Dark kitchens are a (relatively) new concept with companies utilising light industrial sites as premises from which to operate food delivery services. Dark kitchens are being increasingly used by restaurants who wish to extend their business model by offering a delivery service, businesses who are unable to operate out of high street premises due to objections from local communities, or new businesses wishing to enter the delivery service market. This development in the way food businesses operate is arguably a response to, and an acknowledgement of, the changing lifestyles and eating habits of individuals.
Developer landlords are recognising this change, taking advantage of this new concept by focusing on developing industrial sites for both residential and commercial purposes. The offerings of dark kitchens are thought to be in line with the demands and needs of society's younger generation, with the availability of nearby food delivery services being a more important consideration for young people than having their own kitchen. Developers are therefore placing a greater consideration on incorporating dark kitchens into development projects.
There are advantages too for tenants. Not only do they provide a basic rental advantage as rents of light industrial premises are generally lower, but they also avoid additional rental costs often imposed by commercial leases. Tenants of commercial premises are often required to pay turnover rent, a rent charged as a percentage of the annual turnover. As dark kitchens often operate under an umbrella of a food delivery company, such as Deliveroo or Just Eat, payment is taken via the delivery company as opposed to the company producing the food. This therefore eliminates the requirement to pay turnover rent, as no payment is taken at the premises itself. In some other instances, rent is not charged but the dark kitchen pays a percentage commission on the price of each delivery order.
It is important to note however, developers, landlords and tenants need to enter the dark kitchen market with a degree of caution. Where restaurants use dark kitchens as an extension of their delivery business, takeaway demands might increase and subsequently replace customer attendance at restaurants themselves. Although more deliveries could generate a greater income, businesses will still have the outlay of high street rents and therefore the concept of dark kitchens could be commercially more problematic in the long term.
As dark kitchens become more common, local councils are developing a greater understanding of their effect, particularly on local communities. As such, obtaining planning permission to convert light industrial sites into dark kitchens may become more difficult, if permission is so required. Noise pollution, the increase in delivery drivers on the roads and the health and safety considerations of cooking food in a previously industrial setting, are all factors councils are taking into account when deciding whether to grant permission for a dark kitchen.
In an uncertain market, landlords are more concerned with having a paying tenant in occupation at their premises rather than generating a high rental income. As such, tenants have a greater bargaining power with landlords and can therefore use dark kitchens to their commercial advantage.
It will be interesting to see in the next decade how this sector will develop, and the impact this will have on commercial premises. At Howard Kennedy LLP, we advise on commercial landlord and tenant matters, specialising in the retail and leisure sector. Please contact our Real Estate Dispute Resolution team for any assistance.
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