Monday, May 11

Ghost Kitchens and the post-pandemic economic order

Since the turn of this century the globalized trade era that rose up in the 1980s has been characterized by waste in every direction. This includes wasted business space and other indoor spaces. From Economic Recovery After Covid-19: Strategies for Increasing Returns on Resources, The Business Warrior's Dojo, April 26:
A great degree of our built environment has long been unnecessary and has become increasingly less necessary as the digital purchase and delivery revolution has grown.
With respect to the infrastructure that is necessary, much of it is not used efficiently and goes for long hours without being used at all. Think about the total amount of space in airports, malls and other public spaces that spend very large amounts of time being essentially completely empty. The global economy constantly bears the cost of this underutilized space.
In addition to moving toward business models which are increasingly infrastructure-light, another way to generate increased infrastructure efficiency is through mixed-use models that make better use of space and reduce costs for the people who occupy that space.
One example of this is the concept of 'ghost kitchens' or 'dark kitchens' that allow multiple restaurant businesses to use the same space in simultaneous or alternate shifts. This has several economic benefits for both the owners and users of space.
For owners, it creates new streams of income and diversifies renter risk, which could allow owners to lower individual rents while receiving more total income and income that carries less aggregate risk.
For renters, a shared-cost model can reduce their startup and operating costs and decrease their probability of failure due to a shortage of working capital.
Clear even at this early stage of the global economic crisis is that the economic era preceding it -- why, just yesterday -- was already obsolete, a fact masked by booming stock markets. The Covid pandemic is simply accelerating the demise of a way of life that is unsustainable to the point of silliness. It's as if entire societies had gotten used to two lanes of every freeway dedicated to horse-and-buggy traffic.

Yet the above writing about intelligent indoor space allocation shows that practices that can transform an economic crisis into a roaring success are limited only by imagination.   

Nowhere is transformative thinking needed more than in dealing with the crisis of fast-vanishing arable land the world over. The author of the above writing touches on the subject, which dovetails with the use of infrastructure spaces. It is downright suicidal for societies to keep destroying their scarce arable land to put up buildings that are greatly underutilized.

The task right now is to persuade governments and private companies that intelligent ways of building and using infrastructure space can make them a lot more money and save them tons of money. Ghost Kitchens are a small and cheap way to demonstrate how. They're also a crucial demonstration in ways that are surprising. 

For many small cities and big-city neighborhoods, eating places have been essential to their financial survival. And so in the manner of falling dominoes, restaurant closures during the pandemic have touched off widespread consequences. From As Restaurants Remain Shuttered, American Cities Fear the Future, Trending Scroll, May 7:
Already restaurant closures have broken [some] city economies ... Based on Bureau of Labor statistics, of the 701,000 nonfarm jobs misplaced in the United States in March, almost 60 percent of the loss is from meals providers and consuming locations.

Restaurants “are major employers of 9.7 million people across the country and a critical source of revenues for local budgets,” said Amy Liu, the director of the Metropolitan Policy Program at the Brookings Institution.
For instance, the restaurant trade is Washington, D.C.'s second-largest private-sector employer, and in 2019 eating places and bars accounted for $1.three billion of the capital city's gross sales taxes, up 36 percent from 2014.
“Restaurants are extremely valuable to cities,” observed Andrew Salkin, a founding principal of Resilient Cities Catalyst, a nonprofit dedicated to strengthening cities and former official in New York City’s finance department.
“The benefit of having good restaurants outweighs just their tax benefits. They are the anchors of communities. They support tourism and the neighborhood they are in.”
Beyond providing tax income and jobs, small eating places are sometimes tightly interwoven with their communities, sponsoring local groups and serving to energize small companies such as local farms and wineries.
"With our restaurant association alone, on an annual basis we’re giving about $1.5 million back to nonprofits — everything from Little League baseball to the local science museum to the Humane Society,” explained Jane Anderson, the director of Asheville, North Carolina's Independent Restaurant Association, a commerce group representing 150 eating places in Asheville and surrounding Buncombe County. 
At least nine Asheville eating places serve their meals on plates made by East Fork, an area potter that employs 78 individuals. Dessert menus feature flavors custom-blended by another Asheville company, Ultimate Ice Cream. 
Jane Anderson also pointed out that people who own independent businesses such as small restaurants live where their business is.

Yet many of those restaurants can't hope to benefit from the federal handouts designed to help small businesses weather the pandemic. They were shut out of the first tranche of $349 billion when the cash ran out. And the second tranche of handouts will "require that 75 percent of the funds goes toward payroll in order to have the mortgage forgiven,"
“Getting forgiveness is going to be impossible,” said Nina Compton, the proprietor of Compère Lapin in New Orleans. “How do I make money if I have to bring back all my staff doing less volume and less sales?”
So against the reality that an estimated half of the restaurants closed by the pandemic won't reopen, Ghost Kitchens and the concept of shared business space they exemplify can be a lifeline for entire cities.    


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