The Cloud Kitchen: Food Without a Restaurant

How delivery-only kitchens cut rent and service costs but depend heavily on food delivery apps and their commissions.

A cloud kitchen is a delivery-only food business with no dine-in area. Orders come mainly through food delivery apps.

Cost advantages

Lower rent: kitchens can be in cheaper locations.
No waiters or dining area.
Multiple brands from one kitchen: the same kitchen might run a biryani brand, a pizza brand and a dessert brand, sharing staff and equipment.

Costs

Ingredients and packaging.
Kitchen staff.
Delivery app commissions, often around 20 to 30 percent of order value.
Marketing and discounts on apps.

Dependence on apps

Apps control:

Visibility: rankings and search results.
Commissions.
Customer data.

Restaurant associations have complained about high commissions and discount pressures, and the CCI examined food delivery platforms’ practices.

Unit economics

A cloud kitchen must earn enough per order after ingredients, packaging and commissions to cover fixed costs. Small orders and heavy discounts can make orders unprofitable.

Scaling

Some cloud kitchen companies grew large, but several struggled with profitability.

Key lesson

Cutting some costs can create dependence on platforms, which take a large share of revenue.

The commission bite

A cloud kitchen sells a 300 rupee meal through an app. After a 25 percent commission, a discount it funds and packaging, only a small margin remains above ingredient costs. It must sell many orders to cover rent and wages.

Thinking cloud kitchens are always cheaper to run

They save on rent and service but pay large commissions and marketing costs.

Key takeaways

Cloud kitchens are delivery-only food businesses.
They save on rent and service staff and can run multiple brands.
App commissions of around 20 to 30 percent and discounts cut margins.
Dependence on platforms is a key risk.