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Ghost kitchen vs cloud kitchen – what’s the real difference? And more importantly, which one makes more money?
Restaurants everywhere are jumping aboard the delivery-only train – and for good reason.
The numbers justify the craze:
The thing is, COVID-19 changed everything. When dining rooms closed, delivery became the lifeline. Now? It’s a permanent shift in how people eat.
But here’s the thing – not all delivery-only models are created equal. Ghost kitchens and cloud kitchens each have their own profit playbooks.
In this guide, we’ll crunch the numbers behind both models. From startup costs to profit margins, we’ll show you exactly which option could work better for your bottom line.
A ghost kitchen operates purely as a delivery-only restaurant without any physical storefront.
Let’s say you want to start a pizza business. With a ghost kitchen, you’d rent kitchen space and focus solely on preparing pizzas for delivery. No tables, no waitstaff – just cooking and packaging.
These kitchens typically partner with delivery platforms like DoorDash, Uber Eats, and Grubhub. Many successful ghost kitchens operate multiple virtual brands from the same space.
Get insider info on how ghost kitchens work. Read now.
Cloud kitchens, also referred to as shared delivery kitchens or commissary kitchens, are centralized licensed commercial spaces that host multiple restaurant brands under one roof.
The focus here is on cost-sharing and operational efficiency, as restaurants can rent kitchen space and leverage shared infrastructure to streamline their delivery operations.
Ghost kitchens excel at market testing with minimal risk. The startup costs depend on the location (state) and can range anywhere from $30,000 to $100,000.
For instance, MrBeast Burger launched as a ghost kitchen and expanded to more than 150 locations in three months.
The model works best for food that travels well and maintains quality during delivery. Most successful ghost kitchens focus on a specific cuisine or dish type.
Cloud kitchens, on the other hand, are designed for scalability.
By sharing resources like kitchen equipment and staff, multiple brands can operate under one roof without the need for individual locations.
This model is particularly well-suited for established brands looking to expand their delivery services without the high costs associated with building new locations.
A cloud kitchen’s business model is also a great option for restaurateurs looking to test out new concepts or menus in a low-risk environment.
Another key difference between ghost kitchens and cloud kitchens is the way they’re owned and managed.
Ghost kitchens are often owned and operated by a single brand or restaurant group. This allows for greater control over branding, menu development, and overall operations.
For example, a passion-driven private chef could open a ghost kitchen focused solely on increasing delivery orders, both owning and managing the business.
Cloud kitchens operate under a property management model. The facility owner provides space and resources while individual brands maintain operational independence.
CloudKitchens, founded by former Uber CEO Travis Kalanick, manages facilities housing up to 30 different brands. They handle maintenance, security, and shared resources.
This setup allows restaurant owners to focus on food quality while the facility manages infrastructure.
Ghost kitchens maintain lean operations with minimal staff. A typical setup includes 3-5 kitchen staff members per shift.
The focus stays on food preparation and packaging efficiency. Most ghost kitchens optimize their layout for quick order fulfillment and delivery handoff.
Technology plays a crucial role, with order management systems coordinating multiple delivery platforms.
Cloud kitchens emphasize resource optimization through shared facilities. Each brand typically needs 2-3 dedicated staff members.
Common areas like receiving docks and washing stations serve multiple tenants. This setup reduces individual brand expenses while maintaining operational efficiency.
The shared model also enables cross-training opportunities and backup staffing solutions during peak periods.
Ghost kitchens generate revenue through multiple channels, with delivery orders being the primary source. Direct orders through branded websites typically yield 15-20% higher margins.
Third-party platforms like DoorDash and Uber Eats generate 60-70% of orders but charge 15-30% commission.
This way a successful ghost kitchen averaging $50,000 in revenue might pay $7,500-15,000 in platform fees.
Multiple brand opportunities create additional revenue streams. Additional revenue also comes from catering services and meal prep subscriptions.
These channels often generate 15-25% of total revenue with higher profit margins.
Virtual brands can also license their concepts (this applies to cloud kitchens, as well, by the way).
For example, Guy Fieri’s Flavortown Kitchen operates in 170+ locations through existing restaurant kitchens, earning licensing fees and royalties.
Brands operating in cloud kitchens focus on delivery and pickup orders. The average cloud kitchen tenant could generate $40,000-60,000 in revenue.
Many successful brands leverage multiple delivery platforms.
A Thai restaurant in a cloud kitchen might earn 40% from DoorDash, 35% from Uber Eats, and 25% from direct orders.
However, this is just a rough estimate and actual numbers can vary based on the demographic, state, and other factors.
Cross-selling opportunities exist through facility-wide promotions. For example, a dessert concept might partner with a main course provider for combo deals.
Some brands offer catering services using the shared facilities. This can add 20-30% to monthly revenue without significant additional overhead.
Ghost kitchens invest resources directly into brand-specific equipment and staff
A typical 800-square-foot ghost kitchen typically requires $50,000-100,000 in equipment investment.
Staff allocation focuses on kitchen efficiency. Most operations run with 3-4 line cooks, 1 expeditor, and 1 manager per shift.
Technology resources include POS systems ($2,000-5,000 setup), order management platforms ($200-400 monthly), and delivery tablets ($50-100 each monthly).
Brands in cloud kitchens share core infrastructure but maintain dedicated prep areas.
A typical station measures 200-300 square feet.
Equipment sharing reduces individual investment needs by 60-70%. Instead of buying a $20,000 hood system, brands pay a fraction through monthly rent.
Labor costs decrease through shared porters and dishwashers. Brands typically need only 2-3 dedicated staff members per shift.
Besides, shared storage solutions optimize inventory management. Walk-in coolers and dry storage areas serve multiple tenants efficiently.
Monthly rent for ghost kitchens ranges from $2,000-5,000 depending on location.
Utilities typically add another $500-1,000.
Equipment maintenance averages $200-400 monthly. And, annual replacement and upgrade costs run 5-10% of the initial investment.
Staff costs include:
Marketing expenses typically consume 2-5% of revenue.
Social media management ($500-1,000 monthly) and targeted ads ($1,000-2,000 monthly) drive customer acquisition.
However, these expenses can give more than 3x ROI when working with a reliable restaurant marketing agency.
Technology investments include:
Brands in cloud kitchens pay all-inclusive rates of $3,000-6,000 monthly. This covers basic utilities and shared services.
Equipment usage fees add $500-$1,000 monthly. These costs cover maintenance and replacement of shared resources.
Labor costs are lower due to shared staff for cleaning and receiving. Brands typically spend 30% of revenue on dedicated kitchen staff.
Here’s how staff cost is usually allocated:
Marketing costs average 8-12% of revenue due to shared promotional opportunities. And, platform fees remain consistent with ghost kitchens at 15-30%.
Finally, technology costs include:
Lacking visibility? The expert marketing veterans at Restaurant Growth can help put your cloud kitchen on the map.
The average profit margin for ghost kitchens in the US is usually 15%.
However, ghost kitchens can achieve profit margins ranging from 10% to 30%, depending on factors like cuisine type, location, and operational efficiency.
For example, a pizza ghost kitchen might see higher margins due to lower ingredient costs and faster preparation times compared to a sushi concept.
On average, ghost kitchens can break even within 10-18 months of operation. This quick timeline is due to lower startup costs and focused delivery operations.
For example, a ghost kitchen with $30,000 monthly revenue often nets $4,500-$7,500 in profit.
Scaling a ghost kitchen brand is relatively easy, as it doesn’t require significant investment in new physical locations. Operators can expand by renting additional kitchen space or partnering with other restaurants to prepare their menu items.
Cloud kitchen tenants can expect profit margins between 20 to 25%.
Restaurants can typically see a return on investment within 6-10 months of joining a cloud kitchen. This timeline accounts for initial setup costs and the time required to build a strong delivery presence.
Cloud kitchens offer substantial growth potential, as brands can test new markets without committing to a full restaurant buildout. Successful concepts can expand quickly by leasing space in multiple cloud kitchen facilities.
Location is crucial for ghost kitchens, as it directly impacts delivery times and customer satisfaction. Ideal locations are centrally located and easily accessible for delivery drivers.
Menu optimization is key to ghost kitchen success. Focusing on a specific cuisine or dish type helps streamline operations and maintain quality during delivery.
Efficient delivery is the backbone of a ghost kitchen. Partnering with multiple delivery platforms and using technology to manage orders can help ensure smooth operations.
Consistent branding across all touchpoints, from packaging to online presence, helps build customer trust and loyalty.
Targeted digital marketing, including social media and email campaigns, can help ghost kitchens reach their ideal customer base and drive sales.
Effective facility management is essential for cloud kitchens. This includes maintaining shared equipment, coordinating tenant schedules, and ensuring compliance with health and safety regulations.
A diverse tenant mix helps attract a wider customer base and encourages cross-promotion between brands.
Consistent service quality across all brands is crucial to maintaining the reputation of the cloud kitchen facility.
Integrated technology, such as order management systems and data analytics tools, can help optimize operations and provide valuable insights for tenants.
Offering support services, such as marketing assistance and staff training, can help tenants thrive in the competitive delivery market.
A virtual restaurant, also known as a delivery-only restaurant, is a unique concept that’s taking the food industry by storm.
It operates as an extension of an existing brick-and-mortar restaurant, but with a twist – it offers delivery-only menus that are often distinct from the dine-in offerings.
Think of them as an add-on menu that runs alongside your main restaurant operations. Your kitchen stays the same, but you’re cooking up completely different dishes for delivery.
Virtual restaurants tap into your existing kitchen’s downtime to boost revenue. For example, a pizza place might launch a virtual wing concept during slow hours.
This way you’re maximizing your kitchen’s potential without extra rent or equipment costs.
Your staff already knows the kitchen layout and basic cooking techniques. They’ll just need training on the new menu items.
Here’s a quick comparison table that highlights the key differences amongst a virtual restaurant vs ghost kitchen vs cloud kitchen:
| Feature | Ghost Kitchen | Cloud Kitchen | Virtual Restaurant |
|---|---|---|---|
|
Operational Model
|
Delivery-only, independent
|
Shared space, multi-brand
|
Extension of physical space
|
|
Cost Efficiency
|
Low setup cost
|
Shared resources, scalable
|
Moderate
|
|
Branding
|
Online-focused
|
Collaborative branding
|
Leverages existing brand
|
|
Target Audience
|
New/independent restaurateurs
|
Established/multi-brand owners
|
Existing customers + new
|
Selecting between a ghost kitchen and a cloud kitchen requires careful analysis of your goals and resources. Let’s break down the key factors that will shape your decision.
Your initial budget plays a vital role in this decision. Ghost kitchens typically need $30,000-$50,000 to start, while cloud kitchens often require $10,000-$25,000.
Why the difference?
Ghost kitchens demand a complete kitchen setup, while cloud kitchens share resources.
Brand visibility varies significantly between models.
Ghost kitchens offer more control over your brand image.
Cloud kitchens, however, benefit from shared marketing resources and established delivery partnerships.
Do you prefer working independently or collaboratively?
Ghost kitchens provide complete operational control. Cloud kitchens involve sharing space and sometimes staff with other brands.
Start by assessing your investment capability. Do you have enough capital for equipment, staff, and marketing? Ghost kitchens need less initial investment but may cost more in the long-term.
Analyze your local market opportunities. Are delivery services popular in your area? What’s the competition like? Cloud kitchens excel in dense urban areas with high delivery demand.
Consider your growth goals. Ghost kitchens offer faster-scaling potential across locations. Cloud kitchens provide built-in infrastructure but may limit expansion options.
Map out your five-year plan. Will you focus on single or multiple locations? Ghost kitchens suit rapid expansion, while cloud kitchens work better for steady growth.
Calculate your break-even point. Ghost kitchens typically break even in 10-18 months, and cloud kitchens in 6-10 months.
Evaluate your tech readiness. Cloud kitchens often include ordering systems and delivery partnerships. Ghost kitchens require setting up these systems independently.
Remember: Your choice should align with both your immediate needs and long-term vision. Take time to crunch the numbers and consider your operational preferences before deciding.
Consider these practical examples:
A new restaurateur with limited capital might choose a cloud kitchen. Starting costs are lower, and shared resources reduce operational risks.
An established restaurant expanding delivery might prefer a ghost kitchen. This maintains brand control and allows for menu experimentation.
Remember: Your choice impacts everything from daily operations to long-term scalability. Take time to evaluate each option against your specific needs and resources.
Want expert guidance on making a final decision? Our team helps restaurant owners evaluate their options and choose the right model.
So, which type of kitchen makes more money?
The answer, as with most things in the restaurant industry, is “it depends.”
Ghost kitchens can be incredibly profitable for brands that have a strong delivery presence and a menu that travels well.
Cloud kitchens, on the other hand, can be a great option for established brands looking to expand their delivery services without the high costs of building new locations.
Ultimately, the profitability of any restaurant concept depends on a wide range of factors, from menu development and pricing to marketing and operational efficiency.
Speaking of marketing, Restaurant Growth’s omnichannel marketing services help boost profit margins by 18% – all within 90 days.
We have taken the marketing burden off of 4800+ restaurant owners, helping them scale up profitably. And, we can do it for you too.
Want to learn more?
A cloud kitchen is a type of dark kitchen, so, essentially there’s no difference. A dark kitchen is a kitchen that does not have a physical location and only operates through a delivery-only approach and both cloud and ghost kitchens fall under this umbrella term.
Yes! Many successful restaurants run hybrid models to maximize their reach. You could run your main brand from a ghost kitchen while testing new concepts in a cloud kitchen.
This strategy helps minimize risks and operational costs. Just remember – each model needs its own management approach and resource allocation plan.
When weighing cloud kitchen vs ghost kitchen options for startups, cloud kitchens often win. They require less initial investment. You’ll benefit from shared resources and lower operational costs. Cloud kitchens also offer the flexibility to test multiple concepts without heavy investments. However, you’ll have less control over the facility compared to a ghost kitchen.
Absolutely! Many traditional restaurants successfully made this shift during the pandemic. Start by analyzing your delivery sales data and the most popular takeout items. Choose menu items that travel well and maintain quality during delivery. Consider running a pilot program alongside your current operations. The transition typically takes 3-6 months for full implementation.
From strategic marketing planning to seamless execution, we’ve got you covered!
