Faasos (Rebel Foods), Biryani By Kilo, Eatsure, Freshmenu, Behrouz Biryani, Oven Story. Sounds Familiar? These are some of the well-known cloud kitchen brands in India.
So, if you are considering investing in this business model and looking for cloud kitchen profit margin, understand what you are getting into first to make an informed decision.
According to the estimates, the cloud kitchen industry size is expected to reach USD 71.4 Billion by 2027, with a CAGR of 12% between 2021 and 2027.
In fact, quick-service restaurants like Mad Over Donuts and Momo King are also switching to cloud kitchens to meet the rising demand for food delivery orders.
Cloud kitchens offer great potential for profitability, and their operations can be scaled much more quickly than restaurants offering dine-in services.
The average cloud kitchen profit margin is 20%-25%.
However, the profits from a cloud kitchen venture depend on the number of orders you process in a day.
Generally, if you manage 25-50 orders worth Rs. 200-250 each day, your estimated monthly income would be somewhere between Rs. 2 Lacs - Rs. 4 Lacs.
Accordingly, your average profit would be Rs. 50,000 - Rs. 90,000 per month.
However, if you partner with food ordering companies like Swiggy or Zomato, 20% - 25% commission plus GST will be deducted from each order.
Thus, keep this factor in mind while listing the products on these platforms.
The minimum investment required to run a cloud kitchen is Rs. 6 Lacs - Rs. 7 Lacs initially. However, it will differ depending on the size, scope, type of food served, tech infrastructure and the location of the business.
Here are a few common costs associated with starting a cloud kitchen that must be considered while investment planning:
The type of kitchen equipment you need may vary depending on the type of dishes you want to prepare.
However, there are a few items that are essential in most kitchens, such as knives, cutting boards, a microwave, refrigerator, pots, pans, stainless steel table and a burner.
All of this could cost around Rs. 70,000 - Rs. 90,000. (You can save a lot if you can find second-hand items)
Find a low-cost space to set up your cloud kitchen. Consider renting the top floor of a commercial building or the backside of a complex.
Avoid renting an expensive location or invest in decorating it as you won't be having any physical interaction with customers.
Delivery services can be carried out from anywhere with a basic kitchen setup.
Establishing a cloud kitchen requires at least 100 - 200 sq ft of space.
Depending on the city, you can expect to pay between Rs. 8000 - Rs. 25000 per month for the rental of this area.
Rent prices in Tier II and III cities are more economical as compared to metropolitan cities.
TIP - It is recommended to have a longer-term agreement when leasing space. There are various cases where landlords increase the rent price once your success becomes noticeable.
Considering that you are going to do everything legally, the cost of registrations would be as follows:
Approximately, the total cost of legal registrations would be Rs.35000 - Rs.40000.
You can easily buy raw materials every day. However, we suggest that you buy it in bulk to save costs and get discounts.
Keep a budget of approximately Rs. 30,000 per month for raw materials.
Don't rush when it comes to identifying vendors and take the time to negotiate with them to get the most bang for your buck.
Making sure you get the best price for your raw materials can have a huge impact on your bottom line.
Considering the packaging supplies, you must know that packaging is way more important than you think.
The cost of food packaging can vary between Rs 40,000 and Rs 60,000, depending on the amount ordered and the quality of the packaging.
Generally, if you order in higher quantities, it will cost lower per unit.
Market before you launch.
The best way to create buzz around your new cloud kitchen is to run ads on Facebook, Instagram and YouTube. This would cost a minimum of Rs. 10,000 initially.
Create awareness of your kitchen by allowing potential customers to register their interest with their contact information.
But will they give their phone number and other details?
To get customers to sign up for your product launch, think of something you can give away in return. It could be anything from a discount coupon to a gift. Get creative and let them know how much you value their loyalty by offering an irresistible incentive.
You can use tools like Canva for designing offers and posters. For the content part, you can use free AI writing tools like Copy.ai.
Cloud kitchens are becoming increasingly popular as a cost-efficient way to expand the reach of a business. However, running a successful cloud kitchen requires careful planning and implementing various strategies to maximize profits.
With these strategies, you can easily maximize the profits of your cloud kitchen business model and remain competitive in the market.