How Much Does it Cost to Open a Ghost Kitchen? [Ghost Kitchen Startup Costs]
How Much Does it Cost to Open a Ghost Kitchen?
Starting a ghost kitchen is a little different than opening a traditional restaurant. Ghost kitchens and other delivery-only concepts exclusively interact with customers online. This means that startup costs often exclude the costs of equipping a front-of-house space. Yet there are additional costs for marketing, publicity, and third-party delivery that can be expected.
Ghost kitchens are capitalizing on the increasing demand for restaurant-quality delivery. Starting a delivery-only restaurant concept isn’t spooky, and doesn’t require arcane knowledge – this guide breaks down all the costs and investments associated with starting a ghost kitchen.
Building a sustainable delivery-only restaurant concept takes planning, innovation, and dedication. Luckily, we provide a restaurant opening calculator to help you accurately forecast your concept’s startup costs.
Average Delivery-Only Restaurant Startup Costs
Average startup costs for such a cutting-edge business model are difficult to predict, and are likely to change rapidly in the near future. That said, considering similar concepts like food trucks allows us to get a close estimate.
The startup costs for a delivery-only restaurant concept can range from $100,000 - $2M, depending on location, assets, equipment, and the size and structure of your business model.
Average Ghost Kitchen Startup Costs
The average cost to open a ghost kitchen that operates from a single location is between $20,000 and $60,000. Ghost kitchens incur lower-than-average startup costs because of a few factors.
They save on the costs of training staff and buying equipment for a front-of-house space. Additionally, many delivery-only concepts run focused menus that can be prepped with minimal equipment in almost any space, creating myriad opportunities to save.
It’s important to factor the right operational costs into your ghost kitchen's business plan. Startup costs will get your business up and running, but you’ll also need investments and funding.
The Costs of Opening a Ghost Kitchen by Square Foot
Whether you lease a shared kitchen or invest in a dark kitchen to run your ghost kitchen concept, you can expect to save on rent, mortgage, or building costs per square foot when compared to traditional restaurants.
Constructing a commercial kitchen costs around $300-$800 per square foot, depending heavily on location. Real estate is more expensive in densely-populated areas which will give your kitchen access to a higher volume of customers. Budget appropriately for the space you’ll need, and plan realistically for price ranges in your area. Restaurants on the West Coast in the North Eastern U.S. will see prices at the higher end of the range.
To get a clearer idea of how all your local costs will add up, use the Restaurant Opening Calculator to estimate what it could cost you to open a ghost kitchen.
Restaurant Opening Calculator
This calculator lays out some of the fundamental financial costs of opening a restaurant, so you can start planning and bring your dream restaurant to life.
Startup Costs for a New Ghost Kitchen Concept
When preparing to open your ghost kitchen, build detailed plans for the space and equipment you’ll need and the financing that will power it all. Consider the upfront costs, what you can finance, and how you’ll cover all the costs when they come due.
Delivery-only establishments have only slightly bigger margins than traditional restaurants and are on a similar timeline to profitability – most food service businesses take 1-3 years to become profitable. So play the long game and plan for a sustainable delivery-only business model that will build success from increasing demand.
Ghost Kitchen Expense Breakdown
Ghost kitchens aren’t funded with ghost money – use this checklist to build a detailed budget of the startup costs for your business plan.
Utilities for restaurants that are less than 4,000 square feet—which your ghost kitchen is very likely to be—will cost around $1,000-$2,000 per month. This included gas, internet, electricity, and water for an independent delivery-only kitchen. But ghost kitchen concepts that operate out of shared kitchen spaces might save on utility costs, since they’re spread across the rent of several businesses.
Location is critical in determining costs. That’s because it determines which customers your business can access – delivery drivers are only profitable within a limited range.
To find the best location for your new ghost kitchen, consider if you want to lease, buy, or build. Starting out in shared kitchen spaces can help reduce the costs of rent, utilities, and equipment while you test your menu and concept. On the other hand, dark kitchens can help proven concepts get started quickly.
The equipment for your ghost kitchen concept is determined by the needs of your business and menu. One thing to keep in mind is that to maximize the profitability of these innovative businesses, ghost kitchens concepts often keep their menus simple.
A simple menu can be produced with less equipment, which requires less investment to get kitchens up and operating. Simple, affordable, and accessible equipment has the added benefit of making it easier for investors to help you expand into new markets.
4. Marketing and Branding
Marketing and publicity for restaurants always require a lot of creativity, but spreading the word about a restaurant exclusively online presents a unique set of challenges. While some traditional restaurants can get away with zero marketing, ghost kitchens and other delivery-only concepts will have to invest to get noticed online, on social media, and on third-party delivery app marketplaces.
Potential marketing costs include:
Public relations and email marketing
Branded merchandise (invaluable word-of-mouth marketing is hard to capture for online brands)
Digital ads and promotions
A sophisticated website and coherent brand identity
An aggressive social media presence to capture and keep attention
Marketing costs usually fall between 3% - 6% of a restaurant’s sales and it’s important to keep track of spending so that loyalty programs and competition for likes and retweets don’t eat all of your profits.
5. Startup Capital and Contingency Funds
Startup cost estimates include the savings, personal loans, or lines of credit that are necessary to ensure that your business becomes profitable. Keeping enough liquid funds to pay for labor, food, paper goods, and delivery services is a crucial part of starting a successful ghost kitchen.
Read our complete guide to Restaurant Financing and Loans to learn more about the financing available to new restaurant owners, including Small Business Association (SBA) loans and securing personal investors.
Even the technology required for ghost kitchens is unique – a restaurant management system that fires online orders to kitchen printers is a must-have for high-volume ghost kitchens. Ghost kitchen owners can choose restaurant management software for features like inventory management and labor analytics rather than the point-of-sale.
7. Food Costs
Most restaurants can expect from 28% to 35% of their total sales to be spent on food, depending on prime costs - there’s always a balance between labor, food cost, equipment, and delivery. Most ghost kitchens operate simple, focused menus to keep their prime costs down.
It’s important to plan for supply chain issues and potential product delays – how will you access the inventory you need if the normal supply is interrupted? Keep as much stock as possible on hand and design your menu to withstand both unforeseen supply chain delays and seasonal fluctuations.
8. Organizational Costs
Organizational costs include staffing, management, franchise fees, and the logistics of producing and delivering restaurant-quality recipes. About 30% of a restaurant’s revenue is spent on organizational costs, including the day-to-day labor of cooks, managers, and delivery.
Before opening, be sure to research the market to determine what works and what doesn’t. Hire kitchen managers and marketing experts that understand your vision and are willing to engage with the unique challenges of the delivery-only sector.
9. Franchise Fees
Starting a new concept can be profitable, but most require a significant initial investment. To mitigate some of the risks, you might invest in a tested ghost kitchen concept and budget for their franchise fees.
WowBao is an example of a business that franchises its brand to business owners who have the means to set up a dark kitchen, or that have the kitchen space to produce their menu. It’s a clever way for restauranteurs to diversify their portfolios or for new investors to start with a tested concept.
Ready to open a Ghost Kitchen?
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The Complete Guide to Restaurant Financing and Loans
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