Dark kitchens: Understanding the insurance implications of the delivery-only food revolution

'Dark kitchens', also known as 'ghost kitchens' are delivery-only food operations with no customer-facing storefront. One in seven food outlets on the UK's major delivery apps is now a 'dark kitchen', often operating under are several brand names. 

Public awareness of 'dark kitchens' is low, with many customers not understanding that they have purchased from one. This low visibility means that people with allergies may not understand the potentially increased risks of their order being cross contaminated. 

Several factors unique to 'dark kitchens' mean that careful consideration by insurers is sensible. 

The regulatory and inspection gap

Until recently, 'dark kitchens' lack a clear and consistent definition, which creates challenges for regulators, local authorities, food safety officers, industry stakeholders and consumers. This ambiguity can create significant regulatory blind spots.

However, new research funded by the National Institute of Health and Care Research (a government funded body dedicated to health and social care research, aiming to improve the nation’s health and economic wealth) has now defined a 'dark kitchen' as:

“Technology-enabled commercial kitchen(s) operating primarily for delivery, to fulfil remote, on-demand, consumer online orders of food for immediate consumption.” 

The invisibility of 'dark kitchens' creates significant challenges. It can be difficult to identify which businesses are 'dark kitchens', especially where they operate under several brand names. A recent study has identified unique challenges Environmental Health Officers (EHOs) face with 'dark kitchens', including:

• EHOs don't have time to track down every new 'dark kitchen' or brand popping up on delivery apps. 
• Shared kitchen spaces often have unclear responsibility for hygiene.
• Many 'dark kitchens' operate without proper registration. 'Dark kitchens' may not notify their local authority, and without a public physical premises, these businesses can be difficult to locate. This can mean they are not having their food safety compliance assessed.
• Multiple virtual brands from one kitchen can lead to duplicated registration records, complicating the identification of all trading entities operating from a single location.
• Uncertain or sporadic operating hours can make it hard for authorities to physically visit and inspect the business.
• The absence of clear, comprehensive guidance tailored to the unique operational structure of 'dark kitchens' – creating regulatory uncertainty. 
• High turnover of staff and understaffing can lead to shortcuts in compliance with health and hygiene standards.
• Delays in updating menu changes with online aggregators (documentation like allergen charts) can fall behind reality. There is reliance on online platforms for communicating important information such as allergen or ingredient information to consumers. Some platforms can take days to show updates, creating a dangerous gap during which customers could be exposed to undeclared allergens.
• Slipping standards under the pressure of fulfilling multiple brands' orders quickly.
• Staff preparing meals from extensive menu offerings in a busy, fast paced, high throughput setting creates risks to quality assurance and food safety protocols.
• Limited client interface means that the kitchens are less likely to be frequently seen by people not involved in the business. 

Food safety risks and operational challenges

The operational model of 'dark kitchens' introduces specific food safety hazards that differ from traditional food businesses. Different 'dark kitchen' businesses may operate alongside each other at the same time in the same shared kitchen space, making inspection more difficult and creating issues in determining responsibilities. 

There are struggles in maintaining hygiene, food safety and cross-contamination risks because of shared resources and conflicts over responsibility for pest control. There can also be issues in the food handling practices of third-party delivery drivers.

What does this mean for insurers?

• Food poisoning, undeclared allergens and other food safety concerns can be quite serious and even deadly. 
• If food compliance is not being assessed, this creates additional risk for insurers.
• The new definition may assist insurers in identifying and classifying these businesses and in developing appropriate risk assessment protocols specific to this business model.
• There can be significant losses in the event of food borne illnesses or allergen contamination, with potentially severe consequences including death. 'Dark kitchens' are likely more prone to such risks. 
• The extended chain of custody, from preparation through to third-party delivery, amplifies exposure to contamination or other incidents (such as issues with maintaining appropriate temperature).
• The rapid growth of 'dark kitchens' and EHOs struggling with the resources to keep up creates a risk profile which is distinct from traditional food service operations. The current regulatory infrastructure lags behind market growth, creating elevated exposure to food safety incidents and allergen-related claims.

The sector's rapid expansion suggests that 'dark kitchens' will become an increasingly significant component of food service portfolios, making informed underwriting practices essential to managing profitability.