Cloud kitchens suddenly seem to be the only reasonable solution to handle high rentals and slim margins in light of the development of cloud technology, which also makes it easier for customers to place online orders and the ongoing Covid outbreak. This concept gained economic & cultural importance specially during 2020 owing to the increasing demand of customers ordering food online and wanting to be delivered at the doorstep without any human contact. The most recent trend that has swiftly made a name for itself as a powerful restaurant concept is the Cloud Kitchen, also known as the Digital Restaurant.
The food business has evolved rapidly over the period of time. The restaurant industry and conventional food ordering business models have all been put at risk by high beginning costs, onerous regulations, and currently COVID-19. With the current state of the restaurant industry, fierce rivalry, expensive rents, and rising costs, Cloud Kitchen Business appears to be a more sensible restaurant operation method. This demonstrates the tremendous potential that this marvel format has. The concept of such kitchens helped the traditionally functioning businesses recover their losses incurred during pandemic. There are supporting statistics that show that the Global Cloud Kitchen Market will grow at a 13.5% CAGR from 2021 to 2027 to reach US$118.5.
In this blog, we’ll detail what a cloud kitchen is and how much it will cost you to start one.
What is a cloud kitchen?
A delivery kitchen, virtual kitchen, or “Ghost” kitchen are other names for a cloud kitchen. It is a commercial kitchen where food can be prepared and sold in retail online or to other eating establishments. However, most cloud kitchens focus on selling their menu online through a renowned online food delivery system. Furthermore, such kitchens do not offer dine-in options.
The cost of starting a cloud kitchen
The magnitude of the investment that goes in starting the cloud kitchen is comparatively lower to the offline food spot. However, there are certain costs that cannot be neglected before starting one. Let’s go over the cloud kitchen business startup costs, licences needed, location options, and all the other information you need to know about starting your cloud kitchen.
Location of the Kitchen
Real estate costs are what keeps the cloud kitchen costs low. Cloud kitchen setup need not be in a posh area where customers can come to dine. In the cloud kitchen model, footfall, parking, and high-end sites are irrelevant. Instead, proper sanitation, water supply, and affordable rents are critical. The location should be based on client demographics and the food sold. The cloud kitchen should be where food is in high demand. Renting a space for a kitchen can cost you anywhere in the range of $120 – $550 per month (depending on the locality and the overall area of the kitchen.
Licenses Required
Any commercial firm requires a license and is one of the most critical elements of setting any restaurant. Cloud kitchen businesses are no different; during the initial months of setting up the cloud kitchen might require certain licenses for smooth functioning of the businesses.
Here is a list of licenses or permissions that would be required for setting up a cloud kitchen:
- FSSAI license
- Health license (For the owner and staff)
- GST Registration
- Other zonal permits
Considering all the permits and licenses, the equipment cost to start a ghost kitchen would be about another 120 -180 USD. Such licenses are valid for a specific tenure and might need to be renewed from time to time.
Kitchen Equipment & Packages
Various kitchen equipment along with enough raw materials are the most fundamental necessities for any cloud kitchen. They are entirely dependent on the cuisine or concept of your cloud kitchen. Stove, oven, microwave, deep freezers, if necessary, refrigerators, knives, and other items are among the essentials. You can save significant money by purchasing used equipment such as tables, racks, and storage shelves. Also, good food & good packaging leaves a strong impression on the customers and hence must be taken care of. These expenses should also be taken into consideration to better comprehend the overall calculation.
Considering even the most basic needs of a kitchen, the one-time cost might be about $1200 – $2400. However, it largely depends on the requirement of cuisine or the concept of your cloud kitchen.
Note: If one common Cloud Kitchen is run for multiple brands can in return help you save up on the various equipment costs.
Staff
The crew that works at a successful restaurant is its most valuable asset. The chef is the team’s leader since he prepares the food and at the same time also contributes to the menu. A minimum of two to three staff members are necessary for the operation of an online kitchen. Initially, you will require a minimum of one cook and one to two assistants. Even though your cloud kitchen only will have a small number of staff, you must ensure they are highly skilled, have adequate training, are honest, and can work quickly and effectively to ensure the kitchen’s flawless operation at all times. The level of experience of an employee will determine their starting compensation. Considering you have three staff members; your monthly salary cost may be around $485 – $660.
Marketing
Your cloud kitchen success largely depends on marketing and advertising. For a cloud kitchen, marketing is the only source of orders. Since you don’t have a website or a walk-in store, you may utilize that budget for marketing. Cloud kitchens advertise well online. First, register your restaurant on listing and review sites like Swiggy, Zomato, etc., and promote good feedback from regulars. You can also advertise on Facebook, Instagram, and other social mediums to gain further traction in the market. To start with small marketing campaigns, your marketing may cost about $120 -$180 per month.
Miscellaneous
Mobile phones, high-speed internet, stationery, packaging materials, tiny counters, seats, delivery boxes, etc. are all essential components of an online kitchen. In addition, you also have the option of subscribing to cloud telephony, which will prevent any missed calls on your end. Such miscellaneous costs can sum up to about $240 – $300.
Conclusion
Cloud kitchens deliver food using a hub-and-spoke system. Cloud kitchens don’t allow dine-ins, do restaurants save on furniture and labour. Cloud kitchen setup in India costs almost three times less than a regular restaurant. However, considering the basic factors and the lowest minimum cost, you still need about $1800 – $2500 to get your kitchen going, and if you are willing to start a cloud kitchen franchise of a particular brand, then a minimum of $30k – $36k of investment is required (since it would cover lease rent cost, equipment cost, license & registration, franchise security deposit, franchise fee, franchise royalty etc). Having said that, owing to the technology innovation in this industry, it is for sure that the trend of cloud kitchen is going to stay and progress multiple folds, hence investing in such cloud kitchen business informally could be a wise decision.
