CloudKitchens, the “ghost kitchen” startup from Uber co-founder Travis Kalanick, has over the past year laid off staff, closed locations, and decreased its real estate purchasing, according to a new report from the Financial Times. Per the report, the company’s buildings were “only about 50 percent full at the end of the first quarter,” and the business has closed locations in New York and Tennessee.
Struggling to keep warehouses full and win contracts with restaurant chains, the company is facing problems much of the startup industry has become familiar with in recent years. Launched in 2016, the company was well-positioned when the pandemic hit. As Kristen Hawley reported for Eater, the concept of ghost kitchens proved especially promising during the early part of 2020, when restaurant owners sought to “mitigate losses” from slowed in-person business. That year the Wall Street Journal wrote that “entities tied to” Cloudkitchens had “bought more than 40 properties in nearly two dozen cities for more than $130 million.”
Despite that early success, CloudKitchens hasn’t been without problems in recent years. An Insider report last year found that some operators had sued the company for “deceptive business practices” and filed complaints with the Federal Trade Commission. Other operators cited dirty and unsafe conditions, tech problems, and a general lack of support from the company.
Insider’s analysis of five CloudKitchen locations revealed that “41 out of 71 restaurants that were open in May 2021 were no longer operating there a year later,” much higher than the rate of restaurant closings nationally. This led Eater’s Amy McCarthy to surmise at the time that ghost kitchens were yet another example of tech CEOs like Kalanick benefiting at the expense of operators and workers.
Perhaps no surprise then that ghost kitchens are on the downturn. “Ghost kitchens are dying and nobody noticed,” the Washington Post announced this year, pointing to losses from CloudKitchens and competitors like Reef. The latter had partnered with Wendy’s, announcing in 2021 that the two would open 700 delivery kitchens over the next five years. In 2022, Wendy’s cut the deal back before closing all its remaining Reef units earlier this year.
Though delivery apps did especially well during the early pandemic, their growth has slowed recently as the economy changes consumers’ spending habits. If the trend continues, ghost kitchens just might go the way of their name.