The F&B industry in Singapore has experienced drastic changes over the past few years due to the global pandemic. Restaurant owners are finding new, cost-effective ways to keep their businesses running and searching for other alternatives to maximise profits. One of the most popular avenues restaurateurs are venturing down is opening CloudKitchens® delivery kitchens.
With an increasing number of CloudKitchens® delivery kitchen providers like Smart City Kitchens popping up in Singapore and worldwide, there are more facilities and opportunities available for F&B businesses to grow and tap into new markets that are incredibly lucrative.
While this sounds enticing and exciting, you might be wondering how much it costs to start up a CloudKitchens® delivery kitchen in Singapore. Don’t fret because we, at Smart City Kitchens, have got covered with all the details you need to know.
The main costs of a CloudKitchens® delivery kitchen
There are multiple elements that make up the main costs associated with opening a CloudKitchens® delivery kitchen, whether in Singapore or anywhere else in the world. Be sure to keep all these in mind when preparing your business plan and assessing the finances you will need to hit the ground running.
- The kitchen space
- What equipment is needed?
- The number of staff
- Marketing needs
- Food technology software
- Your inventory
- Insurance
- Business licences and permits
1. The kitchen space
When it comes to choosing the kitchen unit that is right for your business, you have to decide whether you are going to do it on your own or utilise the services of a CloudKitchens® delivery kitchen supplier like Smart City Kitchens. For newcomers in the F&B industry, it is recommended that they opt for the latter as the facilities these providers have are strategically located in districts where there are a lot of residents, students or office workers, which equates to a large number of delivery orders on a daily basis. Before moving into any kitchen space, do your research on the area and ensure there is strong demand for the type of cuisine you specialise in!
It is also imperative to know the size of the CloudKitchens® delivery kitchen you want, along with how much it will cost. Our kitchens in Singapore are 165 square feet on average and require an investment of just S$10,000. This is significantly less than traditional brick-and-mortar restaurants as they are approximately 1,000 square feet on average and need S$200,000 on average to start up.
2. What equipment is needed?
One of the main costs of opening a CloudKitchens® delivery kitchen is the equipment you will need to purchase. From the basics such as pots, pans and refrigerators to specialist equipment required when making certain types of dishes, the list goes on and on. However, it is essential to have a budget in mind when buying all the apparatus you need to prepare the delicious food you will serve to your customers. This way, you won’t go overboard and overstock your kitchen space.
Our kitchens come equipped with the basics and we provide utilities as well, but the amount you pay for gas, electric, water, etc., will depend on how often you are making food. In addition to this, you will also need a tablet to keep track of all the delivery orders that come your way. To streamline this, our app lets you easily view all the orders placed through multiple food delivery companies on a single tablet.
3. The number of staff
To make delectable food, you need top-notch employees who know their craft. In CloudKitchens® delivery kitchens, your staff costs will be minimal as you will likely have to hire 2 to 3 people. This is significantly lower than traditional restaurants, which need about 10 people. It’s recommended that you start off with a small workforce, but as you get increasingly busy, you can assess whether you need to bring in more people to cope with the surge in demand.
4. Marketing needs
Many restaurateurs may forget to add this cost to their list when moving into a CloudKitchens® delivery kitchen, but it is important since people need to know who you are and what makes your eatery so special. Since there are so many channels you can use to market your business, it’s easier to break it down into bite-sized chunks.
Logo – Whether you create this yourself or get a company or freelancer to do it, be sure that it accurately represents your brand as it could end up being one of your establishment’s defining features.
Website – Your customers need to be able to find you and engage with your business online, so a website is a must. Make sure you include an online menu, an origin story and contact information. Platforms like WordPress and Wix are great for creating simple and functional websites, but you can opt to have someone build one for you. It is also useful to buy a domain name so that your URL looks professional.
Social media accounts – These can be created for free across the multiple platforms that people use. However, you will need to invest in boosting posts and creating ads so that a larger number of people start to know your restaurant.
Photography – You might think that this is easy and just requires a camera or your phone. However, if you really want to entice people to order from your business, it’s best to hire a professional photographer to take care of this aspect as they will know how to make your food stand out.
Digital advertising – Whether it’s promoting your brand through Google or food delivery apps like FoodPanda, GrabFood or Deliveroo, it is essential to factor in the cost of digital advertising when launching your CloudKitchens® delivery kitchen.
5. Food technology software
This could be one of the main costs you incur as you will need a top-notch POS system and food technology software to keep your CloudKitchens® delivery kitchen running smoothly. At Smart City Kitchens’ facilities, we provide industry-leading food technology that allows you to keep a close eye on all aspects of your business. From managing orders to getting accurate reports and keeping track of which items on your menu are your bestsellers, our software can do it all.
6. Your inventory
Buying fresh and top-quality ingredients will be a cost you have to pay close attention to as you need to have a proper budget in place so that you can maximise your profits for every dish you put on your menu. It’s good practice to know your customers’ habits, so that you can ensure none of your inventory goes to waste and that you don’t overbuy anything.
7. Insurance
Insurance is a cost no business can escape from. Whether you operate out of a CloudKitchens® delivery kitchen or have a brick-and-mortar location, the law states that you must have insurance. You will most likely need employer insurance and public liability insurance to protect yourself in instances such as employee accidents, workplace mishaps, or customers who try to come after you if they eat your food and get sick. Smart City Kitchens goes the extra mile when it comes to our kitchen units as the pricing includes insurance to provide you with protection should an unexpected accident occur.
8. Business licences and permits
All businesses in Singapore will require a licence to operate, so this is a cost your CloudKitchens® delivery kitchen has to bear. You will also need to do your homework when it comes to any other permits you may need. It is essential to do this step properly as the last thing you want is to be shut down for not having the correct licences from the Singaporean government. If you are in need of further information, our blog delves deeper into this topic.
Other costs to keep in mind
1. Marketing strategy
Once your food business starts to gain traction, you will need to do some marketing to ensure you continue growing. This can be achieved through numerous means, including:
- Developing a social media plan
- Working together with influencers
- Creating a loyalty program for repeat customers
- Providing rewards for customer referrals
- Promotional activities
- Targeted ad campaigns
2. Data analysis
This will be essential when it comes to getting to know your target customers. You will need to find out their pain points and why they might be choosing your competitors over your eatery. In order to do this efficiently, it is worth hiring a freelancer or marketing agency. However, this could be quite a hefty cost for CloudKitchens® delivery kitchens, so it is worth taking a step back and thinking about how big of a priority this is.
In a nutshell, data analysis can help you do the following:
- Learn more about your patrons and why they are not ordering from you
- Gives you clear insight into what type of ad campaigns and offers work best
- Lets you know which dishes on your menu are really hitting the spot
Ready to launch your own CloudKitchens® delivery kitchen?
Now that you know the costs associated with operating out of a CloudKitchens® delivery kitchen, you can clearly see that it is significantly cheaper than opening a traditional restaurant. On top of that, CloudKitchens® delivery kitchens break even in 6 months in Singapore, while regular eateries take about 4 years to reach that break-even point.
Interested in venturing on your CloudKitchens® delivery kitchen adventure today? Fill out the form below and get started right now!
