Cloud kitchens are outpacing nearly every typical business model in the food industry. This modern kitchen concept works on a ‘delivery-only’ business model that is not only cost-effective but time-worthy as well.
These kitchens have been exclusively designed to eliminate ‘dine-in culture’ across restaurants that take enormous investment capital. All it takes is a central kitchen space to cook food and an arrangement to get it delivered to the customer’s home.
Setting up a cloud kitchen is relatively easier. Still, there are multiple moving points in this ecosystem that tend to impact the overall cost of cloud kitchen. How much does cloud kitchen cost? This review carries a perfect explanation.
While moving through this article, you will learn –
- What exactly will it cost you if you start a cloud kitchen?
- What are the factors impacting cloud kitchen cost?
- How to control cloud kitchen costs?
- What is the suitability for the cloud kitchen business model?
And many more. Without missing a moment, let’s go straight to the cloud kitchen business model to trace the overall cost of working along with this business model.
How Much does it Cost to Start a Cloud Kitchen?
Cloud Kitchen setup isn’t a big deal but the overall cost is. It can readily shake up your budget if you aren’t working with a plan beforehand. The exact figure to bring into the answer for how much cloud kitchen cost depends on certain factors as well.
And for your information, here are the anticipated figures on how much will you be paying for a cloud kitchen if you plan to start now –
- The minimum startup cost is $1300
- The maximum startup cost is $11,600
- The average startup cost for a cloud kitchen is $5,900
If you are a small startup, tapping into the internet world assumes that it will cost you less to get started compared to a physical restaurant. Then you can be wrong! The startup cost of a cloud kitchen is entirely decided by the restaurant’s requirements.
Right from the beginning, if you want to target an audience on large scale in your region, a big chunk of investment capital is expected to go into “website creation”, “marketing” and “delivery services.”
$25 to $299 (each) can be easily consumed by multiple software if starting from scratch. Followed by a utility cost of $1,150 and Wi-Fi & internet costs can invite an additional $100 respectively.
Best if you have your own property to run a central cloud kitchen (your home is good too). But if you are taking a property on rent, then its cost can go up to $5,000.
Breaking Down the Factors Deciding Cloud Kitchen Cost
As said, some deciding factors bring a big difference in the anticipated cost and final cost of launching a cloud kitchen. Such as –
Kitchen Outlet
How much is cloud kitchen size good enough to get started? Again, it depends on your business requirement. Such as, if you are a single brand, a space approximately of 500-600sq feet may serve flexibility in kitchen activities. Since, a dine-in space, storefront, or any other facility isn’t required in the cloud kitchen ecosystem, a small space will work.
If you don’t have any private property to carry out the kitchen operations, you are allowed to take property on lease. The starting rental cost is $900 in Pittsburgh, PA for 500sq feet of property, and for similar property size, you may be paying up to $2,200 in some bustling cities like Boston, MA.
Online Portfolio Set up
The next big thing which may impact your budget is “website creation.” Digitalized setup has a major contribution to the cloud kitchen business model and a web profile of a brand on the internet is an indispensable component here.
Cloud kitchen attracts over 90% of its customers via these digital handles. These restaurants operate entirely on a “delivery-only” business model. Considering that, cloud kitchen receives orders online and delivers them to the address asked by the customers.
But the problem is, a website built from scratch can cost anything between $10k-$50k. Marketing and website maintenance may add more to the cost.
This is where online ordering systems like App2Food come to your rescue. Against a small monthly fee, you can access a well-working and feature-rich website, and that too with personalized branding benefits.
Facility & Equipment
Without appropriate facilities and equipment, it can be inherently tough to operate a cloud kitchen in the long run. Indeed it has a higher chance to shut down in its initial days of launch. However, these facilities are unlike the on-site dining restaurant’s kitchen.
Such as a commercial cloud kitchen must be more tech-enabled to ensure all information from staffing attendance, and food preparation to order delivery is monitored.
Compared to a standard restaurant, these “delivery-only” restaurants cater to a wider audience. Therefore, the facility in the kitchen should be advanced enough to meet the unpredictable challenges at the working site.
However, in the list of the facilit, you can make on-site dining facilities available to customers if you think it may help your business in the expansion.
Staffing
Staff uniforms and salary should be taken into account while preparing your budget. Most startups require only 3 to 4 people for cloud kitchen operations. That’s great if your business is family-backed.
But in the future, if you are ever short of staff, and can’t meet more requirements of customers without more manpower, start hiring. Cloud Kitchen concept was exclusively designed to generate a passive income source for people in the food industry.
And it can be only possible if your business operations are up and running non-stop. However, how much the cloud kitchen cost after hiring staff members will depend on the wage rate in the city. The average wage rate of restaurant staff in the US can range from $14 per hour to $22.04 per hour.
Marketing
A strong online presence is precious for a cloud kitchen. Apart from establishing your online portfolio or creating a website, marketing is an additional factor to consider as it may have a direct impact on your restaurant’s growth.
Simply put, being a cloud kitchen operator it is more important for you to spread awareness of the brand and the food items you serve. This ensures your restaurant gains brand recognition and more-n-more people search for it online and access its services even though it isn’t available offline.
However, marketing can be done paid and organically. Such as, you can make more people aware of your brand through social media campaigns that take a significant amount of investment. Alternatively, you can use Email marketing and SMS marketing free of cost.
Other factors that will be considered in the marketing section are-
Logo: Hire a graphic designer or logo maker to form a logo that’s meaningful and mimics the restaurant’s niche, purpose, and work ethic precisely like a professional.
Digital Advertisement Banners: It would be best if these banners are built by an experienced graphic designer because in the marketing channels hereafter they will play a chief role.
POS and Delivery Software
POS system linked with delivery software automates the whole process of cloud kitchen operation. The delivery guy need not respond to the executive separately that they have delivered the order. Instead, all such activities can be handled by the computer itself through automation. However, it will be just a one-time investment, but it will have a long-term impact on your business success.
Inventory
Depending on your menu and location, startup and ongoing inventory costs may vary. However the cost is always unpredictable, yet it is manageable. Following are some pointers for effective inventory management:
Keep strict control over food storage and labeling methods.
Use daily specials and menu alternatives to help prevent food waste.
Benefit from lower pricing offers in seasonal foods by offering in-season produce.
Review your inventory operations and activities to limit overusing anything.
Pick a tech solution and eye on everything that you can access in the data-form
Insurance
Business insurance may give you peace of mind, especially if you are operating a restaurant on personal property and are afraid of losing it due to a natural crisis or afraid of losing inventory inside. You can cover almost every business aspect in your insurance plan to ensure its safety.
But bear in mind that you are aware of the pros and cons attached to it. You may be wishing to purchase general insurance for your business, but others also buy worker or employee insurance to retain their team. However, it can be a kind initiative, but premiums for such insurance can go higher than one’s expectations.
But as a startup, we recommend avoiding buying any such services that aren’t yet required for your business as a starter. Buy only once your business scales.
Business Set up, Licenses and Permits
Business setup on documents, legal processes, licenses, and permits, are some additional cost-adding factors in the entire process. However, compared to all the above-mentioned factors, the cost coming in this section must be comparatively less.
But if you are intending to launch your commercial kitchen at a place where special permission is required, expect additional costs or legal fees to have business approval.
Some of the most common cost-adding documents are –
- Business destination and state registration fees
- State business registration cost
- Business and state license fee
- Food handling permits or license fee
- Food service license fee
Cloud Kitchen Vs Typical Restaurant: What is more affordable?
The business model of typical dine-in restaurants and cloud kitchens varies significantly. Still, both business models have a few intersecting points that are worth noting.
Such as, ‘The Kitchen’ which is obviously a chief component, as the quality of the food, can’t be compromised at any cost, and the professional work culture, an identical glare of all these three can be found in typical restaurant and cloud kitchen.
But in terms of affordability, cloud kitchen seems to outpace dine-in restaurants. It is because cloud kitchen owners are no longer concerned about higher operational costs. They only need to update a menu on their online ordering systems and wait for the order to come.
Also, investment in in-house dining e.g., investment in furniture, light, paints, wall decor, and other stuff for the convenience of customers isn’t a requirement in a cloud kitchen but in a typical restaurant is.
All orders are taken online and are sent to the desired locations of the customer. Also, there’s no need for extensive space, a small kitchen outlet is enough for food preparation. However, the only thing which may irritate most cloud kitchen operators is ‘delivery service’ and ‘website’ as both are costly sometime.
But no worry! The solution is served by App2Food now. The online ordering system supports your cloud kitchen business model with an affordable customizable business website and delivers services. All these are against a small monthly fee.
Cloud Kitchen Cost Reducing Tips
Now that you have learned how much cloud kitchen cost, you might have got an idea of the components which may shake up your budget for a cloud kitchen.
Cutting Cloud Kitchen Cost with Automation
The world is being automated, and so kitchens are also becoming digitalized. The transition is increasingly visible across restaurants.
Businessmen in the food industry are automating their manual tasking because not just it cuts cost, but speeding up kitchen activities it even boost business productivity.
All inventory counts, food cost calculations, and invoicing are automated. Thanks to the software-powered facilities that take only one-time manual action to get things done.
Order executions and order tracking happen entirely online as well.
Streamlining the Operations
It is another helpfulness of automation-driven operations across cloud kitchens. Simply put, POS-linked online ordering systems facilities bring smoothness to workflow.
Activities involved in the business are streamlined to meet day-to-day business needs. The procurement, invoicing, order adjustment, menu updates, and many other activities happen within a jiffy.
The executive will be handling everything seamlessly through a single source of operation. It eliminates the need of running multiple apps and software at the same time. Simultaneously that saves your investment capital.
Keep Portfolio Visually Appealing
In case you want to use less marketing and still want to drive traffic organically, try making your menus visually appealing. They must be attractive enough that customers couldn’t hold themselves from clicking on them and landing at the checkout page.
Most food items are delicious enough that a single good picture is enough for your marketing operation to achieve the purpose. So rather than scouting for how much cloud kitchen cost and how to reduce it, be logical and make your portfolio visually appealing.
Make Recipes Work For You
Your recipes and menus are the biggest promoters of your brand. Good food leads to automatic positive feedback and testimonials and most notably returning customers. If your cuisines are genuinely tasty, it has a higher likelihood of attracting more attention.
Therefore, above all good marketing tactics, try focusing more on making your cuisines tastier and more experimental so that you are the only unique food server in the entire city. Your menu is king, and if you can’t make your recipes work out for your restaurant, you will end up wasting your money on cloud kitchen.
Analyzing Food Cost
While making your food tastier, consider analyzing food costs because it is likely to drop the profit margins if general calculation isn’t done beforehand. Ideally, analyzing food cost per plate is recommended so that an ideal profit and loss ratio could be maintained.
Analyze total inventory cost, total production cost, and staff salary and decide the product price accordingly. In case other restaurants are providing the same food item at a comparatively less price, maybe you are required to adjust your plans and preparations to bring it down to less price.
In most events, these aren’t inventory but the production speed that is giving less output at a higher operational cost. Also, food waste management may help in reducing cloud kitchen costs.
Shared Kitchen May Help
Well, if you can’t manage kitchen activities on your own, the shared kitchen may help. Most people sidestep the idea of starting after knowing the answer for how much is a cloud kitchen because it really takes a lot sometimes.
But a solution is also available. In case, you have less production space and team but you can’t afford to hire more people, then a shared kitchen may help.
Especially if the food demand is occasional or you can’t handle the increasing numbers of orders on special days, you can trust the shared kitchen power. These kitchens are basically additional support to the cloud kitchen and can help a business meet its occasional goals.
In short, they are much recommended to fulfill short-term production needs and make sure any big long-term investment is avoided.
Optimize Employees Scheduling
Optimizing Employees Scheduling is another note-worthy tip likely to trim down your cloud kitchen cost by a big percentage. Simply put, if each person knows their duty, and obey them with discipline, and is checking in on time then it can reduce cloud kitchen costs.
No staff member must be delaying the production; the duty must be fulfilled by other people if one is absent and can’t come on duty.
It would be much better if the historical data of each employee is kept safe in the software database to ensure an appropriate wage rate on an hourly basis is distributed among them. Also, how much production takes time must be monitored and get it aligned with the employees’ performance.
Retain Experienced Staff
You must give more importance to your existing staff over a new one. Even though they are charging a bit extra, still they are more experienced and promise the timely delivery of orders.
They are well-versed in every corner of the kitchen and can perform most activities on their own in your absence. Ideally, it is recommended not to keep the ratio of new employees over 30%, or else it may contribute to confusion at the workplace and delays hereafter.
Also, keep your experienced staff at the top work positions and take the best step to retain them in your kitchen so that your business productivity is never halted.
An Optimized Delivery Chain
Cloud kitchen operates entirely on a ‘delivery-only’ business model. It must raise your focus on delivery services because you can’t keep them as the standard ones. You should keep it more personalized. In short, the third-party delivery service provider may not work for you as it will not provide the benefit of brand recognition.
Rather than that, you must hire your own delivery team. But this sounds costly. Consider calculating how much a cloud kitchen cost after hiring delivery guys, it is relatively less. How?
Well, the third-party delivery service provider charges a significant commission per order. If luckily your cloud kitchen is experiencing high order demands, it can bite a big chunk of the overall profits you make per day. Also, the branding benefit is also snatched from your restaurant.
But you can hire delivery guys on a salary basis, and can even track their work efficiencies to keep your business up and running.
Keep Your P&L Updated
The last but foremost tip is to keep your Profit and Loss entries updated so that you figure out earlier when it’s time to scale or stop. If the business is more profitable, invest more into your business and grow. But if losses are persistent, maybe things aren’t working for you.
Till then, you can rely on cloud kitchen operations that cost less such as the online ordering system by App2Food that lets you build a personalized website from scratch for free. Until the business is again back on track, you are even allowed to experiment with your business here. Re-invest in your business as you spot profits.
Final words
That’s the complete summary of how much cloud kitchen cost and what factors you can consider to keep it within your budget. As a startup, we advise taking every step carefully because you may have limited capital now. Avoid investing too much in building your own website as it can unnecessarily increase business expenses for you. Instead, adopt a versatile solution e.g., an online ordering system that lets you manage your cloud kitchen profile with utmost easiness. Create one at App2Food today, for absolutely free!