Cloud Kitchen Startup Costs: Is Cloud Kitchen Profitable In 2024?

The Online Food Delivery segment is expected to show a revenue growth of 16.6% in 2023.

Revenue is expected to grow (CAGR 2021-2025) at a rate of 9.89%, resulting in a projected market volume of US$441,622m by 2025.

As consumers shift their interest from dine-in to food delivery, it’s next to impossible for restaurateurs to overlook the growing appetite for the emerging model. Interestingly, the market trends are favoring the transformation.

What Is a Cloud Kitchen?

Cloud kitchen as a concept was gaining popularity even before the pandemic struck, but now they have become more lucrative and can operate in a fraction of the traditional restaurant space.

A cloud kitchen- also referred to as a “ghost kitchen” or “virtual kitchen” provides food businesses the facilities and services required to prepare menu items for delivery. It is a delivery-only restaurant that has no dine-in space. In this article, we have covered in detail how to start a cloud kitchen? Get expert advice to start a cloud kitchen.

Restaurants can launch more than one brand using the same kitchen infrastructure.

The primary factors that are attracting new entrants towards cloud kitchen are:

1. Profitability
2. Scalability

Nevertheless, the road to success doesn’t come easy and is covered in thorns and brambles. The only way to make it an instant hit is knowing the cost of setting up a cloud kitchen. In this post, we’ll focus on learning everything about the cost you need to incur to develop a cloud kitchen.

The global cloud kitchen market size was valued at USD 51.96 billion in 2020 and is expected to expand at a compound annual growth rate(CAGR) of 12.4% from 2021 to 2028. Increasing consumer preference for online food services over dining experiences is one of the major factors contributing to the market growth. Amid the COVID-19 pandemic, when dine-in facilities were shut as a precautionary measure to stop the spread of the virus, online food ordering and delivery services gained popularity among consumers.

Cost Of Starting A Cloud Kitchen- Investments Required

Let us walk through the investments, licenses required, and other factors that add up to the cost of setting up a cloud kitchen.

Deciding The Location Of The Cloud Kitchen Restaurant

Undoubtedly, the location of the cloud kitchen restaurant has nothing to do with footfalls, parking space, and grand infrastructure. However, proper sanitation and water supply with low rentals play a pivotal role when choosing the location of the cloud kitchen. This becomes a significant part of the cost of starting a cloud kitchen.

Implement The Online Food Ordering

After deciding the location, you need to choose the technology to accept orders. The market is flooded with various online ordering and delivery platforms that accept online orders and deliver the food to your customers. Most platforms charge 18-30% of your revenue per order along with one-time integration fees.

You can also opt for getting a website developed to attract more customers.

Acquiring The Online Kitchens Licenses

Setting up a restaurant requires you to acquire licenses. Being the most time-consuming task, it is advised to hire an agency to apply for the permits.

Procurement Of Kitchen Equipment, Raw Materials & Packaging

The cost of starting a cloud kitchen depends on the cuisine and food you are offering. Nevertheless, the cost can go up if you invest in a chimney, deep refrigerators, and burners.

Raw materials required depend on the type of food you are offering and you must choose the right vendors at this stage.

For packaging, it must contain your restaurant’s logo and reflect your restaurant’s theme to build a more robust public image.

Staff Recruitment

Recruiting the right staff is imperative because they are the driving forces behind your successful cloud kitchen restaurant. The team must consist of chefs, helpers, and a housekeeper.

Staff Uniform

Having a dress code for the staff is highly recommended to maintain discipline, hygiene, and cleanliness. Apart from the uniform, you can also provide hygiene and safety equipment like gloves, masks, and hair caps.

POS Technology

Proper acceptance of food orders can justify the cost of setting up a cloud kitchen. Tracking the number of incoming orders is essential for the smooth functioning of the restaurant.

Mobile Phones & Other Miscellaneous Devices

Running a cloud kitchen requires a board line, mobile phones, high-speed internet, stationery, and chairs. All the items can increase the cost of starting a cloud kitchen.

Marketing

For a cloud kitchen, proper marketing and advertising are essential. Keeping sum aside for marketing will work in your restaurant’s favor and make it more successful.

Cost-reducing Tips

The cost of starting a cloud kitchen involves multiple factors that need to be considered minutely. Let us have a look at the cost-reducing tips that can make setting up a cloud kitchen cost-effective.

Prioritize Automation

Automate as many BoH processes as you can to reduce costs. The processes that need automation are purchasing, invoicing, inventory counts, and food cost calcs.

Installing a conveyor belt to take the prepared food to a takeout window can reduce FTE/labor costs.

Pick A Tech Stack For Integration & Streamlining

Choose a tech solution that can manage and streamline your day-to-day business activities like procurement, invoicing, stock-taking, inventory, and menu engineering.

The main motive is to have a single source of operations to reduce complexity among the employees. This will reduce the cost of setting up a cloud kitchen.

Integrate Cloud

Make everything cloud-based, starting from SOPs, employee training, inventory, procurement, tech & allergen sheets, and more.

Review Your Systems & Operations Regularly

To make a cloud kitchen profitable, it is necessary to check and tweak the systems regularly. You must analyze your sales data and double-check recipes. Besides, ensure employees are following the book and monitor vendors to crack better deals on raw ingredients.

Purchase Modern & Better Equipment

Purchasing heavy equipment increases initial investments but cuts down on labor costs.

Focus On Virtual Brands

The theme of a cloud kitchen lets you come out of the cocoons and provide a fusion with your food. Look for what’s missing that you wish to offer and begin on-the-ground research.

Bring Simplicity To Your Menus

Speed and volume are the key metrics that can optimize the cost of setting up a cloud kitchen. Keep your menu simple and keep the extra load of it.

Check Food Costs

Checking food costs at a glance can be fruitful to keep the cost of starting a cloud kitchen controlled.

Shared Kitchens Can Be A Smart Choice

Shared kitchens are fully equipped and ready to go. The only thing that you need to do is sign a contract, bring your cloud and ingredients along, and begin the work.

However, this concept works only with the virtual brands that have recognition, don’t operate around the clock, and have menus that always stay in demand.

Reach Temporary Pop-up Locations

You can make quick bucks if you stay close to a location where people gather. Besides, you can grow brand awareness in an area that wasn’t served earlier.

Become A Host Kitchen

Turning into a host kitchen is a profitable option by welcoming other brands into your space.

Go For Employee Scheduling

Optimize employee scheduling by using the data to see how many employees you need at a given point in time. In case you are unsure, under-staff but have someone ready to come if the need arises.

Hold On To Employees

There are multiple ways to retain employees like paying slightly above the market price, introducing employee-centric benefits schemes, providing training & mentorship, and introducing engagement campaigns & rewards.

Switch To A Central Location

If you are running kitchens at different locations, consider switching to a centralized location. As a result, you’ll be able to employ fewer chefs, sous chefs (medium to high salaries), and more line chefs (low salaries).

Capture Customer Data

Look for ways to capture customer data- add an on-site ordering option, offer takeaway, and run in-house delivery for a month. This will give you an idea of how and where to scale and the changes that are required.

Encourage Takeaway

You can incentivize takeaway by building a social media presence, an email list, and working on your reputation. To encourage takeaways, you can offer coupons or discounts on pick-up on a regular basis.

Bargain With 3rd Party Delivery Operators

You can grab the chance to get new delivery operators below 20% of order value if you are running established brands in your kitchen.

What Makes Starting A Cloud Kitchen A Wise Decision?

Cloud kitchen is the buzzword capturing the attention of startups and people looking for options to expand their business. We have listed down the most crucial factors that make starting a cloud kitchen a wise decision.

One Kitchen, Multiple Brands

Cloud kitchen allows you to have more than one brand in the same kitchen. If you plan to start a Chinese cuisine apart from the cuisines that you are already serving, you can place it under a different brand instead of adding it to the same menu. You can also reduce investments massively by getting the cuisines prepared by the same chef.

All About Food

In a cloud kitchen, everything relates to food because you do not have to focus on table management, decoration, and location. The prime objective is to provide ultimate dishes to the customers. You can work on the menu with unique names, introduce new items, and collect feedback to better your services.

Low Investments & More Orders

The cost of starting a cloud kitchen is low, while the revenues are high. You can manage a whopping number of orders by operating from a place with affordable rents and less staff. With this, you can be assured of high returns with low investment.

Customer Data Collection

Collecting customer data gets easier when orders are integrated with technology. You can alter the menu as per the tastes and preferences of the customers. You can also identify loyal customers and reward them accordingly.

How Much Does it Cost to Open a Cloud Kitchen?

You can start your cloud kitchen with investment as low as 5 thousand dollars to 9 thousand dollars and can attain a profit share of 35-40%.

How Much Money Do You Need to Start a Ghost Kitchen?

As I said in the previous answer in 5 thousand dollars to 9 thousand dollars you can start a ghost kitchen and can make a profit share of 35-40%

Are Cloud Kitchens Profitable in 2024?

Yes, Anyone can make a 30 to 45% profit on total investment.

Bottom Line:

We can’t get enough reasons to keep the cost side of running a cloud kitchen under control. When it comes to the cost of starting a cloud kitchen, every bit of cost-savings matters.

Cloud kitchen formats are the most profitable with minimum risks. Nevertheless, you need to play smartly to prevent any risks from hampering the mushrooming of your cloud kitchen.

If you are ready to take on the challenge to set up a cloud kitchen, we are there to assist you. Give us a call, and we will give you first-hand information on the development process and the cost of setting up a cloud kitchen.

• Cost Of Starting A Cloud Kitchen
• cost of setting up a cloud kitchen