Ghost Kitchens: Startup Led by Former Uber CEO Enforces Widespread Layoffs, Shuts Down Multiple Sites

Cloud Kitchens, or "ghost kitchens," gained significant popularity during the pandemic as it offered spaces exclusively for restaurants to cater to takeout and delivery services. Fueled by Venture Capital investment and taking advantage of historically low interest rates, Cloud Kitchens globally acquired and repurposed vacant warehouses into rental kitchens for both small local restaurants and major brands such as Chick-fil-A between 2019 and 2021.

Despite acquiring over 80 locations across the United States during this period, with varying operational statuses from renovation to hibernation, the company now faces economic headwinds impacting startups in the industry. Notably, other ventures like Reef, supported by SoftBank, ceased operations in the U.S., and Kitchen United, backed by Google, closed its kitchens within Krogers. Challenges in the UK also led to the closure and sale of a kitchen startup that raised $21 million in 2020.

The report further reveals that City Storage Systems, led by Uber co-founder Travis Kalanick, raised $850 million with a valuation of $15 billion in the same fall of 2021. However, the economic challenges have prompted layoffs at City Storage Systems, including engineering positions, as revealed by a current employee.

Cloud Kitchens is reported to be experiencing a significant loss of customers, leaving kitchens empty and difficult to fill. Critics argue that the model may not be profitable for most restaurants, asserting that traditional dining establishments will continue to shape the future of the industry.

Despite setbacks, the report suggests a potential reset rather than a complete withdrawal for Cloud Kitchens. There are indications that future ghost kitchens may adopt a different approach, possibly integrating robots instead of human staff. Kalanick hinted at a robot under development during a recent meeting, envisioning a fully automated kitchen and distribution system that could bring economic efficiency to ghost kitchens.

Efforts to weather the challenges are evident, with some locations, particularly in markets like Chicago, temporarily hibernating. Formerly operational Cloud Kitchens sites in cities like Memphis, Tucson, and Buffalo are currently paused, indicating the impact of the company's rapid expansion.

In addition, the report highlights the future potential of robot-assisted kitchens, as Kalanick introduces a robot named Bowl Builder, capable of adding various components to a bowl, producing sauces, and significantly reducing labor. While Bowl Builder is still in the development stage, it represents a potential avenue for Cloud Kitchens to dominate the evolving food market. The report concludes by drawing parallels to Uber's transformative impact on transportation, suggesting that Cloud Kitchens, according to Kalanick, could similarly eliminate the need for household kitchens.