Complete Guide to Restaurant (and Ghost Kitchen) Profits

Complete Guide to Restaurant (and Ghost Kitchen) Profits

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How to start a successful Ghost Kitchen

Building a profitable restaurant takes a lot of work. You must determine whether the operating model you're using can sustain things like small shifts in revenue or expenses. In order to make a profit, your restaurant needs to bring in more revenue than it has to cover in expenses.

Restauranteurs who want to increase restaurant profits should consider implementing these tips in mind as they're finding ways to boost the restaurant profit margin.

Start with A Comprehensive Analysis

The ghost kitchen business model involves using third-party applications and integrations. Its operations also come with extra packaging, delivery and other operational costs. As a ghost kitchen startup, it is essential to develop a comprehensive business plan that addresses all the key areas. You should analyze your business model, identify the customers and their online ordering journey, develop pricing and marketing strategies and fortify your brand to increase preference among the competition.

Develop Your Pricing Strategy

Pricing is critical when venturing into off-premise ghost kitchens and virtual brands.

The initial capital shouldn't be a problem, considering you can rent fully-equipped meal-preparation facilities to complete food preparation. However, if you intend to purchase a ghost kitchen food truck, it is highly recommendable.

The goal here is to ensure revenue from your ghost kitchen covers all the essential costs, including food, packaging, delivery, rent, equipment depreciation and other operational costs. Some cases may require trial and error, but it is important to review all aspects, including competition, to develop a pricing strategy that guarantees business continuity and profitability.

Control Food Costs

The cost of goods sold (food costs) is one of the biggest expenses in this industry, so controlling what you have to spend in this area is one of the most effective ways to increase the profits of the restaurant. Controlling food costs doesn't mean that you have to serve your customers subpar food.

  • Track the food inventory. This enables you to cut down on food waste because you'll know what you have and what you'll need. Companies like Marketman and BevSpot make this easier so you don't have to track manually. You can also get insights into when you're using certain ingredients the most.

We all know that restaurant profit margins are razor thin. The average full-service restaurant profit margin is somewhere between 3 and 5 percent, while a fast-food restaurant’s profit margins stand between 6 and 9 percent. After doing the math, you may find your food costs are too high. If that’s the case, there are cost control measures you can put in place to reign in your spending.

  • Support local businesses. Turning to local farms and other suppliers for food might seem a bit more expensive at first; however, these small businesses are likely going to work with you about pricing if you're buying in bulk. Additionally, you can advertise that you have locally sourced ingredients or that you have "farm to table" items on your menu.
  • Finetune the menu. Try to set up the menu so it's based on common ingredients. Having to purchase fewer ingredients means that you won't have as many items to track. It can also help to cut down on waste because you won't have to keep ingredients on hand that you might not use.

You should also have the instructions set for each item your restaurant sells. Portion control is also a big part of keeping food costs under control. Pre-portioning items can help to keep costs down and provide a better customer experience because this is done ahead of time, so those items are grab-and-go even during a rush.

Encourage Customer Loyalty

Customer loyalty can increase the revenue from the business because you'll have the business of returning customers. Those same customers will likely introduce their friends and family members to your restaurant so you can increase your returning customer base.

Excellent food and great service will help to build up your loyal customers, but you can also use online incentive programs, such as LuckyDiem, which can also help to drive customers to your restaurant. This program includes a special search so new customers can find your restaurant when they want to find somewhere with great food that also provides an incentive when they make a purchase.

According to LuckyDiem, "a national top 5 burger chain property test card-linked offers to provide incremental revenue life (with no privacy or data restrictions) resulting in a 123% lift"

You can also add limited-time specials to encourage customers to try new foods. Some restaurants offer a daily special based on what ingredients they have an excess supply of so they can use those. This helps to control the inventory, which also helps to keep food costs to an acceptable level.

RELATED READING: Loyalty Programs and Restaurants: How to Make Them Work

Minimize Overhead Expenses

The overhead expenses for the restaurant are a considerable cost. While there isn't much you can do to save money in this area if you have a traditional restaurant with an eat-in dining space, ghost kitchens have a few options that can help them to save money on overhead costs.

Services like UseKitch connect ghost kitchens with restaurants that have underutilized kitchen space that ghost kitchens can rent out. This may prove to be a valuable resource when the hours that are open work for both parties. It also helps to curb equipment costs since you could use the equipment that's already in the kitchen you rent out.

Running a virtual kitchen takes a lot of work. Many of these kitchens operate on a very tight margin, so keeping track of the bottom line is critical so you don't end up spending more than you make. This can help you to grow your ghost kitchen as time progresses.

Attacking the restaurant's bottom line from many different angles will often net the best result. When you can control the expenses of the virtual kitchen, you can maximize profits and ensure that you're providing your customers with the best deals possible.

One thing to remember is that you must stay true to your company's values while you're watching the bottom line. You should have a business plan in place. While you can alter some areas, be sure that you're keeping the bones of the plan in place.

Get Creative with the Marketing Campaigns

Your marketing campaigns can be rather simple, but you should be creative. Many ghost kitchens focus on their main dishes, which works for some markets. Another option that you have is pulling in the local appeal. You can do this in several ways.

Some virtual kitchens use locally sourced produce and other goods. This could become a central theme to your marketing campaign because you can reach the people who want to support local businesses. If you have main suppliers that are local, consider reaching out to them to find out if they're willing to take part in the advertising campaign.

It might also behoove you to think about creating a campaign based on a unique dish you offer. Many virtual kitchens have a fusion dish or something similar that patrons can't get in other places. Some ghost kitchens even create campaigns based on seasonal or limited-time offerings.

Include a Personal Touch in Each Order

You can connect to your restaurant's customers without ever having to see them. Consider adding a personal touch to each order. This could be as simple as writing "Thank you" on one of the packaging items. You can also consider adding something with your company's branding on it. Refrigerator magnets or something similar are usually cost-effective marketing options.

Decrease Food and Supply Costs

The food and supply costs at a virtual kitchen likely make up the bulk of the budget. Finding ways that you can decrease these costs without having to use poor quality items can help to boost the profit. One thing that might help is to look for local sources for items. Local suppliers might be willing to work with you on the price, but this might not always be the case if you aren't buying large quantities.

Protect Your Restaurant's Reputation

Customers will have the ability to write online reviews for your restaurant. While you might have a lot of positive feedback, never overlook the complaints. Every customer complaint is a chance to win back that customer and others. Address the complaints head-on with realistic solutions. Try to entice the person to give your business another try.

As you're handling the complaints, others might notice that you're really interested in complete customer satisfaction. This may encourage them to give your ghost kitchen a try.

Feedback online is also a chance for you to learn what improvements you can make within your company. If you notice consistent complaints about something, try to fix it. If you see consistent compliments about something, give praise where it's due.

Look at the Overall Picture

Finetuning the menu can help you to control the bottom line. Running reports about what's selling and when can help you to keep control of the inventory. Looking into the sales trends may also clue you into what menu items you can remove from the menu. You may even figure out what you can add to the menu to increase your virtual kitchen's appeal.

When you're going over the information, you can also check the trends to determine when your restaurant is the busiest. This lets you know when you need to have full staffing and when you can likely cut back a little bit. It's important to ensure that you have the staff you need to meet the needs of customers without spending too much on labor.

Getting information from reports is easy when you use Cuboh. Our easy-to-use dashboard lets you see all the important data that can help you to ensure that your ghost kitchen is running as efficiently as possible.

Save Money on Ordering Services

Connecting with your customers for takeout or delivery once required you to have a staff member who was able to answer the phone and take the order. Now, services like Allset and ChowNow connect customers who are ready to place an order with a local restaurant. This is all done through an app or online. You can set the menu options and pricing. The orders come right to you through the Cuboh integration app.

"Restaurants and diners have a special relationship, and we make sure our technology and pricing doesn't get in the way of that," said Chris Webb, CEO and co-founder of ChowNow. "For our online ordering product, we have a basic flat fee for restaurants, and special features like email marketing, membership programs, and branded mobile apps are included in that price. We pride ourselves on maintaining a transparent commission-free marketplace."

If you're using a delivery service, check the commissions that you'll pay. These vary greatly from one company to another, so read the pricing structure before you sign on to any service. You have to balance your cost with the perceived value your customers will have in knowing that they can simply place the order and get their food.

Tracking the revenue and expenses for your restaurant can help you to determine what steps you should take to make increase your average restaurant profit margins. While you're doing this, you must keep customer service intact. Customers who feel they are valued and heard are more likely to come back. They'll also provide valuable word-of-mouth advertising for your restaurant. Finding the right balance can greatly boost your restaurant's income!

Get Ghost Kitchen SaaS

The professionals at Cuboh understand that you have a lot on your plate running your ghost kitchen. Our app was developed with busy virtual kitchen management in mind. It can help you with order processing, inventory management, and more. Give us a call at 855-572-8264 to discuss how our app can help your restaurant succeed.

Thinking about launching a ghost kitchen? Get our free Ultimate Guide to Starting a Successful Ghost Kitchen. It's a 7,000-word guide covering everything operations, tech, marketing, and more.


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