What is the profitability of a Cloud Kitchen?
“Kitna deta hai?”, is probably the first question you ask when considering any new business, and a cloud kitchen is not an exception. And why not? Revenue matters, after all. Add munafa to the equation, and all your top-line and bottom-line college assignments will pop up in your heads.
Don’t worry, like always; there is a method to this kitchen-ness!
Save That Coin
It is common knowledge that cloud kitchens have lower operational costs. Here are some areas where you can expect to spend lesser than a restaurant:
- Rent: When you’re only running a kitchen, there shall be no need for sitting space. As a cloud kitchen owner, you may not need to worry about the location of the kitchen too much. In all major cities, locations are the key drivers of rental costs.
- Labour: With cooking being the main agenda, think about the money you save by not hiring stewards and not needing to train them.
- Overheads: It is time to forget the costs for ambience, décor, fancy cutlery, and any other overhead costs that are related to outside the kitchen area.
But just as you would have saving areas, there are few areas where you would be shelling out more money. Heard about the food delivery and packaging costs? That can be a drain, but if applied right, it can also be a great marketing tool!
The best way to make the business more profitable is by recognizing the variables costs and defining strategies to keep them minimal. For example, you can get on top of the game through smart inventory management. Higher Average Order Values and order frequencies can save you more money. Therefore, put on your marketing cap to create more value for the customers to buy more and buy frequently.
Talking Money
Did you know that a cloud kitchen can earn somewhere closer to 15-20%, if strategically, operationally and financially you do things right? In an age where ordering in is steadily taking up more space than going out, cloud kitchens are on their home turf for this consumer behaviour.
They have the advantage of passing on the benefit of lower operational costs to their customers. The challenge is to comfortably stay afloat amidst the cutthroat competitive rates in the food industry. You can carve this niche for yourself by specializing in a particular cuisine. Who would have thought Khichdis will be made popular again, the way Khichdi Experiment has done? Sticking to niches help you offer a unique proposition and, in turn, increase margins as well.
Your cloud kitchen can increase its profitability by positioning a certain brand image that speaks to its target audience. Do not shy away from the power of social media when it comes to bringing in more business!
Looking Ahead
If food aggregators inculcated the habit of food online, then the COVID-19 pandemic made it a norm. The innovation in food delivery systems and take-away meal processes are booming and becoming more customer-friendly than ever.
According to Allied market research, the global cloud kitchen market is estimated to reach the $71.4 billion mark by 2027. This is a MAJOR jump from the $400 million valuation of 2019. It is evident that if you play your game tactically, you can be riding the wave of profitability while running a cloud kitchen.
Did that change your “kitna deta hai” question to “shuru kaise karein?” Perfecto! If you don’t jump in, how will you learn to stay to swim and ride the wave?
The right time to start is today.
