Brick-and-mortar restaurants run on thin profit margins, on average between 3% to 5%, whereas ghost kitchens are typically more profitable with an average profit margin of 15%. With that said, it’s still important not to rest on your laurels due to rapidly increasing competition.
In a recent blog, we discussed why and how dark kitchens are more profitable than traditional restaurants. Today, we’re sharing our insights and tips on maximising your ghost kitchen profit margins.
From reducing overhead costs to increasing sales and refining operations, here’s our tried and true strategies to grow the profits of your dark kitchen rental.
Strategies to Boost Kitchen Profit Margins
Elevate Your Menu
When creating your food delivery menu, always choose quality over quantity. While your menu should appeal to various dietary requirements, too many items can be overwhelming for your staff and customers and could affect output quality.
Keeping your menu items simple – but tasty – will prevent spending huge amounts of money on food that might expire before you get to use it, and will also help you refine the amount of commercial kitchen equipment that you need to buy to execute the offerings.
Use customer data to create a menu that appeals to your audience to help drive sales and regularly review your menu and sales to see what is or isn’t working, and optimise your menu to suit. Market research and customer analysis will help you to realise your growth potential and plan your staffing requirements and supply chain based on demand.
Run Promotional Offers and Loyalty Schemes
Customers love incentives. Promotional offers show your brand cares, and the customer can save money or enjoy a freebie.
You can run exclusive discounts on meals or push ‘happy hours’ on low sales days, or if you prefer, offer a freebie on every tenth meal in the form of a loyalty scheme.
Although it might feel like you’re losing money, loyalty schemes and promotions will encourage return customers and increase sales in the long run.
Enhance Your Brand Reputation
Nothing kills sales more than negative reviews. Food quality and meeting customer expectations should be the main focus of your delivery service. Unhappy customers will leave negative reviews, damaging your online profile and limiting future orders.
In contrast, a positive brand reputation will give you the competitive edge on food ordering platforms. If your food is tasty, delivered on time and your customer service is impeccable, the positive reviews will soon speak for themselves.
Connecting with Your Customers
Another way to improve your brand reputation is by connecting with your customers. If you operate from a food delivery kitchen, it’s likely that you will never meet your customers in-person, but there are still ways to make a connection.
A simple way to humanise your brand is through sending personalised thank you notes, especially in the early days if you are a start-up business. Have a few cards printed out in advance, then when an order comes through, you can customise the note by signing it with the customer’s name and your name.
Staying proactive on social media platforms is another quick and easy way to build a community and connect with past, present and future customers.
Traditional high street restaurants can rely on passing trade, whereas you won’t have that luxury with a ghost kitchen business model. Therefore, you should be proactive when trying to increase your conversion rates:
- A great website with a simple and easy-to-navigate UX
- Creating an online presence
- Running digital and email marketing campaigns
- High-quality food photography
- Encourage customers to leave reviews on your chosen food app or ordering platform
Upselling goods is a great way to increase average order value and your overall profits. When customers place an order, it leaves valuable data on your POS or the ordering platform you are using. Leverage this data to upsell other items on your menu based on the customer’s demographics or preferences.
For example, you can upsell desserts, sauces or sides at a later stage of the ordering process and increase your ghost kitchen sales and average order value.
Rent the Right Size Kitchen
Don’t waste money on an unnecessarily large kitchen from the get-go. The biggest appeal of renting a commercial kitchen is cutting overheads compared to restaurants with a storefront, so take advantage of this and keep costs low.
Most food delivery brands won’t need a space bigger than 400 sq ft. Before committing to a kitchen, calculate how much space your commercial kitchen equipment will need, how many staff you will hire and make an informed decision based on these calculations.
Optimise Your Pricing
After finalising your menu, you need to work on your pricing. You need to keep your prices relative to the quality of your produce but also keep them relative to your target market. There’s a fine balance to achieve, which can be tricky, but being accessible to your target customers is especially important with the current cost of living crisis.
If your ideal customer dines at posh high-end restaurants and your food quality reflects this, your pricing might rightfully be slightly higher.
However, if you are targeting students or the younger demographic who might have a lower disposable income, you need to keep this in mind to ensure your customers can afford to order from you.
Reduce Food Waste
Keeping track of your inventory and avoiding food waste in your kitchen is essential for keeping running costs low.
Also, monitor the size of your portions for each course. Customers might think they love the extra large portion of food, but this often results in the customer throwing away some of the leftovers at your expense. Don’t scrimp, but don’t feel like you need to overcompensate to keep customers coming back for more – your food quality, customer experience and incentives will help with this.
As we mentioned earlier, reviewing your menu to see what is or isn’t working is a great way to reduce food waste. If an item is selling well over some time, remove it from your menu, especially if it means you are consistently throwing away raw and fresh ingredients before you can use them; this is eating away at your profits.
Marketing, Marketing, Marketing
Without the luxury of footfall that traditional restaurant owners benefit from, you have to put in the work elsewhere when it comes to advertising your food business.
You need to have a presence where your customers are based, which is likely to be on social media platforms such as Instagram, TikTok and Facebook. Create profiles on each of the platforms and maximise their reach to their full potential.
Post content that showcases your food, such as eye-catching snaps of your food, behind-the-scenes footage and people love people, so share snaps or videos of the faces behind your brand.
You should also get a Google My Business listing live if you don’t already have one. This is a free feature from Google that allows you to list a business, including its location, opening times and contact number, and it makes your food business easier to find.
If you’re looking for your next commercial kitchen space to rent, or you’re a beginner and just getting started, get in touch to see how Dephna can help. Our London kitchens to rent are in prime locations with a great delivery radius, and starting from just 400 sq ft, there’s plenty of opportunity to maximise your profits with us!