multiple operators. I feel like that's going to be a real challenge for some folks.
Lessons LearnedMatt Levin: I think one of the challenges of being an entrepreneur and particularly one who's kind of innovating in a new concept is that a lot of the bumps and bruises, the learnings, only come from doing the thing and building the business and you can't really read them in a book. You really have to experience it. Can you share a little bit of maybe some of the toughest lessons that you've learned over the last few years?
Andrew Martino: Yeah. We got our butt kicked when we first opened I think. A little bit because it was new and our customers didn't really know what to expect and we didn't know it was what was going to move.
So I think the most important lesson or takeaway is to allow yourself to be flexible. Some things, food items, we thought were going to do really, really well didn't work at all. And I think you need to be willing to let go of those things and realize that customers are really going to determine what works and what doesn't.
So you need to have some level of flexibility in what you're doing. I like to give the example of our wings. So I'm going to shameless plug; I think we have the best wings in the Tri-state area. We put a lot of time and energy into our wings. When we first opened our wings were part of a smoked meat ghost truck with several other options and they really weren't moving at all.
We weren't selling hardly any. They were so good, but they weren't moving. Instead of removing them, we actually changed how they were placed and we created a whole ghost truck concept specifically around our wings. Since then, they've been flying. They're our bestsellers. So it was really just that iteration of what does the menu look like in a digital world, featuring those items, getting it in front of the customer. Just being flexible.
Speaking the Digital Language
Matt Levin: So this is really menu profitability and costing and figuring out how you position bestsellers, but adapted to a newer type of ghost kitchen model. Do you feel like this is something that came very easy for you because of your many years in the hospitality industry? Was it a new process that you had to develop in your new hybrid model or something else?
Andrew Martino: Generally will say hybrid. But I think the more that I got into this business, I realized that I was dealing with something completely different from my full-service background. Digital menus aren't the same as print menus. The way someone will scroll a menu on their phone is different than the way someone will peruse a physical menu with their eyes sitting down in a restaurant.
AB testing menu placements and seeing kind of maybe where bestsellers could go or the most purchase items are. We're still learning every single day, but it's definitely a departure from the comfort of just physical dining and physical dining room.
Matt Levin: When you have conversations with other operators, either in silver space or other verticals, are they talking the same kind of digital language as you are, like let's talk about AB testing and split testing and doing analytics, get insights versus something that you think is maybe less well adopted?
Andrew Martino: I think for independent restaurants, it's definitely less adopted. I'm sure all of the big guys, QSR, fast-casuals, franchises, I'm sure they employ a lot of analytics, data follow-ups, AB testing. Or at least my assumption is they do. But for independent restaurants, they don't really have the time or sometimes the technology or the implementation of technology in order to get accurate information.
So restaurants are still definitely behind in the digital world. It's a challenge for independent restaurants to just find the time and resources to do that, to keep up with the big guys.
Matt Levin: Are there tricks that smaller operators can deploy if they're feeling like they may be too small or don't have the digital skills or background to be able to do this kind of stuff?
Andrew Martino: Yeah. I think for me, as most things do, I like to say that I go to Google University. So it really is like, ‘Hey, what do I need?’, Googling it, maybe finding companies, demoing different products that are out there that maybe could help whatever your goals are.
Maybe you want to know where my customers are, how many repeat customers. So I want to search for like a CRM type profile. Maybe it's: I want to see who's ordering what, at what time, and I can use my POS and comb through that. But I think you almost need to reverse engineer. What's your ultimate goal with the data and then kind of work backwards for how to achieve that goal. Every restaurant is different. If you want to get butts in seats to sell beers, you're going to have a very different approach than someone who is only worried about how much delivery food they're selling.
So I think starting with a clear goal in mind is the most important thing, and then figuring out what companies are out there, or what it would take for you to get the information necessary to make a decision or just achieve that goal in the end.
The Permanent Changes in the Hospitality Industry
Matt Levin: So we've obviously had the most disruptive year and a half in the hospitality industry and a generation. And this of course has accelerated a variety of changes within the industry. Do you think that the delivery, takeout, ghost kitchen model and this landscape is permanently changing? And if so, in what kind of ways?
Andrew Martino: Yeah, I think it's a fact to say the landscape has permanently changed. I don't think that's debatable. I think there's still going to be a big segment of people who are, of course, going to dine out and have experiential dining and want to enjoy themselves and be amongst friends. But I think the digital adoption happened and behaviors changed and people that never ordered delivery or takeout food became comfortable doing it. Of course, there's tons of apps that were subsidizing a lot of this, right? $10 off your first order, $30 off an order of 40. So there was definitely a lot of drive and competition between some of the big third-party apps to bring people on and convert them.
So I think it is a different world. That being said, just like the traditional restaurant world, maybe there's only a 15 or 20% success rate. I feel that's the same shakeout for ghost kitchens or cloud kitchens. There'll be operators that are very good at it and we'll have some success, but there's going to be a lot more failures than there are successes.
Matt Levin: So I generally think that there are some universal timeless rules of hospitality and some general principles of how you serve people well and do great customer service and things like that. But there's also a lot of things that are kind of rapidly changing. What other big changes are you seeing in general in the restaurant industry and hospitality just beyond this ghost kitchen model emerging?
Andrew Martino: Well I think the topic du jour right now amongst most restaurateurs is the shortage of labor that exists. I don't think that this is new for anybody that was paying attention. I lived in California for several years. So minimum wage hikes, how to adapt to those -- those conversations have been happening. But I think it's more prevalent now than ever, which is, how do you staff your team, how do you make things most efficient, right?
The days of having back waiters, servers, food runners, expediters, bussers, those days are probably over. Restaurateurs have to adapt and it's like, how do people wear more hats? How do we maybe pay someone a little bit more, but they're doing a few more things, or how do we eliminate certain parts of our service in order to run more efficiently from a labor perspective?
That's definitely a big conversation I think. A lot of restaurants are having to modify their system and I think COVID and the change to digital ordering and take out, that accelerated in some people's minds changing up their entire operation and what that could look like for the next decade.
Matt Levin: If you were to jump 10 years in the future and then look back to today, is there anything that you would look back on and say, ‘Wow, that was totally crazy. Like, why are we doing it that way? Why are we operating like this? This is totally insane. I can't believe we never did this.’
Andrew Martino: That's a great question. I can't say that there's anything I would look back on right now and think, ‘Okay, that was insane.’
I would lean towards some labor I think, possibly cashiers, someone that's strictly standing at the front to ring up orders or hand someone food. I think we might look at that and say, ‘Wow, that was a really easy thing to eliminate because now all these orders inject directly, here they go here.’ No one needs to answer the phone because everything's coming in digitally right to our POS system.
My dystopian point of view is that I think we're going to look back at this era and restaurants and wish that we had more state support, local government support to help independent restaurants. I am very worried about a future that is controlled by the big aggregators, cloud kitchen performers that are kind of well-funded global machines.
Matt Levin: One of the fundamental aspects of the internet and technology is that it ultimately reduces transaction costs. And in many cases, gives rise to these power law type of dynamic where you have a ‘winner take all’ or ‘winner take most’ type of situation. Things get cheaper for the average person when they're buying stuff, but you get these extreme situations where large players and almost any tech enabled industry can get massive overnight and out-compete the smaller guys. Whether that's Google, kind of owning search or you see Amazon with almost every retail category. So I had this thesis that a similar dynamic will occur in the restaurant industry accelerated by COVID where these smaller local restaurants just ended up being replaced by changing conglomerates. So basically the total number of restaurants doesn't really change because the demand is still there, but who they are and who owns them does change.
Andrew Martino: Yeah. I mean again, I think it depends on what part of the country that you're in or you're operating in.
Your downtown local pub is probably pretty safe, but maybe your standoff classic pizza joint is not so safe because a national chain is going to move into a cloud kitchen, destroy you on pricing because they can because they're getting all their stuff for cheaper.
There is the risk of running some local independants out of a job and out of their livelihoods. We as the consumers are in control, but consumers typically are driven by price points. And when you have a conglomerate and you have a crazy amount of buying power, you're able to offer things at a much lower price.
My hope is that consumers are aware that, ‘You know what, it's worth spending $2 to keep my local Tavern open.’ I'm hoping that consumers realize the power that they have with their decision-making. It's kind of up to us to make them aware of the impact of their decisions.
Surviving and Thriving in Local Neighborhoods
Matt Levin: Do you have any advice for smaller, potentially struggling, operators and what they can do to be able to survive and potentially thrive in their local neighborhoods?
Andrew Martino: Yeah. I mean I think the advantage that you have as a small independent is you're amongst your peers in the community. So really harping on that connection with your guests, right? Learning people's names, reaching out to them individually, responding to any reviews and feedback you can, getting involved in community service, whether it's donating food or sponsoring an event. Those are things typically that independants can do better so that you really are a part of the fabric of the community and people want to support you more than the franchise or the cloud kitchen down the street.
Hospitality is something that's sorely gone missing, of course, over the last year and a half. So I feel that those that can do that better, make a great experience for their guests, make them feel welcome, make them feel heard, I think that'll give them a real advantage long-term.
Changing Models and Disruption
Matt Levin: In any market there's major disruption or change, or when technology is involved, there's this rise of experiments that don't work out or even worse, scammers or frauds come into the markets. Have you seen any of that over the last year/over the last couple of years with these changing models and disruption?
Andrew Martino: Definitely. For me, and I'm not gonna name any names, but I'm not a big believer in the virtual restaurant franchises that have launched around the country. Some are more nefarious than others, but I really look at that as a pure cash grab economic model, it does not support restaurants operating other people's third-party virtual concepts for a strong bottom line. So, there's a lot of snake oil salesmen that are saying, ‘Hey, we have 50 virtual restaurants for you to choose from, pick whatever you have, we do all this legwork for you. All you need is this activation fee and this blah, blah, blah, and we only take this small piece and-.’ It’s not going to work out well for restaurants. So I think restaurateurs need to be aware when they're considering partnering with guys that promise the world and say, ‘Oh, you know, you're already paying for all of your overhead, so this is just a pure profit play.’ That's truly not the case and you really need to look hard into the numbers. And if you're going to invest in anything, invest in yourself. Come up with your own virtual concept that showcases why you got into the business in the first place.
Convergence Between Food Delivery and E-commerce
Matt Levin: One of the analogies I make a lot is that there's this convergence happening between food delivery and e-commerce, both on the marketing and logistics side of the house, right? So the same kind of principles of digital advertising or conversion optimization apply to both businesses. And online delivery, it takes the form of things -- you talked about like menu optimization.
So one of the challenges of course with e-commerce is that these days you need a lot of technology to make that business work, and you need a really specialized set of e-commerce skills on the marketing side, on the creative side, on the logistics side, etc. So if you're in the business of selling clothes or selling fashion or beauty products online, you're most likely an organization that's kind of built that into your DNA. But if you're getting into the restaurant business or you've been in the restaurant business for 20 years, it may not be. Is that something that you're seeing and are people now having to essentially adopt new types of e-commerce skills? If so, what advice do you have for them?
Andrew Martino: I think you just really nailed it. Even when I was getting ready to launch this business three years ago, knowing that 90% of my orders were going to be online, I still considered myself in the restaurant business and didn't think of it any differently. Sometime during the first year, it dawned on me, and then I felt stupid that it didn't dawn on me earlier that I'm no longer in the restaurant business; I am in the e-commerce business. And it's very very different for a restaurant to be in this e-commerce world because we're decades behind. We're literally probably 20 years behind, online sellers. It's challenging to wrap your mind around it.
And also the big differences when you're an e-commerce retailer, you can ship your product nationwide. Your product's not going to go bad. It's not going to get soggy. When you're a restaurant, you don't have that ability, right? You can only deliver to so many households, you can only keep the food good for that long. It really is a challenge. It's still been a challenge for us: getting all of our data in one spot to make it actionable, creating those initial funnels, calculating lifetime value, calculating customer acquisition costs.
I've been working on it for a year now, and we're probably still a year away from getting what we need to get into the way we need to get it. So, every restaurant out there needs to start embracing and bringing technology on board and figuring out what works best for them and their style of restaurant. But you're in e-commerce now.
Investing in Technology Matt Levin: Where would you suggest people start in terms of either technology investments or skills or generalized capabilities?
Andrew Martino: I would probably start as whatever my source of truth is. For me, that's my point of sale system. I think it's important to really know what data you're getting now. So I would really start with guest data. I think that's the best place to start. And making sure that your guests' data is clean and you're getting the information you need, whether that's an email, a phone number, first and last name, preferences, whatever the case may be. And then some ability to track those guests and their life cycle is probably where I would start out.
If you're in a high-end fine dining, you're probably really focused on your VIP's. If you're a fast-casual, you probably want the broadest customer base possible so that you can drive as many different customers in there as possible.
Matt Levin: One thing I've noticed over the last year/year and a half, is this really very inconsistent approach to gathering that guest data. Sometimes what we call in the marketing world first party data, right? Do you think that some of this inconsistency is really just because the industry is 20 years behind and people are still figuring out their technology stacks and what to do with it? Or do you think it might be a cultural shift or some sort of cultural resistance where people say, ‘Ah, it's a little bit icky to ask people constantly about, you know, they ask for phone number, their email, and hassle them when they're just trying to order food and have them. What's your take?
Andrew Martino: I don't think there's a big pushback on sharing an email or phone number in this day and age. I think it's important what you do with that information, right? If you're getting someone's phone number and then spamming them with text marketing once a week, that's probably not going to go over very well. But I don't think the culture shift has gone away from that gathering of data.
I also think restaurants are at a disadvantage in that there's so many tech companies, POS providers, third-party providers, that the data that we're getting in right now is very fragmented and it's very fractured.
So it is challenging to get that data in one spot, especially if you're dealing with anonymous third party data that stops you from tracking that customer journey, which the big third-party companies have done a very good job, for them of hiding your customer's information from you so that you can't create that relationship with them.
Matt Levin: So how do you make sense of this data and the systems that maybe don't talk to each other perfectly?
Andrew Martino: I mean, I think there's more and more technology that is working together, especially with the POS information to help these things, to automate these things.
I don't think it's where it needs to be yet to make it a simple plug and play for restaurateurs. But for us, for example, it's really important to us to try to re-engage customers that we've lapsed or lost that were regulars. We've created a system where we're kind of able to track people that haven't ordered in 60 days. For other guests, they might want to target high spenders. They might want to target making sure people return for a second visit or a third visit. So I think there are different goals that you can do and there is technology to create that, but I think there is a lot of headache right now in figuring out what is the right piece of technology for your business.
And sometimes you don't know until you're six months in and you're like, ‘Oh, this actually isn't going to work for me now. I need to find a different solution.’ So, still a lot of testing for me, then a lot of demos, a lot of learning. There's a lot of new tech out there and you want to make the right decision..
Matt Levin: If you had to give one piece of advice to somebody that's looking to get more tech savvy and really make a high impact on their business, what would that advice be?
Andrew Martino: Yeah, I think it would be to make your digital ordering experience as frictionless as possible for your guests. And do that natively, meaning don't engage a third party and expect them to have your best interests at heart and say, ‘Oh no, click on this and you can get our digital menu on GrubHub or on Yelp.’
Having a native, digital ordering system that is easy for the guests and the guests can repeatedly use is the most important thing. I'd love to see restaurants stop putting GrubHub DoorDash icons on their Instagram profiles and stickers on their door. You're giving your customers away.
And it's not going to benefit you in the long term because you're not only giving your customers away, you're giving your data away, which these third-party companies are then going to be using against you in the near future.
OutroMatt Levin: Yeah, that's super interesting. Andrew, thank you so much. This has been super insightful. I think you've got some fantastic lessons learned by trial by fire to share with the world. So I really appreciate you taking the time today.
Andrew Martino: Absolutely Matt. It was a pleasure speaking with you. Glad to do it.
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This podcast was produced and edited by MarketMan. Music by Joseph McDade.