How to Open a Cloud Kitchen Restaurant

How to Open a Cloud Kitchen Restaurant

With the advent of cloud technology facilitating online ordering, cloud kitchens suddenly seem like the only logical thing to do to manage high rentals and poor margins. Cloud kitchen or digital restaurant is the latest trend that has quickly established itself in the restaurant space as a formidable restaurant format. With extreme competition in the restaurant space, high rentals, and rising costs, Cloud Kitchens actually seem like the smarter way to run the restaurant business.

What Is a Cloud Kitchen and How Does It Function

A cloud kitchen is basically a restaurant kitchen that accepts incoming orders only through online ordering systems and offers no dine-in facility. They just have a base kitchen that delivers food to the customers’ doorstep.

Cloud kitchens can have their own online ordering website and online ordering app, or they can accept orders through the various food delivering platform. Since the primary source of revenue for these internet restaurants is through the various food ordering platforms, such as Swiggy, FoodPanda, Zomato, etc, it is important to have a Point of Sales software that accepts orders from multiple sources.  This would save you the hassle of manually adding and calculating orders from different ordering services at the end of each day.

Yumist, Spoonjoy, Box8, ITiffin, Biryani by Kilo, FreshMenu, Eatlo, Hello Curry etc are some of the popular examples of Cloud Kitchens.

All You Need to Know About Opening a Cloud Kitchen

In this article, we will take you through the investments, licenses required, type of location and everything else you need to know to open your very own cloud kitchen. It would come to surprise that it requires less than Rs 5 lakh to open an online restaurant.

1. Deciding the Location of the Cloud Kitchen Restaurant

The primary reason behind the low investment needed to open a cloud kitchen is the real estate cost. In the cloud kitchen format, the location doesn’t have to do anything with footfalls, parking space, and high-end location. However, it does have a lot to do with proper sanitation and water supply with low rentals. Also, the location should also be chosen on the basis of the customer demography and the type of food product that you are selling. The location for the base kitchen can be acquired for as low as Rs 25k per month for 600-700 sqft which can go up to Rs 40-50k in a prime location market. This article will tell you how to decide the best location for your restaurant.

2. Implementing the Online Food Ordering

Once you have decided the location, you need to decide on the technology to accept orders. There are many online ordering and delivery platforms such as Swiggy, Zomato, Foodpanda etc that accept online orders on your behalf and also deliver the food to your customers. These companies usually charge 10-25% of your revenue per order. There is also a one-time integration fee involved for some FoodTech companies.

Since a cloud kitchen relies solely on its online presence to draw in customers, a website with the option to order food online is an absolute must.  There are various website developers who can build a well-optimised website for you. However, you can also go for the services provided at POSist which also gets integrated with your POS software which further increases you efficient in taking orders and managing customers. Also, customers can track their order on a real-time basis. The total cost of enabling Online Food Ordering for your restaurant comes to up to Rs 50,000.

3. Acquiring the Licenses for the Online Kitchens

Licensing is an integral part of setting up of a restaurant. There are few licenses which are important to procure in the first month of operations for a hassle-free business. These are FSSAI license, GST Registration, Municipal health trade licenses, fire licenses etc. It is advised to hire an agency for applying for all the licenses because it is the most tedious and time taking task. However, you can get the VAT registration done by your Charted Accountant. Apart from this rest of the licenses would cost you around Rs 10,000 (if FSSAI license is applied for one year)

4. Kitchen Equipment, Raw Material, and Packaging Needed for Cloud Kitchens

The cost of setting up of the kitchen may vary from Rs 1,80,000 to Rs 2,30,000 depending upon the cuisine and food you are offering. For example, the cost of setting up a cloud kitchen which wants to serve items like Burger, Pizza, Pasta and Sandwiches will not cost more than Rs 2,00,000. If you spend wisely on equipment by procuring new electronic items and old equipment such as tables, racks and storing shelves, you can save up a lot of money. The cost can go up to Rs 2, 30,000 because of the heavy equipment like a chimney, deep refrigerators, and burners.

Lastly, raw materials such groceries, packaging, dairy, and poultry will cost you Rs 20,000 for the first five days of the operations.

5. Staff Requirement in a Cloud Kitchen Restaurant

The secret sauce behind a successful restaurant is the team that works for it, the Chef being the most important part of the team, as they not only prepare the food but also helps in designing the menu. In an online kitchen, minimum of nine employees are required. You’d need at least two chefs, two helpers, and one housekeeper. The salary of the staff depends on upon their experience. The average salary of the chef at Commis level 1 is Rs 14000- Rs 15000 while that of helpers and other staff salary range between Rs 6000- Rs 8000 based on their work. Apart from the kitchen staff, two employees at the delivery and one at the counter for receiving online and telephonic orders are required. Here we would also like to recommend you to partner with the third-party delivery services which work on per order basis.

6. Staff Uniform for Cloud Kitchens Employees

For a cloud kitchen, one may feel that staff uniform is not required. However, it is still heavily recommended to have a dress code for maintaining discipline, cleanliness, and hygiene. The staff uniform would not cost more than Rs 7,000 – Rs 8,000 at Rs 150 per T-Shirt. However, if ordered in bulk the cost can go down to up to Rs 100 per T-Shirt as well.

7. Point of Sale Technology Needed for Cloud Kitchens 

The entire online food ordering and delivery system are heavily dependent on the proper acceptance of food orders. It is also important to keep a track of the number of orders incoming from the various online ordering platforms. Tracking of orders and detailed reporting is essential for smooth functioning of restaurants.  Select a POS that is customized to suit the requirements of the online ordering website. The one we recommend is our very own POSist software, which is hardware independent and completely browser-based. You can use any web-enabled device such as a computer, laptop, tablet or even your mobile to generate the bills. The cost for this should not exceed more than 25000.

8. Mobile Phones and Other Miscellaneous

An online kitchen requires a board line, mobile phones, high-speed internet, stationery, small counters, and chairs. Apart from that, you can also get a Cloud Telephony subscription that ensures that no call gets missed. You can also record the call for training purposes. The total cost of mobile phones and Cloud Telephony subscription comes up to Rs 40,000.

9. Marketing Required for Cloud Kitchens

Proper marketing and advertisement are essential to the success of a restaurant. For a cloud kitchen, marketing becomes even more essential as it becomes the single source of getting orders. Since you are not spending on location and other maintenance costs, you can keep a sum aside for marketing. Online marketing works in the favour of cloud kitchens quite well. The first thing you need to do is to get your restaurant registered on restaurant listing and review sites such as Zomato, Tripadvisor, Burrp, etc, and encourage positive reviews from your regulars. You can also try Facebook for advertising special deals and discounts. Distributing pamphlets are also a great way to spread the word. You can get 25000 pamphlets printed at the price of 70 paise, that would amount to Rs 18,000.

Pros And Cons Of A Cloud Kitchen

While cloud kitchens are certainly one of the most profitable restaurant formats, with mimmum risks involved, you still need to stay on your toes to make it a success. Employ these tips to increase the sales of your online restaurant, and let us know how they worked out for you.

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18 COMMENTS

  1. Hi,

    Thanks for the article. Its really helpful.

    Wish you could add a section suggesting how to arrive at a suitable valuation, for buying an existing cloud kitchen business.

    Regards,
    -Vinay

  2. Hi,

    We have initiated setting up unique cloud kitchen and looking for 1-2 partners who are interested and passionate about..

    You may please call me @ 9986814525

  3. I have a commercial space in Faridabad , If anybody is having relevnat experience and interested in partnership
    pls call 9971200870

  4. I have good experience in the hotel Industry over two decades in India as well as abroad and i know how cloud kitchen model works anyone interested to partner to start a business in north Bangalore can contact me on 9880664131.
    Any one seeking assistance for setting up cloud kitchen may please contact 9880664131.

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