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5 Common Cloud Kitchen Mistakes That Will BANKRUPT You

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One of the most popular restaurant concepts right now is the Cloud Kitchen or Ghost Kitchen.

If the Cloud Kitchen model is a new restaurant concept for you, check out this article that covers everything you need to know about them including how you can take advantage of starting your own today.

There are lot’s of amazing benefits to starting a Cloud Kitchen over a traditional restaurant, but not a lot of people cover the potential mistakes you could make. Some of them could even cost you your whole business!

So today we’ll go over the five most common Cloud Kitchen mistakes to avoid.

1. The ‘Build it & They’ll Come’ Mentality

This is the number one mistake that new Cloud Kitchen owners fall for…

Before you actually start your Cloud Kitchen, you need to think about your concept, who your target audience is, how your menu and brand match your avatar, and whether Kitchen A is better than Kitchen B.

If you skip these things, you’ll be sitting there wondering why no one is ordering from you or why people only order from you once and never again.

Building a Cloud Kitchen, like any business, requires proper research first. You can’t just cut straight to the execution.

Since you’re creating a Cloud Kitchen, you first need to be aware of how Third-Party delivery apps function. If you don’t, you’re in big trouble since you’re 100% relying on their marketplace for customers.

Third Party Food Delivery Apps Are Search Engines

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If you stuck with the whole “build it, and they’ll come” mindset, you’ll struggle with getting orders on the third party food delivery apps. Instead, you should understand that these apps have become a giant marketplace that functions like a search engine.

What does this mean?

If you look at how these apps are structured, you’ll see that they tend to feature promos, sponsored listings, and popular cuisine categories on the home page. When you click into a category like Pizza or Japanese Food, you’ll see sponsored listings at the most popular or highly rated spots underneath it.

This format is similar to how Google searches function.

Unfortunately, this means that restaurants not listed on the first page of these delivery apps won’t get many clicks, and chances are that no one will order from you.

When was the last time you clicked on the second, third or the fourth page of a Google search?

The majority of time we click on the first three or four links that pop up. We’re not going to scroll through multiple pages. We’re getting hungry and we want to pick something fast and have it arrive as soon as possible.

This is why it’s super important to understand how these third party apps work to put yourself in a winning situation. so you’re not stuck with 0 orders, running promo after promo.

So before you build your Cloud Kitchen, make sure to do your research!

2. Bad Management and Systems

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Yes, building a Cloud Kitchen takes a ton off your shoulders when it comes to operations compared to a traditional restaurant. But that doesn’t mean you don’t have to care about making your operations as efficient as possible.

It is still up to you to manage your food processes and systems.

There are some disadvantages of Cloud Kitchens. One being, that it’s harder to create loyal customers. You rely heavily on pushing volume to drive your revenue up. So your systems MUST be efficient.

If you order a bunch of ingredients and don’t fully use them in a properly managed time, then they expire and become spoilage.

This is something that runs a lot of people into bankruptcy because they don’t manage their costs and systems properly.

If you have a menu with 10 different food items, you want to make sure that there are overlaps with ingredients so you can save on your overall food costs and decrease spoilage.

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Lower cost of goods sold (COGS) means more profit in your pockets.

Building quality systems and processes allows you to put staff in your position and have more free time.

Your goal should be to work ON your business and ON the processes that will expand the business, rather than being stuck IN the restaurant, flipping burgers or making tacos day-in-day-out.

Having proper systems and staff allows you to create that lifestyle you were longing for. This will bring you much greater success in the long term.

3. Too Many Menu Items

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Having tons of menu items should be a thing of the past… A full menu of 30 or 40 items is harmful to your business, because it causes decision paralysis.

What does this mean?

When someone has too many choices to make, they get confused and overwhelmed and just end up making safest choice, or worse ordering from another restaurant.

We don’t want to confuse or overwhelm our customers, we want them to enjoy looking at the menu and cut any buyer’s remorse.

When you have so many items on the menu, you have to make sure everything and everyone is prepared for that. That means you have ingredients for all the items, chefs know how to prepare each, and the servers have the food knowledge on all 30 items.

In the end, when you think about it, all that extra money and time is just going into the 20 dishes that aren’t picked 90% of the time.

Aim For High Margins And Simple Prep Items

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I also recommend cutting any items that don’t have high margins or take a long time to make. If you have a bunch of dishes that make you little to no profit AND take a very long time to cook up, it just slows down your business and wastes your money.

The only time you’d want a low margin item on your menu is if it is a decoy item (high priced to make other items look more worth it) or one that pushes a customer to also order a high-margin item.

Remember, if you’re relying on third party apps for your delivery and fulfillment, they take 20% to 30% of the cut.

You have to make smart choices when building your menu: high margins, low prep time, with shared ingredients.

4. Not Knowing Your Customers

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This goes back to the first mistake I pointed out…

At the end of the day, a ton of restaurateurs just make food for themselves, the food they want to cook.

They make the mistake of ignoring the feedback from customers because they think they have the perfect concept. That naysayers are just haters, and people actually love it!

But the reality is that even if you think you make the best steaks in the city, it doesn’t matter if no one orders steak because they’re just looking for something quick to grab and get back to work.

Understanding your customer profile is huge when it comes to choosing the right Cloud Kitchen concept. Doing your research and understanding what the kind of restaurants popular around you is crucial!

Once you know what your customers actually want to eat, having your own twist to the menu item is key to your success.

For example, Rebel Foods does an amazing job. In terms of research and market, they analyzed which restaurants were popular near them, which determined what Cloud Kitchen brands to build. This ensures a high demand for these items prior to opening.

5. Not Using Alternative Marketing

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Lastly, a big mistake I see new Cloud Kitchen owners making is not using alternative market acquisition, and only relying on third party food delivery apps.

You might feel like these third party apps will do all the marketing for you and that you don’t need to invest more time and money.

But what if one day these third party apps take you off their platform? All your hard work put into building your brand all goes down the drain.

This is a scary scenario to think about, but it does happen! Just like when companies are banned from Facebook Business or Twitter.

Find Ways To Own Your Customers

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It is crucial for you to consider marketing strategies that allow you to own your customers, instead of these apps.

An example would be including a card with your orders that pushes customers to sign up for your email list. Or perhaps a lead magnet with recipes – or a loyalty program.

The goal is to capture their personal and/or contact information. It will be extremely beneficial to you when marketing to these customers via email newsletters or social media.

This could be the the difference between having 0 vs 500 customers on your newsletter list to promote new items to.

To reiterate, being able to control your customers is crucial for your food concept’s success. Do not rely solely on third party apps because they could charge any fee or promote any business at any time.

This is why diversifying your business is super critical, and might make or break your success.

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There you go, five mistakes to avoid when building your Cloud Kitchen.

I know that there’s tons of advantages to building these Cloud Kitchen concepts, but it’s important to remember the downsides too, so you can prevent them from hurting your business.

If you’re in the beginning stages of starting your dream restaurant, cafe or food business and want to do your best to avoid costly mistakes or waste a ton of money…my free masterclass will give you an in-depth look at my ACE formula – the same formula that I used to build my 7 store ice cream chain and how my students were able to get more clarity in their food business. Sign up for the masterclass here.

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