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Executive Summary

The aim of this evidence report was to connect the SDGs related to the environmental, social, and economical factors with the ghost kitchen industry. These kitchens can overcome negative impacts of environmental factors by focusing on sharing the space with other kitchens, making required changes in their packaging, using zero emission vehicles for distribution, and utilising data to identify preferences of the customers such that wastage of could be reduced. Similarly, social and economic factors could be handled by the industry through the lens of SDGs. The relevance of different SDGs was described in taking care detrimental effects of each of the factor.

Overview

The increment in the concept of ghost kitchens after the pandemic is something of significance for the hospitality industry. The increased demand of selected food and restriction on dining out at the time of pandemic are the benefactor for this concept. These kitchens are known as ghost kitchens because they do not have the same traditional methods of serving their customers which is the option of dine in. The other names for these kitchens are micro-cloud kitchens or virtual kitchens. This concept focuses on the providing what is required by the customers virtually and not physically. These kitchens have added an option grab and go windows where customers can pick up the food they have ordered, if they wish to save the delivery charges.

Even though the ghost kitchen industry is expected to grow and generate a revenue of around $1 trillion, the problems persists within it (Beniwal & Mathur, 2022). The statement of the problem for this report is ‘Under the prism of the Sustainable Developmental Goals (SDGs), the ghost kitchen's possibilities of overcoming the detrimental effects of social, environmental, and economic issues to achieve sustainable growth are slim but not unattainable’. Social environmental, and economic are the three main factors that can be associated with the ghost kitchens as they are the most important from the perspective of SDGs. The sustainability of the ghost kitchen is defined due to these factors (Cai et al., 2022). Just like the two sides of a coin, there are negative and positive impacts of these factors. For this report the focus will be on the negative impacts of these factors and the solutions through which they can overcome those challenges. From the perspective of making ghost kitchens sustainable, they will have to emphasise on three SDGs that are SDG 3, 9, and 13. SDG 3 is the good health and well-being (Social), SDG 9 is the industry, innovation, and infrastructure (economic), and SDG 13 is climate action (environmental). Some of these negative impacts are carbon emissions due to deliveries, packaging waste, lack of physical presence, distribution, and delivery through the third parties can be expensive for the consumers.

Solution

The idea of a Cloud kitchen is the domain of the restaurant business. Despite the novelty of the idea, the worldwide virtual kitchen business was estimated to be worth $56.7 billion in 2021 and is expected to reach $112.53 billion by 2027, indicating a compound annual growth rate of 11.5% between 2022 and 2027 (Sorn & Al Nesrawi, 2022). Instead of these estimates there are social, environmental, and social problems that needs to be handled by these virtual kitchens in order to become sustainable.

Environmental Sustainability

Four elements are critical to the long-term viability of virtual kitchens: 

(1) Shared kitchen area; 

(2) Packaging; 

(3) Distribution model; and 

(4) Using data to anticipate client requests.

The following four components were chosen by the team of investigators to be included in to determine the solution. Every component is examined and connected to SDG and circular economy (CE).

Sharing

Packaging

CE: Reusing and Sharing

SDG: Wastage and decline in consumption

CE: Reprocessing

SDG: Wastage and decline in consumption

Distribution

Data Usage

SDG 13

SDG: 13 and Wastage and decline in consumption

Sharing

By allowing several packages to be gathered up from a single spot by one delivery person while delivering to food lovers rather than numerous pick-up areas, sharing the cooking area opens up many possibilities for improving environmental sustainability. This would minimize the amount of miles travelled for each meal. Not only can ghost kitchens share broad, costly appliances like freezers but the majority of large appliances in the cooking area can additionally be utilized among several companies, saving on the requirement to purchase multiple units of the exact same appliance and reducing greenhouse gases from its production and distribution. By pooling premises, businesses may also integrate their logistics network, cutting down on the number of truck trips needed for delivering raw materials (Accorsi et al., 2019).

The number of ghost kitchens occupying the area and their individual needs determine how effective this environmentally friendly element is. By examining the needs of the respective businesses in all locations and finding operational efficiencies across them, administrators can improve this.

Packaging

Among the greatest significant challenges to solve for ghost kitchen sustainability is packaging. According to research, 86% of the greenhouse gases released from just one meal supply can be attributed to packaging products (Heard et al., 2019). There are existing alternatives for environmentally friendly packaging, as well as multiple companies, are switching either all or portions of their packaging-related needs towards environmentally conscious alternatives. For most eatery proprietors, plastic and foam wrapping is still far less expensive. As cloud cooking areas will be purchasing in substantial amounts and possess the bargaining ability to do so, they can assist companies by helping to negotiate a far less expensive cost for environmentally friendly packaging.

When several companies use identical purchasing outlets as well as supply chains, it might be simpler to streamline packaging whilst still enabling businesses to personalize the materials used for packaging to represent their unique identities. A further advantage is the greater revenue margins and savings on operations that cloud cooking areas provide to businesses, which could entice companies to increase their investment in environmentally conscious packaging solutions (Choudhary, 2019). Implementing packaging that does not contain plastic, nevertheless, might be difficult because it varies greatly depending on the features of every alimentary business. To ensure that what they produce stays in good condition and is safe to eat, certain food businesses have strict packaging guidelines.

Distribution

Delivery routes will become more efficient and streamlined if cooking facilities are located in proximity to high population density regions. Yet, if environmentally friendly options are employed, the distribution vehicle could have a considerably greater impact. This could be a battery-powered scooter, bicycle, or car. Zero-emission vehicle deliveries have been permitted in certain regions of the metropolitan area according to laws issued by a few virtual kitchen providers (Katsela et al., 2022). Controlling this element may prove to be difficult because a lot of outside variables influence how decisions are made in this situation. For this aspect to truly affect the strategy of ecological sustainability, a number of additional variables such as salaries, fuel and energy rates, municipal rules, and availability to sites must be taken into account.

Data Utilisation

The inability to forecast consumer demands serves as one of the main problems with the conventional dining industry. Due to the aforementioned, proprietors of restaurants are forced to make meals in bigger amounts that cannot be distributed on a daily basis and to surplus items in order to be geared up for serving consumers at all times. The result is the fact that items that have expired have been overloaded with no cautiousness and the remainder of the meals that were made are going to transform into wasted food which constitutes one of the most significant problems confronting the food service sector. With the goal to aid businesses in planning their supplies inventory and cooking processes to decrease the number of outdated commodities and not sold prepared meals and, ultimately, reduce wasteful consumption, virtual kitchens utilize information collected by their software to assess client order trends. A virtual kitchen has to run for an extended period in order to gather enough information for utilization. The regulations pertaining to privacy that apply in all markets also have a significant impact on the type of data a cooking establishment is able to gather via consumers as well as how it may utilize that information (Quach et al., 2022). In order to be ready to derive useful details from what information it gathers, kitchen businesses must also make investments in purchasing cutting-edge statistical software and hiring seasoned data scientists for their workforce.

Social Sustainability

SDGs 5 (gender equity), 10 (reduced inequality), 16 (peace, fairness, and robust structures), 9 (industry development and facilities), 3 (good health and well-being), 4 (excellent education), and 17 (partnership for the goals) are among the Sustainable Development Goals. Through the information acquired through the text research and expert discussions, it is noticed that the virtual kitchen might have promoted diversity, improved structures, regulations, and creativity (Vargas et al., 2022). The findings pertaining to the aforementioned codes indicate that the virtual kitchen area idea may potentially help the cultivation and advancement of an employee's knowledge, abilities, and competencies. According to research on the subject, intellectual property is the "ensemble of abilities that an employee possesses." Those with very little job expertise benefit from the employment opportunities created by the virtual kitchen industry itself. Yet, kitchen employees constitute the centre of the manufacturing process, there needs to be an inspiring conversation about technological and job-specific instruction in the food service sector (Ko, 2020). The calibre and wellness of the labour force are taken into consideration by making suitable instruction and educational investments for staff members. In the virtual kitchen industry, there continues to be a lack of extensive reporting and transparency about the oversight of labour regulations and workplace standards. Therefore, in order to maintain equal employment opportunities, ethical regulations have to be put into place and executed.

At every tier, structures must be convincing, accountable, and all-encompassing. Companies work toward the establishment and maintenance of predictable phases when decisions are taken, disputes are resolved, and authority is transferred from one assembly to another. Good close management is important. A virtual cooking company ought to conduct a case for release on fundamental rights as part of an ethical administrative demonstration. The level of discernibility ought to increase. To improve food safety and raise worth, local authorities must work together in concert (Haghani et al., 2023). Everyone seems to agree that teamwork is essential to managing restaurants. Technological advances possess the power to propel sustainability; yet, coalitions, systems, actions, discussions, and projects should work collaboratively to advance sustainable practices. Using a virtual kitchen as an example, implementing the value of technology development can present advantages as well as challenges. When used in well-defined configurations, technological advances can improve operations or activities by 5 to 10% on average. In addition, for it to function at its best, a very specific setting is needed.

Meanwhile, it is apparent that ghost kitchen companies will need to expand into the cultural aspect of sustainable development in order to preserve their workforce and promote the welfare of those who work for them. The business advantages of this innovative idea are still growing, but there is not ample evidence regarding the competencies of ghost kitchen workers (Ahmed Khan et al., 2022). Because of that, virtual kitchen managers are encouraged to learn about the objectives and current skill sets of their staff in order to develop those areas further. The fight for what is within society to be sustainable will continue until the owner of the virtual kitchen is actively taking care of the health and welfare of its workers and forming local coalitions to monitor sustainable practices in order to make themselves responsible.

Economic Sustainability

Affluence constitutes an SDG component that is associated with both SDG 1 (No Poverty) and SDG 8 (Decent work and economic growth). The idea of a ghost kitchen has been found to have the potential to generate employment and financial stability (Lord et al., 2022). Based on the codes' outcomes, virtual kitchens have an opportunity to increase need in the years to come by expanding into other areas. The ability of SMEs, or small and medium-sized enterprises, to engage in the worth of the sector's supply networks is essential. A thriving cloud kitchen enterprise additionally depends on the result of numerous other variables, including the growth and accessibility of trained labour and the emergence of powerful neighbourhood companies. The argument is that while the virtual kitchen's technological capabilities might lead to some degrees of greater efficiency, there are possible compromises associated with the current rapid expansion of the economy, including negative effects on prospective economic development.

Throughout this industry, there exists a burden that impacts the sustainable economic aspect. On the flip side, ghost kitchen owners have the potential to make money since they can generate jobs. Conversely, virtual kitchen owners ought to endeavour to incorporate inclusive goals into their business practices, having the aim of creating an appropriate, fair, and, ideally, efficient workplace for everyone. There is now a need for improvement in the ghost kitchen approach when it comes to creating strategies for addressing both regional and worldwide poverty crises (Jung, 2022). This calls for individuals working for local associations that are driven to bring about major shifts in order to realize the goal of an economically viable goal.

A ghost kitchen's ability to succeed depends not just on how well the food tastes and looks in addition on how well the costs and serving sizes are balanced. A deep comprehension of each customer's requirements and company profitability is necessary for establishing rates and figuring out portions tailored to the food delivery area. In order to do that, they will have to explore the most effective strategies for managing this delicate managing act. The target demographic that chooses delivery may be different from that of regular eating patrons. It is possible that they are searching for family-sized quantities, quick dinners, or simplicity. Establishing proper quantities starts with knowing the preferences of the targeted market. Because there is no eating in areas, virtual kitchens frequently have lower overhead (D’souza & Kumar, 2023). But there are additional expenses to take into account, like payments to outside distribution applications and shipping and packing costs. To preserve appropriate margins of profitability, it is essential that all these aspects are taken into consideration when determining prices.

Figure 8 Pricing Strategies

Source 8 (Cloud Kitchens, 2023)

Variations in the amount served might result in unhappy customers and erratic expenses. Steps need to be taken to guarantee that each order has the same amount of food, for as using regular scoops, quantifying ingredients, or closely supervising kitchen workers. Reducing waste and streamlining processes are possible with effective order oversight. Implementing inventory control structures, for example, can give these Kitchener’s knowledge of what are the most appreciated meals, enabling them to maintain supplies more efficiently and cut costs. This effectiveness allows for higher pricing for clients with no sacrificing business success.

Considering all of these things provides an outline of how ghost kitchens can thrive in terms of economic sustainability. As per the SDG, the market should be at least oligopoly structured and this kind of pricing strategies allow that to happen (Pröll et al., 2022). It increases the sense of competitiveness in the market that in return allows the economy to flow conventionally and in a cyclic order.

Conclusion

With the help of this report, it can be concluded that ghost kitchens as identified by the financial analysts can become $1 trillion industry by 2030 is only possible if they align their way of operating as per the identified SDGs. At present most of the companies in different marketplaces are suffering from making it happen. They are successful, however, they are not performing through the lens of SDGs. To take and care of the respective issues, they will have to make certain changes such that they can achieve the forecasted assumption by the analysts. To achieve the environmental sustainability, they will have to focus on four factors that are sharing, packaging, distribution, and data utilisation. Sharing the space with the other kitchens, using recyclable materials for material by making an exception on plastic because it should be reduced. With the shared space, the distribution of the food materials will be easier. They will have to utilise the data on the customers such that they can reduce the wastage of food. In order to achieve social sustainability, these kitchens will have to work with the local communities in order to identify and help the market in which they are operating. Finally, the economic sustainability can be achieved through developing market structure similar to oligopoly and competitive monopolistic.

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