"Uber" Your Cooking: The Sharing-Economy Operations of a Ghost-Kitchen Platform

56 Pages Posted: 30 Jun 2023 Last revised: 14 Mar 2024

See all articles by Junyu Cao

Junyu Cao

University of Texas at Austin - Red McCombs School of Business

Feihong Hu

University of Texas at Austin, Red McCombs School of Business, Students

Wei Qi

Tsinghua University - Department of Industrial Engineering; McGill University - Desautels Faculty of Management

Date Written: June 24, 2023

Abstract

"Ghost kitchens" are emerging as an innovative alternative to traditional food-delivery restaurants. A ghost kitchen has no storefront or dining area. It only accepts online orders from food delivery platforms or mobile apps. Due to its limited capacity, each ghost kitchen only offers a limited number of dishes. We study a ghost kitchen platform that works as an intermediary between home chefs and customers. It allows customers to shop for meals from multiple kitchens in a single order, and we call it Multi-Dash. Despite a captivating future in the sharing economy where ghost kitchens unlock the strong potential of delicious home-made food for customers and earnings for home chefs, the operational challenges are immense: The multi-dash setting leads to longer waiting times, which affects the customer adoption rate. Additionally, it increases routing costs, imposing a negative effect on cost efficiency. We address these challenges by building a business model that integrates the adoption rate, waiting cost, and delivery cost. To analytically characterize the on-demand expected waiting time, we propose and solve a generalized fork-join queuing problem. Moreover, we analyze the routing cost of an order-pooling strategy, which is designed to enhance operational efficiency. Our findings demonstrate that ghost kitchen platforms can be more profitable than traditional food delivery platforms due to their multi-dash capability, reduced fixed costs, increased productivity, and chef specialization. On the other hand, the optimal service radius of ghost kitchens has to be smaller than that of traditional food-delivery restaurants due to the additional routing costs introduced by multi-dash. Our modeling and analysis shed light on how to scale up ghost kitchen platforms toward uberizing urban cooking services.

Keywords: ghost kitchens, sharing-economy, fork-join queue, on-demand service, vehicle routing

Suggested Citation

Cao, Junyu and Hu, Feihong and Qi, Wei, "Uber" Your Cooking: The Sharing-Economy Operations of a Ghost-Kitchen Platform (June 24, 2023). Available at SSRN: https://ssrn.com/abstract=4494858

Junyu Cao (Contact Author)

University of Texas at Austin - Red McCombs School of Business ( email )

Austin, TX
United States

Feihong Hu

University of Texas at Austin, Red McCombs School of Business, Students ( email )

Austin, TX
United States

Wei Qi

Tsinghua University - Department of Industrial Engineering ( email )

Beijing
China

McGill University - Desautels Faculty of Management ( email )

1001 Sherbrooke Street West
Montreal, Quebec H3A 1G5
Canada

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