Dollars and Sense: Understanding Ghost Kitchen Costs and Expenses

Dollars and Sense: Understanding Ghost Kitchen Costs and Expenses

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Online ordering has made it easier than ever to enjoy delicious, restaurant-quality meals in the comfort of our own homes. As more and more people turn to food delivery services, an increasing number of restaurant owners are joining the virtual kitchen trend.

A virtual kitchen, or a ghost kitchen, is a food preparation facility that relies entirely on online orders to connect with customers. One of the biggest advantages of renting a kitchen space as opposed to a traditional, brick-and-mortar restaurant is the affordability. Here are some of the costs associated with ghost kitchens and how they compare to the costs of typical restaurants.

Rent

A significant obstacle to owning a restaurant is meeting burdensome rent requirements. Not only do owners need to rent out a space that's big enough to accommodate dine-in customers, but that space also needs to be located in an area with high foot traffic.

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Ghost kitchen owners, on the other hand, require just a kitchen to operate their business. This small space demand helps save money on rent, which has proven especially useful during the COVID-19 pandemic. Moreover, because they depend fully on food delivery, ghost kitchens don't need to be in populated areas — they don't even need their own location. For example, many owners have saved money by sharing spaces with other businesses, such as hotels.

Appliances

Whether you run a brick-and-mortar restaurant or a ghost kitchen, you're going to need appliances. These may include:

  • Stove
  • Oven
  • Dishwasher
  • Refrigerator
  • Cooking utensils

Ghost kitchen owners often save money on appliances by sharing them with other virtual brands. Since there's no need for customer interaction, multiple kitchen owners can work from the same space and split costs. Moreover, owners don't need to worry about supplying furniture, decorations and dishware.

Insurance

Insurance policies are designed to protect your business and provide financial support when things don't go as planned. A few insurance plans that are commonly recommended for food businesses include:

  • Business Owner's Policy (BOP): This type of insurance combines property and liability coverage and provides protection in the event of property damage.
  • Worker's Compensation: The purpose of worker's compensation is to protect your business if employees become injured or sick during the job.
  • Commercial Auto: Food businesses that supply their own delivery cars will need commercial auto insurance.
  • General Liability: This insurance offers protection against general lawsuits and covers things like foodborne illness, falls and accidents.
  • Cyber Insurance: Cyber insurance protects businesses from online data breaches.

The cost of restaurant insurance varies depending on factors like location and the provider — insurance companies often give higher premiums to restaurants they consider "risky," such as those with lots of property or staff members. On average, restaurants spend over $4,000 annually on insurance costs alone.

Because they manage fewer employees and use smaller spaces, virtual kitchen owners have the potential to get lower insurance premiums. However, they may have to pay more in cyber insurance as many of the business operations are conducted online.

Staff

Every food business requires some dedicated staff members to keep things running. Most ghost kitchens rely on the following:

  • Managers
  • Chefs and kitchen staff
  • Cleaning staff

Some virtual kitchen owners may also employ their own delivery drivers. However, they don't have to hire anyone to manage a dine-in area — this includes busboys, hosts and waiters.

Online Menus

There's no doubt that the restaurant industry is competitive — if you want to succeed, you'll need to adapt to changing trends. For example, if a menu item isn't doing well, you may want to eliminate it entirely. Unfortunately, if you run a brick-and-mortar restaurant, adjusting your food items requires printing an entirely new set of menus (which takes time, effort and money).

On the flip side, if you run a virtual kitchen, all you have to do is update your website and your offerings on delivery applications. This process is both quick and simple, letting you make fundamental changes without wasting time or money. You can even improve the customer experience by simplifying menu management through an easy online ordering system.

Order Management Platforms

What makes virtual kitchens apart unique is their reliance on food delivery and pick-up orders. Unlike traditional restaurants, ghost kitchens depend fully on online ordering to make money. Thus, it's important to keep customers satisfied by ensuring that every order is made quickly and correctly. To accomplish this, we recommend using high-quality restaurant tech like Cuboh.

By streamlining delivery orders to a single tablet, Cuboh makes it easier than ever to manage your deliveries. It can even integrate with your restaurant SaaS or POS (point of sale) system. Ultimately, order management platforms are an important investment for any virtual kitchen owner that wants to improve customer satisfaction rates and stand out against competition. Book a demo today to learn more!


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