Quick Summary: Are you running a not-so-profitable ghost kitchen? Or, are you considering starting a high-grosser cloud kitchen business? Then you need to prepare in advance and learn the mistakes that you should avoid to achieve your ambition faster. This article helps you get closer to the issue that most ghost kitchen startups face so you can come up with the solution to mitigate them. Let’s explore;
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The lockdown may have ended but it has changed people’s eating patterns drastically. Post 2021, home food delivery has become the norm, resulting in the emergence of countless ghost kitchen companies. Customers want piping hot food delivered to their doorstep and they have higher expectations.
In 2022, the global cloud kitchen market was approximately $60270.76 million which is expected to reach $110670.72 million by 2028 (CAGR of 10.66%). Cloud kitchens are a lucrative option because of countless benefits like lower operational costs, quick scalability and greater flexibility. Believe it or not, the trend is not going to fizzle out anytime soon.
However, ghost kitchen startups may face roadblocks like significant initial investments, stringent government regulations, unavailability of skilled workforce, and insufficient awareness among the masses.
Does that mean you should drop the idea of starting a cloud kitchen business in 2023?
No, you just need to tread carefully and avoid the most common mistakes. Keep reading to know more.
9 Most Common Mistakes to Avoid While Starting a Cloud Kitchen Business
As mentioned above, cloud kitchens have their advantages and a fair share of challenges. Ghost kitchen startups can reap rich dividends if they avoid the below mistakes and work smartly.
Failure to Develop Niche Products
There has been a sporadic rise in the number of ghost kitchens since the lockdown. How will you differentiate yourself from numerous other ghost kitchens in the market? It is crucial that your product appeals to customers and they keep ordering back for more.
Right from the taste, colors, and aroma to the packaging, your product must stand out from the competition. When people understand that what you serve is not found elsewhere, they will place more orders and recommend your food to others. Nobody likes mediocre food, so avoid being ordinary.
Weak Digital Presence
Apart from an appealing website, your cloud kitchen business must have a robust online presence on social media platforms. As per the survey, 36% of TikTok users visited or ordered food from a business after watching a video on TikTok. Is your target audience on Facebook, TikTok, Instagram, or other platforms? Create robust digital marketing strategies and mark your effective presence across these channels. If you lack resources, you can think of starting Instagram marketing and gradually start with others once you start to see the benefits.
Moreover, you should also tie up with food delivery apps and offer attractive discounts to entice customers. If your business is not online, you are already at a disadvantage. Remember that.
Even if your ghost kitchen restaurant does not have a physical location, your kitchen staff needs the right equipment to create exotic dishes. The key lies in not exceeding your budget while buying the right equipment to meet customer requirements and industry standards. Cloud kitchens that fail to strike the perfect balance will have to face tough times ahead.
Inept Financial Planning
Starting a ghost kitchen is cost-effective compared to conventional restaurants but you still need proper planning and strategies. Starting from hiring the right staff, and marketing, to packaging, you need to anticipate the costs and plan accordingly. Ask yourself the following questions while setting aside money for your ghost kitchen startup.
Will you buy, rent or share space?
How many chefs, assistant chefs, managers, and delivery staff do you need?
Have you chalked out your pricing strategy while considering the cost of overheads and inventory?
Did you set aside a certain amount for marketing activities like social media marketing, website development, app development, and others?
Understand your business type, industry requirements, and other factors while conducting financial planning for your ghost kitchen. Reserve an additional amount for emergency situations. Inefficient financial planning can lead to operational disasters later. So, plan carefully and in advance.
No 2-Way Customer Communication
Customer is king, never forget that. Unless you have repeat customers, new customers and referrals, your ghost kitchen business won’t last long. Acknowledge customer feedback and work on your drawbacks.
Be it social media or feedback conveyed to your delivery executive, analyze it and make changes if necessary. Share information about your social media handles along with your email address. If your business has an app, include an option for customers to share their feedback.
Even if customers share negative feedback, communicate with them and assure them that you will work on your flaws.
Not Embracing Technology
Whether it is conventional kitchens or ghost kitchen companies, ensuring streamlined operations has always been challenging (especially after the Covid-19 pandemic). The main challenge they face is managing restaurant processes and operations due to staff shortages and other issues. There is no need for fancy gadgets but a few useful apps and tools like the ones below.
POS System: Monitor orders, accept payments, facilitate deliveries, store and analyze customer data, etc with a POS system.
Restaurant SaaS Technology: Online food ordering system is the need of the hour, whether you are running a ghost kitchen or a meal prep business. You cannot be entirely dependent on third-party food delivery, you need your own cloud kitchen ordering system to build stronger relationships with your customers. A leased and integrated restaurant SaaS technology allows ghost kitchens to manage payroll, scheduling, and online ordering seamlessly.
Food Ordering Application: Don’t think of a mobile app as an unnecessary investment. Teaming up with food delivery partners may be expensive for ghost kitchen startups. Developing an app for your business may be a more economical option plus it also improves your brand image as customers will instantly identify with your name, logo and other distinguishing factors.
Additionally, you may need technology or tools to manage orders pouring in from various channels.
Understand that the cost of ingredients has gone up significantly since 2020. It is relatively less expensive to start a ghost kitchen but incorrect food costing can be disastrous. Entrepreneurs must implement clearly defined processes to ensure optimal portion control and inventory management while avoiding wastage.
Apart from the POS system, it is recommended to implement a robust costing system that tracks food cost per item in the ghost kitchen menu. Analytics can shed light on less popular menu items. Businesses can use such information to change menu items, change ingredients and make other changes to increase profitability.
Maintaining consistency in ghost kitchen operations is of utmost importance, but it can be challenging. The ideal way to maintain consistency is to create a base kitchen. In a base kitchen system, vendors deliver ingredients to the base kitchen where your staff processes them and sends them to the cloud kitchens according to the demand on a particular day.
Establishing proper consistency while serving customers will enhance your reputation and boost sales.
Poor Menu Pricing Strategies
At first, ghost kitchen startups fail to create effective menus with compelling price strategies. They may find it hard to make break even, especially when they team up with third-party delivery partners (who demand fat commission). Hence, it is important that your ghost kitchen business has the right menu pricing strategies in place to ensure long-term sustainability and growth.
Keep in mind the below factors while creating a menu and developing price strategies for each menu item.
Demand for each menu item
Cost of ingredients
Less popular menu items
Seasonal changes
Depending on the situation, you should change your pricing strategy.
Summing Up: How Foodiv Makes a Difference
Starting a ghost kitchen comes with its fair share of challenges. Pros include substantial cost savings, greater efficiency, opportunities for experimentation, flexible menus, and availability of valuable customer data. There are risks and challenges too, but the benefits far outweigh the risks, albeit effective planning, process, and management in place are needed.
Little mistakes like inaccurate costing, late delivery, and lack of consistency can undo all the hard work. In the absence of face-to-face customer contact, the only way you can make a positive impact is with your services. There is no room for error. Foodiv helps. It helps all new and established restaurants, ghost kitchens and cloud kitchen startups of all sizes run their business seamlessly by providing a quality SaaS-based food ordering system.
Follow the 9 tips above and your cloud kitchen business, if you want to keep your restaurant profitable. You can also contact us if you want to get into more details, be it strategies or technology systems.
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