Running a Virtual Kitchen in a Ghost Kitchen: The Numbers You Need to Know
The rise of cloud kitchens, also known as ghost kitchens or dark kitchens, has transformed the food delivery industry. Running a virtual kitchen within a cloud kitchen can be a lucrative business, but success depends heavily on understanding the numbers involved and if there is enough density in your area to support it. Here’s a breakdown of key financial considerations and performance metrics to keep in mind when operating a virtual kitchen.
1. Startup Costs
Setting up a virtual kitchen within a cloud kitchen model significantly reduces capital expenditure compared to a traditional restaurant. Here are the key expenses:
Initial Deposit & Lease Fees: $3,000 - $10,000 (varies by location, layout and provider)
Kitchen Equipment & Setup: $10,000 - $50,000 (depending on menu complexity)
Licenses & Permits: $1,000 - $5,000 (business license, health permits, etc.)
Technology & Software: $2,000 - $5,000 (POS system, online ordering platforms, and marketing tools)
Branding & Marketing: $5,000 - $15,000 (logo, packaging, digital marketing, and social media ads)
2. Recurring Expenses
Once operational, these are the key ongoing costs:
Rent & Utilities: $2,000 - $6,000 per month
Labor Costs: $3,000 - $10,000 per month (depending on staff size)
Ingredients & Food Costs: 30-35% of revenue
Delivery Commissions: 15-30% per order (for third-party platforms like UberEats, DoorDash, and Grubhub)
Marketing & Promotions: 5-10% of revenue
Software Subscriptions: $300 - $1,500 per month (order management, analytics, CRM, etc.)
3. Revenue & Profit Margins
A virtual kitchen’s revenue depends on multiple factors, including menu pricing, order volume, and marketing efficiency.
Average Order Value (AOV): $15 - $30 per order
Daily Orders: 50 - 300+ (depends on demand and location)
Monthly Revenue: $30,000 - $200,000+
Gross Profit Margin: 60-70% (before rent, labor, and marketing)
Net Profit Margin: 10-25%
4. Break-Even Analysis
To calculate the break-even point, use this formula:
For example:
If fixed costs are $15,000 per month
If AOV is $20 and food cost is 35% ($7 per order),
Contribution margin per order = $20 - $7 = $13
Break-even point = $15,000 / $13 ≈ 1,154 orders per month (~39 orders per day)
5. Key Performance Indicators (KPIs)
Monitoring KPIs helps track efficiency and profitability. Important KPIs include:
Customer Acquisition Cost (CAC): How much you spend to get a new customer
Customer Lifetime Value (CLV): Total revenue expected from one customer over time
Order Fulfillment Time: Speed of preparing and delivering food
Food Waste Percentage: Keeping food waste below 5% helps control costs
Repeat Customer Rate: Ideally above 30% to build a loyal customer base
Conclusion
Wingman Kitchens has been talking potential clients out of starting this type of concept for years. It has been very trendy since 2020 when everyone was forced to stay at home. Running a virtual kitchen within a cloud kitchen is a numbers game. While the initial investment is lower than a traditional restaurant, tight control over food costs, delivery fees, and marketing spend is crucial to profitability. The reality is in hyper dense cities this model can work, but that is only in a few select cities. You are competing against some of the largest food brand that are always going to show up above you on the apps and have much more brand recognition. 40 orders per a day may seem like nothing, but you are going against thousands of other concepts on these apps. This is also just to break even and you want to actually make money! Please please please make sure you are understanding your numbers and maybe consider adding catering into your plan. It is our opinion that virtual concepts can only work in spread out cities, like Austin and Houston, if you already have a brick & mortar where you are utilizing existing staff & ingredients and/or you are operating multiple known virtual brands at the same time.
If you aren't ready to take a big swing and add all of these fixed expenses, then a shared kitchen space like Wingman Kitchens might be a good fit.
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