Dive Brief:

• Walmart Canada is trialing in-store ghost kitchens that offer restaurant meals and convenience items from well-known brands, according to a press release. The first location opened last week inside a St. Catharines, Ontario, Walmart store, with four more locations set to add Ghost Kitchen Brands spots later this year.
• Shoppers can select meals from restaurants like Quiznos, Saladworks, Taco del Mar and The Cheesecake Factory Bakery, and from CPG brands like Ben & Jerry's, Red Bull and Beyond Meat. Orders are prepared in an on-site kitchen and available for pickup or delivery through third-party apps like Uber Eats.
• Walmart joins Kroger in exploring the ghost kitchen trend, which offers another takeout alternative for shuttered restaurants and in-store dining venues.

Dive Insight:

Ghost kitchens have taken off during the pandemic as restaurants, from mainstream brands to high-end eateries, invest in dedicated facilities to prepare and deliver meals. Companies like Kitchen United and Ghost Kitchen Brands specialize in bundling together numerous restaurant brands under one umbrella, creating a one-stop mealtime shop in major cities, as well as in establishments like malls and hotels that have seen foot traffic decline and may already house multiple restaurants.

Now, ghost kitchens are starting to pop up in grocery stores, where shopper traffic is still booming and where many in-store dining spots have had to shut down. For retailers like Walmart, the meal offerings promise to add value to the grocery pickup and delivery orders so many of its customers are making these days. 

For restaurants, the arrangement allows for expanded footprints and access to bustling crowds of potential new diners at low cost. A growing number of restaurant brands are seeking ghost kitchen partnerships and are developing their own models as dining room restrictions remain in place in many jurisdictions, and as some customers are still wary of eating on-premise.

Nathan's Famous, for example, has teamed with ghost kitchen platforms Franklin Junction and Reef in the past, and is now growing its delivery-only network through a host kitchen model where it partners with operates that have extra kitchen space. Wow Bao has implemented the same host strategy, and plans to reach 1,000 locations in 2021 through these partner kitchens. Most recently, Panda Express announced it will open a digital, delivery-only kitchen in San Francisco this month. 

Grocers like Wegmans and H-E-B have shifted their in-store restaurants over to takeout operations in the past year, raising questions about what the future holds for grocery dining once the pandemic has lifted. Concepts like the one testing at the St. Catharines Walmart pack in more meal options and allow shoppers to mix and match selections, raising the possibility that they could become traffic drivers and bring in new customers.

The St. Catharines ghost kitchen staffs between two and four workers to prepare orders, according to the Toronto Star, and accepts orders from in-store shoppers as well as online.

"We've been looking for partners who can offer us high visibility and a high amount of foot traffic," Marc Choy, Ghost Kitchens Canada president, told the paper.

Last year, Kroger opened two in-store ghost kitchens offering more than 80 menu items. The locations, which are operated by ClusterTruck, offer online as well as walk-up ordering, with meals available for pickup and delivery.

As grocers, which have become de facto meal destinations during the pandemic, test new takeout options, it raises the question of what store-level dining will look like in the years ahead. One pressing issue is how ghost kitchen concepts and in-store restaurants, a major investment for grocers in recent years, might coexist in a post-pandemic world.