The restaurant industry is constantly changing, and entrepreneurs in the food-service space need to be aware of rising trends. During the COVID-19 pandemic, the size of the U.S. food-delivery market doubled. While food delivery rates aren’t as high as at the peak of lockdown, delivery platforms are experiencing continued success — and cloud kitchens are springing up to take advantage of this.
If you’re interested in learning more about cloud kitchens, you’ve come to the right place. We’ve compiled a complete guide to cloud kitchens, including what they are, how they benefit business owners, and the steps you’d need to follow to open your own.
A cloud kitchen is a kind of virtual restaurant, usually working on a delivery-only model. It’s typically an entirely virtual brand that offers takeout and delivery orders only, with no dine-in option available.
In contrast with traditional restaurant businesses, cloud kitchens — also known as ghost kitchens, virtual kitchens, and dark kitchens — don’t need a large real estate space since there’s no dining room.
Customers order online (or in person for takeout options), and the food is prepared onsite in a commercial kitchen. The cloud kitchen then uses a delivery service to take the food to customers, or they can pick it up from a collection station.
There are several benefits to opening a cloud kitchen or ghost kitchen startup, including reduced costs and higher profit margins. Let’s take a look at three of these advantages.
In large urban areas like New York or San Francisco, there’s a high demand for delivery services, and cloud kitchens are an excellent way for prospective restaurateurs to take advantage of that. Many people enjoy eating good food from the comfort of their own homes, so delivery-only restaurants can capitalize on that customer demand and serve more food to enjoy a higher turnover.
Cloud kitchens tend to have much lower overhead costs than brick-and-mortar restaurants.
Cloud kitchen restaurateurs have no need for several front-of-house staff members, so they can keep their labor costs low. With no dine-in option, they can also choose cheaper real estate, as there’s no need for a dining room. Restaurant owners offering dine-in service must also find real estate in areas with high foot traffic. However, cloud kitchens working on a delivery-only model can be located in more remote or cost-efficient areas.
The main costs in a cloud kitchen business model are:
A commercial kitchen space
Chefs or line cooks
Delivery drivers
An online ordering system
To lower costs further, you could combine your ordering system with your delivery service by using a third-party delivery service, such as Uber Eats, DoorDash, or Grubhub.
Using a third-party food delivery app might make it easier to market your cloud kitchen business. Your virtual brand and menu items will show up on their system in your local area, meaning a broad client base will have access to and hear about your food offering.
You can also share a link to the third-party app on your social media platforms, making it easy for customers to place an order from wherever they are.
Restaurant marketing can be time consuming and expensive, so finding a way to simplify this process can be a huge plus.
If you want to open a cloud kitchen, follow these seven simple steps to get started.
Like any food business, you’ll need to create a detailed business plan. It should include the following:
Executive summary — a brief overview of your business plan
A detailed budget listing both startup costs and ongoing payments (e.g., ingredients, labor, rent for your kitchen space, and licensing fees)
Projected annual turnover based on expected income
Market analysis, with research into local competitors and your target customer
As part of your business plan, you should decide whether you want to operate on a delivery-only model or offer both delivery and takeout.
Many cloud kitchens only offer delivery. It can help you keep labor costs down, as you don’t need any front-of-house staff.
However, adding a takeout option could increase the number of customers who purchase food from you, especially if your commercial kitchen is in a busy area of your town or city. Customers walking past might prefer to stop in to order takeout rather than wait for delivery when they get home.
Either way, you’ll want to choose a popular delivery provider with a reliable service. Some providers allow customers to place orders for pickup and delivery, which could be a good choice if you want to offer both.
With a detailed budget in your business plan, you’ll need to source funding for your cloud kitchen business. You can take out a small business loan or look for angel investors.
You’ll need to repay a loan with regular monthly payments, whereas angel investors usually take stocks or shares in a business instead. Consider what works best for your business model, and find funding that suits your needs.
When funding is secured, you can look for your commercial kitchen space.
Many cloud kitchen owners rent a space in a commissary kitchen — a shared kitchen used by several businesses at once. A commissary kitchen will already be equipped with cooking equipment, which could save you money on your startup costs.
Alternatively, you can purchase or rent your own kitchen space and buy the kitchen equipment you need. If you choose this option, remember to consider zoning regulations in your city. Ensure you can use the space for commercial purposes before you put any payment down.
Now is the perfect time to develop your menu and plan what food you’ll sell. If you’re operating with a small budget, it’s a good idea to start with a reduced menu and increase your offering later when you have more income to play with.
Search for reliable suppliers who can provide you with the fresh and dry ingredients you need for every menu item. Avoid dishes that use niche or seasonal products that might be harder to find.
When running a cloud kitchen, you need the right tools and equipment. This means kitchen equipment and any digital technology that could make your operations easier.
A point-of-sale system is critical for any food business. Its hardware and software help you process payments and keep track of sales data.
If offering takeout, a self-service kiosk app like KioskBuddy can help you decrease labor costs. Customers can place and pay for orders on a tablet without interacting with a staff member. The order will appear on your kitchen display screen, and cooks can start preparing the food immediately.
With everything in place, you can look for the right staff to run your cloud kitchen. Depending on your exact offering, you might need:
A head chef
Line cooks and sous chefs
A delivery driver
A general manager
A server
You could keep costs down by combining or removing roles (perhaps you only need one or two cooks) or offering a digital-only ordering system (removing the need for a server to take orders). Consider your business plan and see what works best for you.
Cloud kitchens can have the edge over traditional restaurant brands regarding technology and ease of access. Potential customers who want to eat great food without going into a brick-and-mortar restaurant will be more likely to order from you than visit a dine-in restaurant.
Equip your cloud kitchen with the right tools by choosing KioskBuddy as your self-ordering app. Customers can place and pay for orders in just a few taps, meaning your staffers are free to focus on food preparation. You only need a tablet, the KioskBuddy app, and a Square Kiosk mount to get started.
Sign up for KioskBuddy today and set up an easy-to-use self-service kiosk in your cloud kitchen.