Cloud Kitchen Setup Package with GST, FSSAI & Menu Setup

How Much Does It Cost To Set Up A Cloud Kitchen?

Setup cost depends on a variety of factors including the cuisine, the level of tech infra, location and many more. However, I have listed some of the common expenses related to starting a cloud kitchen business in India.

Machinery & Equipment

Let’s talk about the spine of any kitchen, the machinery and equipment needed. Although the equipment completely depends on your cuisine, there are some common pieces of equipment that you need.

A basic burner and table setup with Indian Burner, Chinese Burner and a Stainless Steel table will cost you around Rs 60,000 to Rs 70,000. If you can source 2nd hand items, you could save a lot of money on the equipment.

If you are starting a pizzeria or bakery, electric ovens start from somewhere Rs 12,000 and go up to lakhs deepening on the size and quality.

If you are looking for tandoor, gas tandoor starts from Rs 5,000 and can go up depending on the size.

You can make a list of required equipment and search on YouTube to get some information about the prices.

Rent and Security Deposit

You should rent a space that is cheap. You can rent at the topmost floor of a commercial building or the backside of a complex. And don’t find spaces in areas with high rents, as you will eventually deliver the food to the customer’s doorstep. And that can be done from anywhere. The rent for these spaces are cheaper as compared to a frontline shop.

You can easily start a cloud kitchen with 100-200 sq. ft. space and in tier II or tier III cities, these spaces are available for Rs 8,000 – Rs 10,000 a month. Security deposits are around Rs 50,000 to Rs 1,00,000.

Rent could be higher in metro cities.

Since you don’t expect customers to visit you, there’s no need to invest too much in decorating the space. Basic setup will get you going.

A lot of entrepreneurs usually start right from their home kitchen which is good. But, if you are serious about the business, it’s advisable to rent a proper space as you might need to shift from a home kitchen to a commercial kitchen at some point.

But if you are tight on budget, you can always start from your home. If you are starting from home, at least convert it to a commercial property and apply for FSSAI, Trade License and Commercial Electrical Connection.

Pro Advice – Always lease out the space for at least 2 years. It’s advisable to lease out for 5 years instead of renting for 11 months. There are a lot of examples when a cloud kitchen becomes a hit in the market, the landlord starts asking for exorbitant rent. If they did not agree, the landlord refused to renew the rent agreement. To be on a safe side, lease out the space for at least 2 years. Yes, the stamp duty may seem higher at the beginning, but if you think of the long run, you will be on the safe side as finding a new space and shifting an already established kitchen is way more expensive than leasing out a space.

So the total cost for this would be Rs 1,00,000 as security deposit including 1 month of rent.

Government Licenses

I have already explained in detail about the licenses required to start a cloud kitchen. I am considering that you are going to do everything legally. So the cost would be as follows:

FSSAI License (with agent charges) – Rs 2,000
Trademark (with attorney charges) – Rs 6,000
Company Formation (Partnership firm) – Rs 2,000
Municipal Trade License – Rs 1,000
Gas Connection (with security) – Rs 5,000
Electricity Connection (with security) – Rs 20,000
Fire NOC – Rs 1,000
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Grand Total for Licenses – Rs 37,000

Let’s round it off to Rs 40,000.

Marketing & Media

Most of the cloud kitchen owners think that they will start marketing after starting their cloud kitchen. But that’s not a good decision.

It’s advisable to market before launch.

The best way to do so is run ads on Facebook, Instagram and YouTube and tell users that a new cloud kitchen is opening soon and let them register their interest via a form where you capture their name, email and phone number.

But why will they give their phone number and other details?

Well, for something in return. You can promise them a discount coupon which they can use when you launch. Or a freebie item. There’s no limit to ideas here. Be creative and thoughtful to create an irresistible offer.

I advise you to do initial marketing even before investing money on equipment. I will tell you why.

Doing this will help you with two things.

Firstly, you will find out if your cuisine/food items are in demand or not. If people want the items that you want to sell, at least 2-4% of them will register their interest in exchange for a discount coupon or offer. If you find out that no one is interested, this may be a signal that the demand of that cuisine is not good enough to build a business around it. You can switch to another cuisine. And if you haven’t bought any equipment, it’s easy to switch your cuisine.

Secondly, if the demand is good, you already have a set of 100-200 customers that are willing to order when launched. This will boost your rankings and ratings on Zomato and Swiggy as well as there will not be any wastage as you already know how many customers to expect.

You can always follow up with each and every customer over a phone call on the day of your launch and remind them about the offer. At least 100-120 of them will order. Don’t send WhatsApp or text messages. Be personal. Call them and inform them.

Now it all depends on the ordering experience which includes food quality, value for money, delivery time, and packaging. If all goes well, they will eventually repeat as well as tell other potential customers about your restaurant.

So what should be the marketing budget?

You should invest at least Rs 10,000 for initial marketing.

How to create graphics and run ads?

You can use tools like Canva for designing banners and posters for your ads. Or you could hire a graphics designer (recommended).

Let’s assume you hire a graphics designer. That would be another Rs 1,000.

Raw Materials

While you can buy raw materials everyday, if you have money, it’s advisable to buy for the whole month in bulk to save costs.

However, that could be done after starting your business.

Initially if you don’t have a large budget, you can buy raw materials for 2-3 days worth of business. You can gradually increase the budget after you understand the demand.

I personally at my business use a buying cost vs storage cost analysis strategy to analyze how much to buy and when to buy. If you want to learn more about this strategy, you can watch this youtube video. But I doubt you will need this in the beginning. You need to analyze your sales for this strategy to work. I suggest you should watch this after 1 month of starting your cloud kitchen business.

For starting your business, you should keep aside at least Rs 20,000 for buying raw materials in the beginning because there may be days where your sales may not be good and the prepared materials are wasted but you have to buy raw materials again for the next day to keep your business up and running.

Set aside some budget and don’t touch it for anything else than buying raw materials. It should only be used for buying raw materials.

After starting the business, you should record your sales and expenses daily and keep aside the profit (or use a software to do that for you). The remaining amount will be used to buy raw materials again.

The Rs 20,000 budget should only be touched if you face loss or cash flow crunch.

Another important aspect is that Zomato and Swiggy pay weekly.

The business you do on Zomato and Swiggy from Monday to Sunday will be paid on next Wednesday.

So you need to keep buying raw materials for Monday, Tuesday, Wednesday, Thursday, Friday, Saturday, Sunday, Next Monday, Next Tuesday and Next Wednesday i.e. 10 days before you receive a payment from Zomato or Swiggy.

So, the final budget would be Rs 20,000.

Pro Advice – Every single rupee counts when it comes to buying raw materials. Take your time to find the best suppliers in your area. Negotiate with them. A lot of cloud kitchen owners think that saving Rs 1 per kg on an item that is consumed only 20 kg in a month will not help them. They think that they can save only Rs 20 in the whole month. But it’s not about the savings. It’s about building a cost cutting mindset. Be strict about that. Even if you can save Rs 20, save it. This habit will help you save lakhs of rupees in the long run.

Packaging Materials

Packaging is important. Way too important than you imagine.

Food is not just what you eat. Food taps on three senses i.e. eyes, nose and tongue. The taste of the food and the experience of your chef may only tap the taste buds of your customers.

But what about the remaining two?

A good packaging improves the overall presentation and thus the ordering experience is positively impacted. Consider it an investment to build brand recall value.

You might already know that Dominos provides free oregano and chili flakes sachets to push its brand into customer’s minds. The whole game is about brand recall.

The more the recall value, the more chances are that you will have repeat customers. And repeat customers are the only ones that can make your cloud kitchen business a success.

The cost for food packaging will be somewhere between Rs 40,000 to Rs 60,000 depending on the quantity and quality. The more the quantity, the cheaper you get it.

I recommend that you use white GSM board with lamination as it appears more hygienic and presentable. However, you can also go with gray boards. But ensure to get it laminated. The average cost of a Roll Box (8X8X2.5) is somewhere around Rs 6 if you order around 5,000 pieces. However, the prices always fluctuate.

You can find some good suppliers locally or search on IndiaMart.

Reserve Surplus

The reserve surplus will be used to cover your costs in the initial days of business. Some businesses start making money within 10 days of launch and some might take 3 months to earn profits. However, you should not give up.

Even if you suffer losses in the first month, you have to pay the rent, pay salaries, pay the bills and keep the business up and running.

Don’t lose hope.

And to be motivated and confident, you should keep a reserve surplus to cover your losses. Its advisable to set a budget aside that could help your business run for at least 3 months. The best is to keep a reserve surplus for 6 months.

But, I know that you might not be having a lot of money.

A 3 months surplus would be good.

But how much?

Let’s break it down.

If you hire one chef and one helping staff (minimum two staff is necessary unless you want to become the helper), the salary for the chef would be around Rs 25,000 per month and for the helper would be around Rs 10,000 per month.

It may be higher in metro cities.

The salary for one month would around Rs 35,000

The electricity bill would be around Rs 5,000 per month and the rent would be around Rs 10,000 per month.

That’s Rs 40,000 per month. Add Rs 5000 per month as miscellaneous cost (needed for cleaning, repairs etc.).

That’s Rs 45,000 per month. For three months it would be Rs 1,35,000.

That’s your surplus. Rs 1,00,000 would also work as it’s unnatural that you will not sell anything for continuous three months (what’s the point in doing business then).

Don’t assume that you have to pay Rs 45,000 per month from your pocket for three months. For some month you may bear Rs 5000 loss in another month you might earn Rs 5000. The value will fluctuate. This reserve surplus is just emergency money.

If you follow my guidelines and use your mind well, you may never need to use the surplus fund as you might start making profits from the first month itself.

TOTAL EXPENDITURE

Machinery & Equipment – Rs 1 lakh
Rent & Security – Rs 1 lakh
Government Licenses – Rs 40,000
Marketing & Media – Rs 10,000
Raw Materials – Rs 20,000
Packaging Materials – Rs 50,000
Reserve Surplus – Rs 1 lakh
Tech Infrastructure – Rs 50,000
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TOTAL – Rs 4.7 lakh

So, the budget for starting a cloud kitchen would somewhere be between Rs 5 lakh to Rs 6 lakh maximum. It could go up or down depending on the location and cuisine.