Cloud Kitchen: Best practices on how to set up and grow 10x

Cloud Kitchen: Best practices on how to set up and grow 10x

Cloud kitchen!

Why is the word cloud kitchen heard so often these days? With the startup industry growing exponentially and the high costs of owning a business in the restaurant sector, cloud kitchens are seeing an all-new rise in number.

Do you own a cloud kitchen? Or are you planning to start one soon? Either way, technology is going to be your new best friend. I like to believe that cloud kitchens are more tech startups than restaurants. Why? Let’s have a look at the major overlap between automation and ghost kitchens, and let’s start with the basics!

What is a cloud kitchen?

A cloud kitchen is also called a ghost kitchen, dark kitchen or virtual kitchen. But what is it?

It is basically a kitchen set up to deliver food to the doorstep of the customer. They do now have any kind of seating area near the kitchen. They usually have websites, apps etc. that allow people to check out the menu and other offerings. People either order their food through the app or website and then the kitchen delivers the food to them.

Did you know that around 60% of restaurants fail during the first year of business? This was mentioned in an article by CNBC. And this is probably because people try to get everything done manually, or take the harder route.

Well, I think it’s extremely important to know when there’s a smarter route and how fast you can get on it! And in this case, cloud kitchens and automation are the way to go for sure!!

 

Cloud kitchen 8 best practices and secrets you can’t live without! – FREE Downloadable list!!

 

Cloud kitchens versus brick and mortar restaurants

What sets these places so much apart from regular brick and mortar restaurants though?

They are actually very different, not just in terms of the system of taking out versus dine-in, but also in the very crux of their business model. So, let’s first look at the…

Advantages of running a cloud kitchen

Cloud kitchen set up costs are lower

In the brick and mortar setting, set-up costs are very high. Leasing, training staff, the decor of the actual restaurant area etc are expensive and also take up a lot of time and effort. In ghost kitchens, these costs don’t exist at all.

The cost of running a cloud kitchen is far lower than traditional restaurants

Regular restaurants have very high costs. Costs such as rent can go through the roof, especially in a business like a restaurant and you need a prime location that has heavy footfall. These locations are particularly costly.

Other factors such as payroll of the waiters and other staff, etc can really set you back and eat away at your profit margins. On the other hand, cloud kitchens save tons of money simply by saving on rent. And not just that, when you don’t serve food at the venue, you can save on so much money when it comes to the payroll of staff members.

Ability to scale the business in more in the case of a cloud kitchen

With, restaurants, scaling would mean opening up newer outlets or expanding (increasing the size)the existing ones. But this would again require the same set-up costs. And just like we saw earlier those setup costs are very low in comparison to ghost kitchens. Here, simply renting or buying a new space and training a few people is a lot easier than when it comes to bigger restaurants.

 

Swaminathan RamaniHere’s what Mr. Swaminathan Ramani, owner and founder of 6 Ballygunge Place (Kolkata) has to say,

“In F&B/ restaurant business, we need to digitize internal people processes so that all key people and payroll information is at our fingertips. Especially post COVID – digitizing internal people operations is mission-critical and as such we are happy to partner with Asanify who is helping us in this journey.”

 

 

Disadvantages of running a cloud kitchen

Like yin and yan, good and bad, it is important that with everything good also comes things that are not so good. So, while there are many benefits of starting your own cloud kitchen, there are some drawbacks too. Here they are!

High competition in cloud kitchens

Seems like everyone is starting their own cloud kitchen. As a result, the competition is extremely high. Finding your own niche in this segment and then gaining marketing share might be challenging.

Lack of customer interaction in a cloud kitchen

When you run a cloud kitchen, you can very easily get very disconnected from customer preferences and needs.

How?

This is because you don’t interact with customers as often or in the way you would in a traditional restaurant. Hence, staying up to date with their needs can get tricky.

A cloud kitchen does not offer much branding opportunity

Your branding efforts are solely focused on the packaging of the food. If you ran a traditional restaurant, you could have shown off your branding in various ways. The entire restaurant, décor, staff uniforms and so much more. On the other hand, your options get limited when you don’t have an outlet for people to come to!

But its important to remember that, while branding can get tricky here, it’s not impossible. You just need to know how to play it smart!

Building people’s trust can be a challenge in a cloud kitchen

Why?

Because people believe in what they can see. When customers don’t see ot interact with any of your staff, they could get a little vary of you. So be careful of that

How to start a cloud kitchen in 5 easy steps!!

Time needed: 30 days.

Steps to help you set up the cloud kitchen of your dreams!

  1. Pick a location

    This should ideally be your first step.
    One of the biggest perks of setting up a cloud kitchen is the low rent. So, pick a place that has low rent so that you can save on money.

    cloud kitchen location

  2. Make sure you have all the licenses in place

    With any business, you must make sure that all compliances are met and licences are in place. The same goes for your cloud kitchen.

    Cloud kitchen registration

  3. Implement a system to order food online

    This could include a variety of options such as,
    1. Your own app through which people can place orders
    2. Cloud kitchen website
    3. 3rd party apps such as swiggy or zomato (in case you don’t want to set up your own)
    4. Set up a series of SOPs (standard operating procedures) to ensure that you know exactly how the food will be prepared and delivered

    food delivery

  4. Hire at least 10 people depending on the role requirements

    You need people who can help you in this set up process. Right from chefs, managers (to get things going), marketing people and one HR to manage people for you (unless you have an HRMS instead!)
    Don’t be afraid to start small.
    It’s better to start small and scale rather than start big and struggle to manage things which leads to a shutdown!

    Click here to download an ebook for hiring your business’s first set of employees
    Or here, to understand more about HRMS or HR outsourcing

    hiring for kitchen

  5. Partner with the right vendors and those who can provide you with quality raw material

    This is essential because it will affect the quality of the food you serve.
    This step is of utmost importance.
    Also, remember, when you just starting out, it’s absolutely okay to ask for help!!
    So don’t be ashamed to do so.
    People are more willing to help than you may think 🙂

    cloud kitchen partners

 

Cost of starting a cloud kitchen

Let’s face it, opening a QSR (quick service restaurant) is not such a quick affair! There are a million things to do. And a million things to pay for!!

Starting a cloud kitchen, on average could cost you up to 25-30 Lakhs (just for setup). And, like in any business, there are 2 major types of costs you need to consider while looking at the cost side of your financials. They are

  1. Fixed costs
  2. Variable costs

Fixed cost of starting a cloud kitchen

Fixed costs basically… are fixed! What that means is that they are the things you pay for irrespective of the level of production in your business.

Say, for example, if you rent kitchen space, and decide to cook 5 kilos of rice there, you still need to pay for rent, electricity, property tax, interest on a loan (if you’ve taken one) and so on. These expenses will remain constant even when you decide that you need to start cooking 50 kilos of rice or even 100 for that matter.

What are the fixed costs involved in a cloud kitchen?

  • Location (rent of the kitchen space)
  • Electricity
  • Taxes
  • Interest on loans (if applicable)
  • Payment for any cloud kitchen management software or HRMS you might be using

Variable cost of starting a cloud kitchen

This can in a way be seen as the opposite of fixed cost. Variable costs, as the name suggests, vary with changes in production level. Meaning what? 

Let’s take the same example of rice. If you want to cook 5 kilos of rice, you need to spend money to buy 5 kilos of rice. You also need 1 vessel and a chef to cook the rice. But if you decide to cook 50 kilos, you may need 4-5 vessels to cook the rice and maybe 3 chefs. Because the volume of rice to be cooked increased, the materials directly involved in cooking (including manpower requirements) also went up.

So examples of variable costs in a cloud kitchen set-up are…

  • Payroll for staff 
  • Raw material for cooking the food
  • Packaging materials
  • Staff uniforms
  • Utensils required to cook the food
  • Electronic devices (phones, biometric devices etc.) for better functioning of the kitchen

What is cloud kitchen management software?

A cloud kitchen management software is basically a set of software that you can use to manage your cloud kitchen is a much more efficient and easy manner.

Here I have listed a few things you can consider automating for your cloud kitchen

  • Kitchen website or online ordering app (that is unique to your kitchen, that is used for taking and tracking orders)
  • Inventory management app for cloud kitchens (to help manage inventory of raw materials better)
  • HRMS and Payroll software such as Asanify (Human resource management system) (to help you manage your employees, their payroll and 100 other employee-related things!)
  • Kitchen display system (to be used in the kitchen to help chefs track multiple orders easily)
  • Analytics software
  • Performance management software (Asanify has a performance management module for your cloud kitchen as well!!)

cloud kitchen cta logo

What is an HRMS?

Now that we have covered in detail what cloud kitchens are, let us see what an HRMS is. HRMS stands for Human Resource Management System. What it does is basically manage all the HR processes of a company.

An HRMS can manage all the following features in any business.

You can also click on each of these links to either sign up with Asanify or understand how each of these features of Asanify can help you!

Why is an HRMS important in any business (especially a cloud kitchen)?

An HRMS can help you do a whole bunch of things and can really help make life easy. How does it help?

Let’s have a look at what Arvind, Founder of Chaiffee says,

“Our aim is to provide the best customer service every single time. And to do this, as the founder, I need to ensure that each and every single one of my employees, be it the cooks or the delivery partners, are just as happy and satisfied with their jobs. Asanify is helping me manage my employees better so that we can serve our customers better!”

 

Saves time and energy

Usually, HR tasks and admin work can take very long. Things like employee onboarding, offboarding, payroll, performance management etc. have a lot of paperwork. So, it becomes very tedious and time-consuming. Some of these are not even difficult to do but are simply time-consuming. An HRMS can help you manage your time better and hence let you focus on other important things.

Minimizes error

Blunders in payroll are extremely costly. Small things like wrongful deduction of taxes and incorrect salary calculation, can be very painful. An HRMS and payroll software can manage this quickly and with absolutely no errors!

Check out also our FREE Salary break up calculator tool – Salary break up calculator

Does everything in literally 2 clicks

You can send out the salary of all your employees in 2 clicks. The system will calculate the salary breakup based on the structure you assign for each employee. Then, with a click of a button, you can send out salaries or download payslips etc.

Asanify – the best HRMS for your cloud kitchen

Up until now, we have separately seen what cloud kitchens are and what an HRMS is. Now, we will look at how our HRMS, specifically Asanify can help you and your Cloud Kitchen.

1. Attendance and shift management of employees in a your cloud kitchen

At a cloud kitchen, chefs or other staff usually work in shifts. In most cases, the staff comes in 3 shifts since cloud kitchens operate from morning and go on until past midnight. When employees clock in, they enter the time and the manager approves of it. Then again, when they leave they write down the time of clocking out and it has to be approved by the manager or team head.

Imagine doing this for every single employee and for every single shift!

Managing attendance of many employees across shifts, their clock in and out time etc. can get very confusing when done manually or even on a spreadsheet.

The easiest way to keep track of all this is via an HRMS. Employees can clock in and out as and when their shift rotation happens. The admin or the manager can approve of it all and the system will automatically keep track of the employees’ data and timesheets. This makes it extremely easy and hassle-free.

Here’s how Som, from Pin Fresh, has been able to manage attendance, and shifts in a much easier way!

“Managing attendance for so many employees at pin fresh used to be such a challenge. But with Asanify it has become so efficient. Everything gets done within a few seconds. And not just that, attendance and leave management integrates with the payroll, so adjusting the salaries of employees based on attendance and shifts is super easy and hassle-free.”

2. Flexible salary and termination payroll can be done with ease if your cloud kitchen uses an HRMS

The salary structure has many components. And when you have staff coming in from other cities, you often end up providing them with HRA and other such allowances.

Say, for example, you have someone coming in to work for you for 15 days from a tier 2 city. They don’t have a place to stay and so, you put them up as a paying guest somewhere. Obviously, all these PGs take rent on a monthly basis. So, if you are providing a place to stay you also need to pay the rent for the whole month (as opposed to paying for 15 days and the staff member paying the remaining).

This is just one example of a component in the salary that will not vary based on the number of working days. Whereas your basic salary may change if the person works for 15 instead of 30 days. Another example is, that if an employee is terminated, there are so many things to settle.

Managing an employee’s termination payroll is not easy. An HRMS such as Asanify can manage all this, with just the click of a button. That’s it! All handled with no confusion or problems.

3. Mobile-based login in made simple for your cloud kitchen and its staff

This feature becomes particularly important when your staff members may not own a laptop or a computer. In such cases, having an HRMS that allows you and your employees to log in from their mobile phones is a huge blessing (not something other any HR software usually offers)

4. LOP Adjustment for the staff of your cloud kitchen can be handled fast and efficiently

What is LOP adjustment and more importantly, what is LOP?

LOP stands for loss of pay and here, we’re going to talk about the loss of pay adjustment. When does this occur? When an employee of yours takes leave, beyond what is allowed, they end up losing pay for those days. And how does this affect you? You will have to manually calculate the loss of pay for each employee every time they skip a day or a shift (for every month of course!!!).

How is LOP calculated? Say, for example, person A missed 2 extra days (beyond what the leave policy allows), then their pay for those days needs to be deducted. If their salary is Rs 15,000/- per month, then to deduct the 2 days you will have to multiply the 15,000 by 28/30 (assume it’s the month of April). So, the salary post LOP adjustment is Rs. 14,000/- Now imagine doing this manually or even via excel for every employee.

There’s way too much scope for mistakes here. An HRMS can do this automatically, it will keep track of the leave policies, attendance and shifts as well as the payroll of every employee. All you have to do is click 2 buttons and relax!

5. Advance salary payments can be managed easily even if multiple employees of your cloud kitchen make requests advance together!

Advance salary payment implies paying an employee a portion of their salary in advance. This could be required in cases where the employee has a medical (or other) emergency and is in urgent need of money. When employees are given a part of their salary in advance, 2 things can happen. Either…

  1. They either repay the amount given (sometimes as a loan) periodically with little to no additional interest (on the loan)
  2. The salary already given in advance gets deducted from the next few salaries.

Either way, it is very tedious. Especially in the case of a cloud kitchen where there are so many members of the staff. So, here an HRMS at a cloud kitchen will be extremely helpful.

See how this feature helped Vikas fron Chakna Nest,

“Very often a cook or another worker will come to me and ask for a part of their salary in advance. Initially, it was difficult to keep track of how much eac\h of them has taken in advance and then adjust it to their respective salaries. But now Asanify manages all that for me, so I don’t have to break my head with this and my workers are happy too!”

6. Biometric device integration

Employers at cloud kitchens can now use biometric devices to track employee attendance. This helps employers collect real-time information about employees’ data and attendance. It also helps get rid of timesheets when integrated with the attendance management system. Thus making it extremely convenient and quick.

7. Cloud kitchen employee documentation made simple

When you run cloud kitchen, the number of employees is huge. Each of them obviously have their won Adhar card, pan cards and other documents. So, keeping physical copies of all these in an office is madness. It becomes difficult not just to store but also to retrieve these documents in time of need.

With an HRMS such as Asanify, you can or the staff members can upload their own documents and you (the admin or HR) can keep them sorted on the HRMS itself. No need for any hard copies lying around or getting lost anywhere. And, with the click of a button, you can retrieve any of those documents within seconds.

Cloud kitchen set up – Summary

summary cta

Cloud kitchen FAQs

What is a cloud kitchen?

A cloud kitchen uses a commercial kitchen space to prepare food and then deliver it to the address requested by the customer. Different from restaurants, these cloud kitchens do not have space for the customer to dine in, i.e. they do not provide the option of sitting there and eating. Takeaway is the only option in cloud kitchens.

Why is it called a cloud kitchen?

This is because, they do not have the concept of waiters, restaurant tables or any infrastructure of any sort. They only have kitchens where the food is prepared. Since they also rely on apps or their websites to take customer orders. Hence the name, cloud kitchen.

Do cloud kitchens make more money?

Say, for example, there are two eating places, one is a cloud kitchen (A) and the other a restaurant (B). While both A and B may sell the same amount of food, A will end up making more money. This is because cloud kitchens are way more profitable than regular restaurants. Factors like difference in location, rent paid, number of staff members and employees hired etc makes a huge difference in the cost structures.
As a result, A i.e. cloud kitchens definitely make more money than their dine-in restaurant counterparts!

Why do cloud kitchens fail?

Cloud kitchens fail for many reasons. Some of those reasons are,
1. They lack proper structure and standard operating procedures (SOPs)
2. Poor inventory management
3. Lack of consistency in the business
4. Poor financial planning
5. Lack of technology to back up the kitchen
6. Little to no customer interaction

What are the benefits of a cloud kitchen?

The benefits of owning a cloud kitchen over a restaurant are,
1. No real estate costs
2. Lower staff (no waiters etc.) and so lower employee salaries to be paid
3. Reduced overhead costs
4. Increased opportunity and ability for business expansion