Dark Kitchen – How Much Money Can You really Make?
Update October 2024 -
I talk to tons of dark kitchen founders on Startupmag. Money is a key topic of course, but the conversations seem to go from “how much money can you make?” to “how do you find the money to start?”.
This article already goes into detail about money making side of things, so I thought I’d add a section about where to find dark kitchen investors to help you fund your business.
Update May 2023 -
The food business world is changing again with food inflation and soaring energy bills. I thought it would be a good timing to revisit some dark kitchens and update this blog post.
I visited a few dark kitchens in London over the last week.
Dark kitchen unit 1 was a dark kitchen borderline takeaway with a trap window that gives onto the street. The kitchen was fully renovated in 2 years ago so extractor fans and electrics are in really good condition. The kitchen was right in the heart of south east London, in between London Bridge and Streatham which is a perfect location for a dark kitchen.
- Rent : £1,000 /month
- Bills estimate: £1,000/month
- Premium: £30,000
That's for the lease. But to start off you’ll need to add your basic dark kitchen equipment.
The following numbers are estimates based on a dark kitchen only selling burgers and fries.
Choose your main cooking station:
- Cooktop Open Burners x8 : £2,500 - £3,000
- Plate griddle: £2,500
- Chargrill with stand (1080 x 900 x 812) : £2,500 - £3,000
- Basic Contact grill : £1000
+
- Upright fridge: £1,200
- Sinks: £600
- Prep station - £400-600
Installation £1000 for 2 people for a day.
If you also need extractor fans, oder control, noise control, you could add an extra £10,000 to this.
Dark kitchen unit 2 was a kitchen/cafe in a community centre. This was an unusual one with a brilliant and fully equipped kitchen perfect for dark kitchen, but also being in the heart of a community centre it works perfectly for a day cafe. This would double your income stream.
- Rent: £1250/month
- Service charge: £1235/month (including electrics, gaz, waste)
- Premium: none.
Dark kitchen unit 3 - I got an update a dark kitchen provider. Rent these days for their South London branch is £1500/month for a small unit. The advantage here is always the waiting room for ubereats/deliveroo drivers. With no need to bring the food to the driver, this means that you could need 1 less staff in your kitchen. They also mentioned that they now have a giant tablet in the front of the building to allow walkings to place orders directly to any of their tenants. That’s pretty awesome.
On this most recent hunt, I feel like rent has dropped slightly compare to 1 year ago. And premiums are clearly going down. I’m still seeing fish and chip shops trying to sell for over £200K but I can’t really see how these numbers will work out for potential buyers. Especially with the recent rise in fish prices.
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Update October 2022 -
Dark kitchen, ghost kitchen, virtual kitchen.. so many names for what is basically a delivery only kitchen. The low setup cost compared to traditional restaurants has made this a growing trend for food business entrepreneurs.
But you have to be careful here, starting a dark kitchen can mean 3 things with 3 very distinct business models:
Dark kitchen as a food brand
This is a real startup business. You create a new food menu and you then promote this menu on food delivery apps such as Deliveroo and Uber eats. As soon as an order is placed, your cloud kitchen makes the food and the delivery people deliver.
That’s it! You do not need a front of house, high street rent prices and you don’t need to decorate your restaurant. This is about efficient food making and marketing.
Rebelfoods raised 125M$ this summer just to build dark kitchen brands.
An extension to your existing restaurant
You already have a restaurant and you’d like to grow by getting into the food delivery business. Using your existing kitchen to cater for extra online orders can mess with your setup. It’s also not great having delivery people constantly walking in and out of your restaurant while clients are eating.
A virtual kitchen will enable you to make and deliver your restaurant’s food off site. It could also allow you to extend your brand and reach to other areas in town.
Dark kitchen as a property investment
In this case, you lease or buy a warehouse. You then split the building into fully kitted professional kitchens and you then rent these kitchens out to food brands. These brands can be pure dark kitchens or extra space for restaurants.
In the UK you’ll find:
Dark kitchens as a commercial property investment is big business. Foodstars is actually owned by CloudKitchen which is Travis Kalanick (the founder of Uber).. small world!
In London, prices are high. Renting a dark kitchen will cost you £3000/month + VAT on a 12 months contract.
Let’s do some quick maths:
Outgoings
£190 000/year: 4000 sqft warehouse in south London rent + business rates + maintenance.
£275 000 in year 1: refurbishment for 15 kitchens (£15 000/kitchen) + shared area (£50 000)
_______
£465 000 in year 1
- £190 000/year in year 2+
Revenu
£540 000/year: 15 kitchens x £3 000
Profit
Year 1: £75 000
- Year 2: £350 000
Obviously, this is an estimation. There will be a churn rate. Not all kitchens will be full all the time and you’ll have issues. But that’s a very healthy return on investment even if half of the kitchens are empty…
You’d have to flip A LOT of burgers to make that kind of money…
How to find the money to start a dark kitchen?
Whatever the type of dark kitchen you’re trying to launch, the key to running a successful dark kitchen business is all about scaling.
Margins are tight at the beginning, so once you’ve proved that a concept works you need to replicate it. This will allow you to streamline your processes, manage staff turnover and slowly your business will become more stable and economies of scale will kick in.
The thing is, growing a business costs money. You need to invest funds early so that returns start kicking in at a later stage.
You can fund this yourself of course, or get a bank loan. But here I wanted to talk about how to get funding from outside investors.
3 topics:
- Best time to look for an investor?
- What do you need to prepare to find an investor?
- Where to find investors?
Best time to look for an investor
By time, I don’t mean time of the year. This is more about when in your business journey you should start reaching out.
If you're a returning founder, this is easier. You’ve proved you can do this, so your story becomes: I’ve done this before, so invest in my project and I will do it again! Great, you can start raising funds now.
However most of the time this will be your first project. So you’ll need to have something to show to help the investor to trust you and invest funds.
This is called traction.
You need something that proves that buyers actually want your food. This could mean anything from sales from popup events, a market stall, a kitchen cover in a pub up to a full test period in a dark kitchen.
The more sales, and statistics you collect, the more investors will be likely to back you.
What documents do you need to find an investor?
You’ll need a solid pitch deck and a detailed financial model. That’s it.
The pitch deck will present the business you are trying to build.
The financial model will show that the numbers work and there is a route to high growth.
Once you have these documents ready you can start connecting with investors.
Some investors may ask for further details down the line, and that’s fine, but a deck and a spreadsheet is enough to start reaching out..
Where to find investors?
At this stage in your business journey, you’ll probably be looking for angel investors.
Angel investors are wealthy private individuals who are looking to invest their own money in fast growing projects. They are willing to take the financial risk in exchange for equity in your food business.
Here’s an example of how a angel investment in a dark kitchen would work:
Example:
A dark kitchen called Chips&Chips Ltd., operates a single location in Manchester and is seeking an angel investment to open two additional dark kitchens in the city. The existing location generates £10,000 per month in revenue.
The founders plan to open two more dark kitchens, each requiring £20,000 in setup costs (equipment, staffing, and marketing). Therefore, they are seeking £40,000 in funding to open both locations.
Current Financials (before investment):
- Revenue per location: £10,000/month
- Total revenue (1 location): £10,000/month
- Net profit margin: 10% Net profit (1 location): £1,000/month
Investment Offer:
The angel investor offers £40,000 for a 15% equity stake in Chips&Chips Ltd.
What does the angel investor get out of this?
With this money, the business will operate 3 dark kitchens, generating £30,000 per month in revenue and £3,000 per month in profit (10% net profit margin).
1 - Share of profit:
- Since the investor owns 15% of the company, they are entitled to 15% of the profits.
- Total monthly profit (3 locations): £3,000
- Angel investor’s share (15%): £3,000 × 15% x 12 months = £5,400 per year
2 - Share of sale price:
- The angel investor owns 15% of the company, so they are entitled to 15% of the sale price.
- Sale price of the business: £1,800,000
- Angel investor’s share (15%): £1,800,000 × 15% = £270,000
The year that dark kitchens took off!
2020 changed everything. Today, restaurants are struggling to bring in enough customers to survive and this trend is set to continue. Eating habits have been changed forever. This is especially true in city centres where remote working has killed the local trade in now deserted office areas.
So this is it, dark kitchens are not so dark anymore. I’ve got a feeling that a rebranding will happen with virtual kitchens or cloud kitchens becoming the new and less controversial “dark” word.
The whole food delivery ecosystem has been revamped over the last months with millions of funds being raised every month. Current players will need to adapt and new players will jump in to take advantage of this very exciting environment.
We’ve tried to map out the market below. This is an ever growing list, so please don’t hesitate to contact us if you’d like to recommend a brand or business.
Hopefully this list will point you in the right direction if you’re looking to get into the dark kitchen space.
Dark Kitchen Investors
Dark kitchens are not restaurants, they feel more like startups and once you're tested your concept, it is possible to grow really fast. A few seed investors are diving deep into this space.
- Hoxton Ventures (investor)
Dark Kitchen Food Delivery
You probably know a few of these food delivery platforms already as being regular customers. These platforms will become your best friends, get to know them really well!
- Supper London
- Just Eat
- Uber Eats
- Deliveroo
- Glovo
- FoodHub
Dark Kitchen Software
A successful dark kitchen is about optimising every part of the food delivery process. And this starts with choosing the best software. Quite a few out there. We think Deliverect is pretty cool, but try 1 or 2 demos before you select your favorite.
- BistroHub
- Flipdish
- RunMeal
- Preoday
- Deliverart
- Orderlord
- Orderswift
- weungry
- Deliverect
- GloriaFood
- Restaumatic
- OrderingDirect
- OrderYoYo
- Weorder
- ApperSt
A big problem for dark kitchens is using different delivery platforms such as Deliveroo, uber eats and just eat. It’s just too much work, and time lost, jumping from one account to the next to fulfill each order.
Bistrohub allows dark kitchens to manage multiple brands and multiple delivery platforms from just one account. It also provides a dashboard with rider screens, runner and manager accounts, order integration, POS system, and customisable printer tickets.
One important feature is taking care of “Sold Out” items. If you’ve suddenly run out a a certain product on your menu you can just click on the Bistrohub platform and pause the product on all delivery platforms in seconds.
Bistrohub offers 3 pricing structures:
- Less than 18 000 orders: £50 per month for each location
- Less than 24 000 orders : £70 per month for each location
- Unlimited orders : £120 per month for each location
Dark Kitchen To Rent
The good news for you, is there is a lot of commercial space available at the moment. And at pretty decent prices. The real choice is between building the kitchen yourself with a commercial lease or going with a fully setup service (like a kitchen co-working space) where you just have to walk in and start fulfilling orders.
Here you'll find a list of businesses that offer dark kitchen hire:
- Dephna
- FoodStarsUK
- TheCloudKitchenPeople
- RunTheBox
- PKL
- Kitchen Republic
- Kitchn'box
- Cooccio
- ReefKitchens
- Kitopi
- KarmaKitchen
- Kitchen united
- Mimic
- CloudKitchens
Dephna did not wait for the ghost kitchen craze to take off to start its business. They opened their first location in 1972 and now have 8 locations helping food related businesses strive in the UK. Mainly based in north west London, Dephna offer 4 services:
Commercial kitchens rental: this includes catering kitchens, central production units and dark kitchens. Prices for their London kitchen rental offering starts at £1800 + VAT for the smallest unit which is 380 sq ft.
Cold storage solutions: £400 + VAT for 100 sq ft cold storage unit
Storage solutions: £200 + VAT for 100 sq ft storage unit
Offices: £500 for a 2-3 person office unit
Dark Kitchen Rent Classified
- ShareDining
- KItchen Torrent
- Kitchup
Kitchen Rental In London
If you want to create your dark kitchen in London, you will want to make sure that your kitchen rental is close to areas with high population density. "Close" in London means within the delivery service range which is usually 3 miles.
Also remember to check on competition in that precise 3 mile area you've mapped out. You may have a special twist ready for your Poké bowl menu but if you're the 26th Poké bowl dark kitchen in your area you'll have trouble getting found in that dreaded deliveroo or just list. This is very different to brick and mortar restaurants when your shop can do some of your marketing for you.
Battersea and Islington are good places to start in London with large kitchen rentals available and in close proximity a strong demand for food delivery.
Dark Kitchen equipment
- Jongor
Delivery Only Brands
Creating a dark kitchen gives you the opportunity to develop several exciting food brands. If you're looking for inspiration, you'll find below a selection of menus that are really crushing it.
- Kbox
- Instamaki
- Taster
- FoodCheri
- Honestfood
- Keatz
- Poke the bear
- LoveYourself
- Frichti
Franchised Kitchens
- weungry
Dark Kitchen Menu Consultants
- EggSoldiers
5 most common dark kitchen mistakes
1 - Not understanding how delivery platforms work
Delivery platforms like Deliveroo and Ubereats are like search engines. And just as on Google, If you’re not in the first results, nobody will see you and nobody will buy from you. It may feel like you just add your menu and orders will start flowing in, but it’s worth spending the time to understand the algorithms and make sure your dark kitchen is on top of the list.
2 - Poor inventory management
If you have great WE and sell hundreds of meals but you’re left with 50% waste, you’re dead! This is key! Make sure you have ingredient overlaps between your dishes. If you have several brands, you can even have dishes that overlap between brands (desserts and drinks are a great example).
3 - Don’t have too many items on your menu
Don’t confuse your customers. Too many options will give your clients decision paralysis. Focus on 5 - 10 menu items max. This will also help with your inventory management as you’ll also be able to work on items that provide the highest margins.
4 - You don’t know what your clients want, they do!
I often hear entrepreneurs saying they have a brand new and awesome food concept that will be a massive hit. But they’re just guessing! They don’t really know what their potential clients are looking for. Remember to do your research and look at your competition. It’s often easier to put your twist on a type of food in high demand rather than inventing a completely new category.
5 - Don’t forget alternative marketing
This is a big problem that we often see. Don’t rely 100% on delivery platforms. If they decide to drop you or to downgrade you, you’re dead. Quickly consider building your own branded acquisition process. A few easy marketing starts :
add a flyer to each order giving your clients a chance to sign up to your newsletter in exchange for a free dessert or one of your recipes.
create a loyalty program offering something exchange for X number of orders
-show your social media account directly on your packaging and offer incentive to follow or like your content
Dark Kitchen Tips
Tip #1 - Make sure your food tastes good when it arrives!
If you run a restaurant, you can sometimes get away with average food by providing an exceptional service in a beautiful and exciting setting.
The thing is, in the dark kitchen business there is no decor to help you with the setting. And you don’t have much control over the efficiency of the delivery. The only thing you can really focus on is the food. And I’m not just talking about “Are we going to sell Burgers or Tacos?”, I’m talking about making sure that the food that leaves your kitchen is just as good when it arrives.
1 - Hot and cold food should be packed separately
This may seem obvious but there are countless mixed grill kitchens putting salad in their meat containers. Invest in different types of bags and boxes. Get your staff trained up to use insulated hot and cold bags. And make sure the containers are put in the bags in the correct order.
2 - Don’t spill the sauce!
The sauce is a very important part of a dish. It will often be the key ingredient to make those taste buds take off! The easy tip is, of course, to put the sauce in its own container. You don’t want those dreaded speedbumps to spoil the meal.
But also, how about adding instructions for your clients? Where should they put the sauce? Over the fish? Over the veggies? At the end, the client will do whatever they like, but you can build up the experience by guiding them towards the idea that you had for this dish when you created it.
3 - Choose the right packaging
Cardboard, plastic, styrofoam, polystyrene, foil.. so many options, so many shapes, choosing the perfect packaging for your dark kitchen is one of those early nightmares. This is a big big topic and we will dig into this subject in a separate article. But to start things off. Cardboard is better for branding (easier to print on) and is currently a lot more trendy. Styrofoam will keep your hot food hot but is easier to break and does not look so good. It’s often about compromise but also really defining what you want your user experience to be.
Tip #2 - How to take awesome food photos for your dark kitchen menu and website ?
1 - Shoot your food pics in natural light
If you illuminate your food with an artificial light you’ll probably add a horrible yellow colour to your photo. Make sure your kitchen is nice and bright (I know, it’s ironic for a dark kitchen ;-)) before you take your pic or even take your food outside for some real natural light.
2 - Use shadows to your advantage
Be careful here. A badly used shadow can really dim down your picture. However, if you use a strong shadow as contrast to your plate or food box you’ll be highlighting the colours and freshness of your dish. Don’t be afraid, you’ll have to be all in on shadows or do nothing at all.
If it’s too sunny to control the shadow you can use a photography reflector or even a white piece of paper can do the trick.
3 - Backgrounds build character
The background that you choose for your pictures will need to match your branding. A dark background will add some attitude to your food, and a light background will bring freshness and cleanliness. It’s probably best to stick to dark or light, nothing in between.
4 - Big big food colours
Be bold with your colours. Whether you go for a light or dark background, make sure your food sticks out. This is also true for the food that will be delivered. Bring delight to your clients as soon as they open your food container.
5 - Tell your food story
It’s tough. You are not there to sell your dark kitchen dish to your clients. Your photos have to do all the talking and make your customers really build a craving for your menu. Don’t hesitate to add objects to your pictures, or books, or even body parts like an arm or hand to give to your food a story.