Everything You Need to Know about Cloud Kitchens

In this guide:

• • • What is a cloud kitchen?
    • How does a cloud kitchen operate?
    • Cloud kitchens: pros and cons
    • Step-by-step guide to starting a ghost kitchen

Cloud kitchens – sometimes called ghost or dark kitchens – are getting more and more popular as our appetite for food delivery increases. 

About half of Australian households have at least  one person ordering takeaway food every day, and the rise of takeaway apps has caused ‘virtual’ kitchens to boom in numbers. 

Meanwhile, the COVID-19 pandemic has seen demand for online food delivery continue to soar. 

Whether you’re interested in converting your current business to a cloud kitchen, would like to set one up from scratch, or simply want to know more about what they are and how they work – we’ve got the answers. 

What is a cloud kitchen 

Cloud kitchens are places that create food solely for delivery online. The kitchen is used to prepare meals, sides and desserts – but no one dines in and no one collects their orders in person.

They’re basically a kind of virtual restaurant that exists in internet form only, much like any ‘cloud’ application (hence the name). 

The total market for this type of business is predicted to grow to $2.63 billion in the US alone by 2026. 

What is a ghost kitchen? 

The ghost kitchen concept is exactly the same as the cloud kitchen concept. It’s simply another name for this type of business – offering food exclusively via delivery. Dark kitchen is another popular term for the virtual business model. 

How does a cloud kitchen operate?

When setting up a virtual food enterprise, a new or existing brand usually secures premises designed for food production only. 

That means no service counter to staff, or tables to wait. Just ovens, sinks, work surfaces and everything else needed for cooking and food preparation.

Are there different cloud kitchen types?

There are two main types of cloud kitchen: 

1. The company rents or buys a dedicated space. Here they own all the equipment, and the premises is purely for the food they produce. 
2. The company rents a shared space (and often the equipment). Here, different businesses create and prepare food for delivery under the same roof. This may be especially popular with new or smaller companies. 

Some businesses adopting the ghost kitchen concept are also capitalising on the boom by buying space and renting it out to other virtual restaurants.  

Cloud kitchens: pros and cons

To help you decide whether setting up a delivery-only business is right for you, check out this list of the possible benefits – and drawbacks. 

Pros:

1. Customer relevance
2. Lower costs
3. Experimentation
4. Flexibility
5. Branching out
6. Marketing

Cons:

1. Different business types
2. Customers and staff
3. Technological demands
4. Quality control
5. Retro-fitting

Advantages

• Customer relevance – mobile food appsare now used by most adults under the age of 44, and predicted to be commonly clicked even more in the next few years. Dedicating your business to the dark kitchen approach may ensure it’s more relevant than ever to the changing way customers are ordering their food.

• Lower Cost – removing front-of-house demands, the need for table space and expensive town and city rates from the equation could be one big reason to start a cloud kitchen service. A business utilising ghost kitchens can massively reduce their overheads. It can be a challenge to fully re-open a fully functioning restaurant in the age of COVID-19, so a ghost kitchen could be a smart way for a food and drinks business to survive the pandemic. 

• Ability to experiment (and reduce risks)– if you’re setting up an entirely new food venture, you can pilot your approach and try things out, without having to commit to a costly restaurant location (and furnishing it). If you run an existing business and want to try something new, opening a virtual kitchen allows you to dip your toe without worrying about over-committing. 
• Adaptable and flexible– when your offering is showcased entirely in digital form, you have far greater options to change up the menu, reconsider your pricing structure, trial offers and alter your brand. 
• The chance to ‘branch out’– some businesses run several brands from the same virtual kitchen, which simply would not be possible within a physical customer-facing eatery. You could create a new brand to target an entirely different kind of customer and still run it from the exact same place. 
• Marketing opportunities – third-party apps that host your restaurant or takeout operation are effectively helping to get the word out on your behalf. Being primarily or wholly located in the digital space also means you can focus more energy on social media and other forms of online marketing, which are huge areas of potential growth.

Challenges 

• Managing different types of business– if you wish to try out a virtual kitchen while also maintaining a physical restaurant of some kind, organising both kinds of operation can prove difficult, at least at first. 
• Customer and staff interaction– customer service is conducted purely through the digital space, so if you’re used to face-to-face interactions you’ll have to adapt quickly to the digital dynamic. Staff may also face challenges with reduced tips and the working environment – so resolving these can also be key. 
• Technological demands– given that ghost kitchens are an entirely online endeavour, you need to ensure your website, booking system, social media, and all other digital business components are user-friendly, well-maintained and secure. 
• Quality control– a meal being delivered across town on the back of a bike may not arrive as neatly as one served just yards from a restaurant kitchen. You’ll need to work out the best way to deliver your food safely, so it reaches the customer still warm and appetising. Otherwise, you could end up with poor customer reviews.
• Retro-fitting your restaurant model– if you are considering converting your traditional restaurant or takeout to a dark kitchen, making the transition will require some careful considerations.

Step-by-step guide to starting a ghost kitchen

There are some useful tips to bear in mind when setting up a dark kitchen. Whether you’re converting or adding to your existing business, or getting one together from scratch, we’ve broken down all the vital points to consider along the way. 

How to open a ghost kitchen

    1. Plan and prepare

Like anything else in business, thoroughly visualising what you want your venture to be and how it will operate is crucial for success in the virtual restaurant world.

Aim to answer these key questions:

• • • What kind of food will you be selling, and why? (If you run a restaurant already, will this give you the chance to try something new and different?)
    • What is your own personal USP or niche?
    • Will you be partnering with a popular food app, or using your own online booking system? 
    • How will your production line from order to delivery work?

    2. Find your space

Seek out either shared or dedicated premises to rent or purchase for your operation. 

Consider:

• • • The number of staff you will need
    • The equipment and space required
    • Whether you want to have your own personal kitchen, or are happy to have other businesses on the same site 

    3. Make sure you are covered

Just like a physical restaurant, you’ll need to register your business (if it is an entirely new venture). 

You’ll also need to secure relevant insurance, certifications, and ensure that your practices will be up to the necessary standards. 

    4. Find the right people for the job

Working in a kitchen without customers may not sound too different from working in a kitchen attached to a restaurant. But there can be some crucial considerations when recruiting. 

• • • Ensure your managers are skilled at coordinating orders (it’s much harder to correct a mistake when a meal has been sent miles away, rather than to the wrong table)
    • Look for staff who are good at motivating themselves and others, without the need for visible customer feedback 
    • Choose chefs and kitchen workers who can make food look great – even when it’s packaged for delivery 

     5. Choose your app partner

The most popular food apps in the world cover thousands of cities and take orders from millions of customers. 

Partnering with a major player is often key for cloud kitchens looking to attract quick visibility in their local area – especially if you are a completely new start-up. 

Consider the conditions of their rates and supplier structure, how their service is perceived by customers and the world at large, and select the app that’s right for you.

If you’re an existing business with a loyal base, or are confident in your technology and marketing skills, you could also decide to use your own online ordering system. 

   6. Market your brand

With more people ordering takeout and restaurant food online, more and more restaurants are now delivering to meet this demand.

To make sure you stand out, create or refine your Facebook, Twitter and Instagram pages, and post regularly to them. Consider deals and offers to entice customers and hire a professional to take high quality professional photos of your mouth-watering food.

This last point is especially important, as this will be the only way of showcasing what people can expect, before they order the first time. 

You could also consider using an email marketing campaign to promote your business. 

Looking for more advice? Check out other posts on our blog – and sign up to be a Groupon Merchant to grow put your new dark kitchen business in front of an audience of millions.