How To Improve Dark Kitchen Profit Margins

A profitable dark kitchen operating

Ways to improve your kitchen’s profit margins and profitability

Running a conventional restaurant brings with it slim profit margins. The average profit margin is around 5%. That means for every £1 of revenue 5p is profit. 

When renting a dark kitchen or virtual restaurant, they have much larger margins with an average profit margin of around 15%. The dark kitchen is currently experiencing a golden age and today is a great time to get in on the ground floor. 

We’ll cover why dark kitchen restaurants are more profitable than bricks and mortar businesses later on but let’s look at how you can increase the profit margins of your dark kitchen business for now. 

The easiest way to increase the profitability of your dark kitchen rental is to reduce costs and increase your bottom line. Once you’ve lowered your costs it’s time to focus on increasing revenue through sales, tightening operations, and improving your product offer.

Simplify and streamline your menu

When deciding on your dark kitchen menu, it’s best to keep things simple. The age-old saying ‘quality over quantity is never truer than with a dark kitchen menu. 

First things first. For any menu, but especially a dark kitchen menu, it’s important to build and maintain a menu that appeals to different dietary requirements and focuses on several core products (a great example of this is five guys). Having a huge menu can be confusing for staff and customers alike but more importantly, can harm the speed and quality of food that you can produce.  

By working from a streamlined menu you will reduce spending on food waste, have a clearer understanding of the commercial kitchen equipment needed to execute your menu, and speed up the production time of items for delivery. 

We recommend conducting customer feedback and surveys to gain insights into not only what your existing client base wants but also what customers may want in new markets that you wish to enter. It’s important to break down the data from sales to establish 3 things;-

  1. What items are selling and what’s not
  2. Where you should focus your energy when introducing new menu items (you’re selling 5x as many burgers as hotdogs so should you focus on a new burger line?)
  3. How to manage staffing and supply chain demands, helping to reduce costs and waste.  

Minimise your food waste

One of the biggest loss leaders and expenses to the bottom line of any food business is food waste. Use expiry trackers and expiry sheets to monitor your inventory and any upcoming expiry dates.

It can be beneficial to offer a reduction on a certain item or include it in a deal rather than dispose of ingredients and which then returns a loss on investment. 

You can also use portion size monitors such as Portion Monitor by Tiny Apps to utilise data to ensure you are delivering the optimal size of the portion. It’s easy to go all in and throw together huge portions but if these are going to waste then it becomes a cost not just to you but also to the customer. As we’ve mentioned above it’s more important to deliver on quality than quantity. You can then use the additional money to focus on the quality of the ingredients. 

Focusing on your menu size and desirability can also help you to control food waste and portion size. Monitor what’s selling and streamline the menu to work around several core ingredients.   

Rent a space that fits

The great thing about off-street kitchens is that you have much more choice and flexibility when it comes to choosing your next kitchen to rent.

It makes no sense to rent a kitchen that is designed for a large chain production kitchen if you have a small menu and limited capacity. Working out these numbers up front can pay dividends later on for your business. The main areas to focus on are;-

  1. Staff numbers
  2. Amount of equipment needed
  3. Amount of dry and cold storage needed

Keep your costs low and focus on producing great food. You can upsize later on once your business becomes profitable.   

Market fit and your price point

Everyone loves to get creative in the kitchen but you must do so with one eye on profitability and pricing. It’s no good selling the best burgers in the UK if they are priced at £100 a slider!

When you are building your menu, focus on market fit. If you are targeting a low-end, low-spend market it is important that your menu and pricing reflect this. 

Equally, if you are aiming for a high-end restaurant takeaway concept it is important to increase your produce spending to improve food quality, which you will then need to reflect in your pricing.

Get your name out there

As we will cover, the downside of any dark kitchen rental is that you lose the benefit of footfall from passing trade. The exception to this rule is with our pub kitchens to rent or residencies where you will often retain the existing client side of the pub. For those with a takeaway concept, to counteract the lack of footfall it is important to have a great marketing strategy in place. 

The cheapest way to reach your customers is via social media. It can be difficult to build your audience initially but a great way to do this is to include a contact card with all orders letting your customers know where they can find you online. Your eyes are bigger than your belly for a good reason! The most effective social media channels to focus on are those that rely on visuals. Think Instagram, Tik-Tok, Snap and Facebook. Post mouth-watering images of your food on a regular basis and use hashtags to target local areas. Show behind the scenes and introduce staff to your customers. Show off your kitchen and processes and celebrate any great wins whether that’s a new 5-star rating or a great review from a customer. 

Complete and claim online listing profiles like Google, Yell and Trip Advisor and let your customers know what to expect with regards to opening hours, contact details and a location – featuring on Google maps is a great way to catch customers on the fly. You can also leverage these profiles to show off your food and menu. 

Build on brand reputation

With the advent of online reviews, gaining fans has never been more important. The easiest way to kill your sales is by attracting a main course of negative reviews! Your main focus at all times should be meeting the expectations of your customers and producing great quality food. End of. There’s no doubt about it, negative reviews will impact your sales and deter new customers. 

In contrast, attracting good reviews and building a positive reputation for your brand will improve your sales and could be the deciding factor when a customer is weighing up whether to buy from you or a competitor. You can improve your online reputation in 3 simple steps;-

  1. Ensure your food is top quality and don’t let bad food leave the kitchen
  2. Manage your customer’s expectations and provide a great service
  3. Ensure food is delivered on time and within your estimated delivery times  

Build relationships with your customers

Working from a food delivery kitchen or dark kitchen one of the negatives is that you never meet your customers. There’s something special about seeing your customers enjoying your food, there’s no doubt about it! However, there are several ways you can connect with your customers, building relationships and your brand’s reputation.

One of the simplest ways to humanise your brand is through personalisation. Think Starbucks with name on cups or Honest burgers, which to this day still send a handwritten thank you note with every order. Recipe cards and produce trail cards are another way to differentiate yourself and show you care. 

With social media playing such a pivotal role in today’s society, it is a great way to keep in touch with customers new and old and can be used to show and share the personality of your business. 3 simple ways to personalise your on-food delivery brand;-

  1. Send a handwritten note or thank you card (especially when starting up)
  2. Consider sending recipe cards to allow your customers to replicate your dishes at home 
  3. Utilise social media to maintain contact with your customer base

Run promo’s and consider loyalty schemes

Everyone loves a deal! By examining your sales data you can establish your busy and quiet periods or identify loyal customers and drive loyalty with a stamp or ticket scheme. Nandos and Starbucks both have great examples of loyalty schemes. While Dominoes pioneered the concept of Two for Tuesday (traditionally their quietest day of the week).  

It’s important to remember that the data is usually right! While it can seem like you are losing money by offering a discount or loyalty scheme you will benefit from the loyalty of returning and new customers incentivised by these offers in the long run. 

Increase your customer conversion

The high cost of a brick’s-and-mortar restaurant has one benefit. Footfall. This is a luxury that isn’t available to dark kitchen or ghost kitchen businesses. However, there are numerous ways to counteract this, and if executed well can even play into your hands by not resting on your laurels. Here are 6 simple ways to increase sales and increase online conversions.

  1. Build or commission a great website that is easy to use and looks great
  2. Build an online presence and fanbase using social media
  3. Run regular online adverts and email campaigns to new and existing customers
  4. Use High-Quality Product photography on order platforms and on your website
  5. Utilise door-to-door advertising in your delivery area. Ensure any material is high quality and represents your brand
  6. Encourage reviews from customers whether through ordering platforms or on your google business listing

Increase your average order value

Have you used ordering apps like Deliveroo or Just Eat and just as you’re about to check out, they offer you a dessert or drink? That’s upselling. Upselling is a brilliant way to increase your average order value, revenue, and spending per head. Using your current order value as a guide, set a goal of adding additional sales to each order and monitor these consistently using trial and error to find out what works for you.

If you’re looking for your next commercial kitchen space to rent, or are just getting started, get in touch to see how we can help you or take a look at our existing selection of dark kitchens to rent. Share There list commercial kitchens to rent in London and throughout the UK. Let’s get cooking together!

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