Can you start a cloud kitchen without spending a ton of money? What sorts of infrastructure and resources do you actually need for your cloud kitchen? Is it possible to make money from the cloud kitchen setup right from home? How do you make the ghost kitchen profitable? Find all the answers here.
Before I reveal all the steps of starting a cloud kitchen, let’s take a quick look at some key facts which make this segment of food business so profitable.
In 2019, The global market size of cloud/ghost kitchen was approx. $43.1 billion.
It is estimated that the valuation will rise to $71.4 billion by 2027 with a Compounded Annual Growth Rate of 12.0% from 2021 to 2027.
Of all the cloud kitchen models, the independents or standalone setups are expected to outperform and grow at a CAGR of 13.1% from 2021 to 2027.
What is Cloud Kitchen and Why It Is Profitable to Start A Cloud Kitchen?
Cloud kitchen is simply a kitchen setup with all the facilities and services needed to prepare specific food items for check out and delivery. A Cloud kitchen doesn’t offer any dining facility. Orders are accepted either online or over telephone.
Benefits of starting a cloud or ghost kitchen
The best part about starting a cloud kitchen is that you don’t need a prime location that costs you a hefty amount. In fact a standalone cloud kitchen can be started right from your home. You only need 300-400 sq.ft. space to start a ghost kitchen from home. Else you can rent a space. Even a small room at the backside of a building is enough to start a ghost kitchen. Also, you don’t need to spend money on expensive decoration that you otherwise need to start a restaurant. The overhead costs are minimal as you can run a cloud kitchen with minimal resources and staffs.
Further you enjoy lots of flexibility by running a cloud or virtual kitchen. For a single-brand cloud kitchen setup, you can keep the menu small, with a maximum of 15-20 items.
As your single-brand cloud kitchen setup starts performing well you can expand it into a multi-brand one. This way you can use the same resources to serve a wide range of cuisines.
Let’s explain with an example. Suppose you start a cloud kitchen that serves only pizza and sandwiches. As this single model starts performing well you decide to expand it to include more brands. Thus you launch three different brands, one for sweet delicacies like cakes and pastries the other for popular Mexican preparations and the third one for Indian favorite Mughlai dishes.
There are a few more cloud kitchen models which are getting popular nowadays, as customers are really embracing this food delivery arrangement.
How to Start a Cloud Kitchen Business?
Now that you know the cloud kitchen basics, let’s move on to the actual process of setting up and running a profitable ghost kitchen business.
Find An Appropriate Location
As already mentioned, you don’t need a prime location to start a cloud kitchen. You can start it right from your home if you have a spare room of 300 to 400 square feet. If there is an unused garage space which can be rented at a low cost you can start the ghost kitchen from there also. Else a top floor one room flat will also serve the purpose. You can easily negotiate the rent of such properties. Mostly such an accommodation will cost you a maximum of INR 5000 to INR 10000.
Remember you don’t need a property near the main road but it is important that your cloud kitchen has good accessibility. Also you need to maintain cleanliness of the place.
Define the Menu
According to cloud kitchen experts it is always a good idea to keep the menu small and simple with limited items. Most of them suggest a menu that consists of a maximum of 15 to 20 items.
Remember your cloud kitchen is not a restaurant where you can play “the more the merrier game”. If your menu consists of a large number of different items it might confuse the customers. Unlike a restaurant or cafe where there is an attendant who can explain the menu and suggest the right items, you can’t do so in a cloud kitchen. So, if your menu is a cumbersome and confusing one, it may prompt customers to move to some other platform.
Decide an Appropriate Name and Logo
The one reason but why cloud kitchen fail in the first year is because the owners tend to skip this part. No matter how small you plan to start the single-brand cloud kitchen, you need to give it a name. Also you need a proper logo to represent your cloud kitchen business.
Naming a cloud kitchen business or for that matter any food business can be a bit tricky. Try to limit the name to one or two words. Make sure the name reflects your cloud kitchen theme. If your cloud kitchen items represent a specific region, or culture, that can be added as the second word, for instance Behrouz Biriyani. Also the name needs to be simple and easily memorable for your target customers.
Now coming to the logo you can keep it simple too. It is advised that you use one color for the cloud kitchen logo rather than making it look like a rainbow of colors. Remember the basic color psychology while picking up the color for your business logo. It is highly advised that you hire a logo designer who can do the job professionally. There are competent freelance logo designers who may charge a maximum of INR 2000 to design a business logo.
Get Your Business Registered
The registration process of food business may vary from one country to another. Also your turnover may decide exactly what sorts of documentation are needed for registration. For instance, cloud kitchen owners in India need to acquire a basic license from Food Safety and Standards Authority of India, if the turnover is up to INR 12 lacs. Also you have to apply for the GST number, Trade License as well as Fire and Safety License. Find the complete details here.
Arrange Necessary Equipment for the Cloud Kitchen
Now that you are finally ready to set up the cloud kitchen, it’s time to arrange the basic necessary gadgets to complete the setup. If you plan to start it on a small scale, then you can buy/rent the basic kitchen gadgets like micro-oven (standard or convection), gas/electric cooking range, refrigerator/freezer, exhaust hood, and kitchen shelves. Apart from these, you definitely need a cutting board, knife set with stand, cooking pots, ladles, containers, etc, based on your cloud kitchen requirements.
For instance, if your cloud kitchen menu mostly contains fried items, you need to invest in a good-quality commercial fryer. Else, if you are going to bake a lot, then it makes sense to buy an oven thermometer, hand mixer, baking pans, measuring cups and so on.
The approximate cost of buying necessary kitchen gadgets for your cloud kitchen will be around INR 50,000 to INR 1,00,000. Remember, this is an one time investment. So, try to spend money on quality products only.
Hire Staff For Your Cloud Kitchen
Initially you can hire 4-5 persons for the cloud kitchen setup. You can start with 1-2 expert chefs and two delivery boys. The minimum monthly salary of an experienced chef in India is around INR 15000 to INR 20000. For the delivery boys, you should be prepared to pay at least INR 10000 a month. Then there might be days when you expect to receive more orders. For those days you can hire an extra chef and delivery person on a daily basis.
Technical Requirements For a Virtual Kitchen
Technology plays a key role in efficiently managing your cloud kitchen setup. Since the entire operation of a cloud kitchen is online based, you should be prepared to spend money to simplify the total process. This simply means to start and run a cloud kitchen profitably, you need a comprehensive system or software that takes care of the entire operation starting from accepting order till delivery. So, how do you proceed?
You can either do your own research online and pick up a ready-made software that offers all necessary features to simplify your cloud kitchen operation. Shortlist a few and request a demo and quote from them. Also read reviews of their customers to know whether the software performance is indeed satisfactory.
The other option is to hire a software developer to create a customized website/app for your virtual kitchen business. Needless to say the second option might be a bit costlier but offers you greater freedom and flexibility. Also having a bespoke solution means, you can upgrade it as your business keeps expanding. This might not be possible with a standard software solution.
Yet if you plan to buy a ready-made software, make sure it fulfills the criteria as mentioned here.
Get Your Cloud Kitchen Business Registered With The Top Online Food Aggregators
If you are setting up a cloud kitchen in India, then you should register your food business with Swiggy, Zomato, Foodpanda, Fasoos, etc. Each platform has its own application procedure which is actually quite simple. You need to provide some basic information about the cloud kitchen business, during the application process.
Usually it takes a few days for your application to get approved. And then there are some food aggregators who might like to visit your cloud kitchen before approving the application. Visit the respective websites of the food aggregators and read their application procedure thoroughly before proceeding with the registration process.
You don’t need to pay anything for the listing process. However, the online food delivery platforms do charge a commission, on each order placed by the customer. The commission rate varies for each food aggregator. You should read and clarify their terms and commission rates before signing the agreement.
Promote Your Cloud Kitchen
Now that you have completed all the procedures to start a cloud kitchen, you should plan to do some promotion. There are many marketing strategies which don’t cost you a fortune. However, if you want to earn quick profit from your cloud kitchen, then paid promotion is the best way to improve online visibility of your business.
You can run paid ads on social media platforms like Facebook and Instagram. Also you can plan Google Ads campaign, which is undoubtedly the most effective way to reach your target customers. Else you can advertise your newly established cloud kitchen business on the aggregator portals too. Since the popular food aggregators cater to a wide range of customers, running ads on their platforms definitely boosts visibility of your cloud kitchen brand.
If you plan to run a month-long paid ad campaigns on different platforms, then you should be prepared to spend a minimum of INR 30,000 to INR 50,000 a month.
Also check out 100+ marketing ideas for small business, most of which can be applied for your cloud kitchen business too.
Few More Tips to Run a Profitable Cloud Kitchen
Packaging is the one of the key criterion to run a profitable cloud kitchen business. Because when the food is delivered, packaging is the first thing that gets noticed by your customer. And if they find the packaging messy, with oil and gravy spilling out, then it obviously won’t make them happy!
Make sure to maintain hygiene and food safety while running the cloud kitchen. After all you are running a commercial food establishment, even if it is not visited by customers.
Happy customers attribute to business success. And this is even more applicable for food businesses. So, always request your customers to leave a review and/or feedback, be it on your Facebook page, website/app and online food aggregator platforms. Make it easy to leave a review by sharing the relevant link via email, SMS or WhatsApp.
And finally, always do your own groundwork before you actually proceed to start a cloud kitchen. Watch YouTube videos of cloud kitchen owners, read blogs to get familiar with the process and understand the typical food delivery business challenges.
Sweta is a veteran content creator, passionate traveler, movie enthusiast, music lover (reasonably good singer!), an informed reader …. and a coffee connoisseur! She has over 10 years experience in developing content for small businesses, internet marketing firms, website development companies and internet entrepreneurs. The experience has helped her develop in-depth knowledge about small business online which she now shares on the OnlismallbiZ platform. In her own words, “I am a dreamer and a doer!”