How to Start a Profitable Cloud Kitchen in India: Costs, Licenses, Challenges, and the Growth Opportunity Ahead

If you’ve ever thought about running a restaurant but felt overwhelmed by the rent, interiors, and staff needed for dine-in, a cloud kitchen could be your golden ticket.

India’s cloud kitchen market is booming. In 2024, it was valued at around 1.1 billion dollars and is still growing at a healthy clip of 10 to 11 percent every year. The delivery-first model is only getting stronger, especially in metro and tier 2 cities.

If you are serious about starting one, let us walk through the process step by step: from your menu and location to costs, licenses, and the pain points nobody warns you about.

Step 1: Begin with a Focused Menu

The biggest mistake most first-time founders make is going overboard on the menu. 

Cloud kitchens are not about variety, they are about efficiency and reliability. A shorter menu means faster prep, less wastage, and better consistency.

Think about dishes that travel well. Biryani, kathi rolls, rice bowls, pastas, or curries usually hold up well on a 30 to 40 minute delivery ride. If you try fragile items like thin-crust pizzas or fancy desserts, you may get bad reviews because they rarely survive the commute.

A good rule of thumb is to start with 5 to 8 strong dishes. Once customers love those, you can expand.

Step 2: Picking the Right Location

Since you are not dealing with dine-in customers, you do not need a prime spot. What matters is coverage and accessibility for delivery partners.

In most cities, a small commercial kitchen tucked into a lane costs about ₹15,000 to ₹30,000 a month in rent. In metros, it can be higher. If you do not want to buy equipment upfront, shared kitchens are another option. They usually charge more, but the infrastructure is already in place.

Some people even start from home. That is possible, but you must still comply with FSSAI rules and get the right licenses because you are running a commercial business.

Also Read:Mumbai Founders Build A Cloud Kitchen Brand Selling Customised Biryani – Now Have 22 Stores In Delhi, Mumbai, Dubai; Eye Rs 100 Cr Revenue

Step 3: Budgeting Your Setup and Running Costs

Here is where a little math helps. Let us break it down.

Upfront costs usually include:

• Kitchen equipment like burners, exhaust, refrigeration, and prep tables: ₹2–4 lakh for a basic setup, ₹6–9 lakh for a professional one.

• Licenses and registrations: anywhere from ₹15,000 to ₹40,000.

• Tech stack like tablets, POS, printers, and internet: ₹20,000–₹50,000.

• Rent deposit and small civil work: usually 1–3 months of rent.

Monthly operating costs include:

• Rent and utilities based on your space.

• Staff salaries. Even a lean team of one cook, one helper, and one packer will cost about ₹50,000 a month.

• Raw material and packaging. Packaging alone takes about ₹5–10 per order.

• Aggregator commissions. Swiggy and Zomato typically take 15–30% of every order plus GST on commission.

As you can see, the biggest invisible cost is the commission. If you do not calculate contribution margin (profit left after packaging and commissions), you will be in trouble.

Step 4: Licenses You Will Need

Even if you are delivery-only, licenses are non-negotiable. The main ones are:

• FSSAI license: mandatory for all food businesses. The type depends on turnover and whether you operate in one or multiple states.

• GST registration: required once you cross ₹20 lakh turnover (₹10 lakh in special category states). Cloud kitchens are taxed at 5% without input tax credit.

• Shops and Establishments registration: must be done within 30 days of starting.

• Trade or health license from your municipal authority.

• Fire NOC and Pollution Control consent in some states.

Pro tip: start filing as soon as you lock your space, especially FSSAI, because approvals take time.

Also Read: Meet the American Founder Who Built California Burrito, India’s First Authentic Mexican QSR Brand That Clocked ₹196 Cr in Revenue in FY24

Step 5: Setting Up Smooth Operations

Your kitchen should run like a well-oiled machine. Create a clear flow. Raw material comes in, prep happens, cooking follows, then food moves to a clean packing station. Mixing raw and cooked food zones is a recipe for disaster.

Hygiene should be part of your daily routine, not a weekend job. Clean counters, temperature logs, and pest control schedules matter more than you think. Bad reviews about hygiene spread faster than any Instagram post.

On the tech side, get a POS system that pulls orders from Swiggy and Zomato into one screen. Without it, you will juggle tablets, miss tickets, and make mistakes.

Step 6: Working with Swiggy and Zomato

You cannot avoid them. They bring you customers, but they also take a big bite out of your earnings. With commissions ranging from 15 to 30 percent per order, you must price smartly to survive.

Some founders negotiate lower introductory commissions tied to order volume. Others delay paid ads until their rating is stable. Both strategies work. And keep an eye out for new delivery players in your city. Many offer lower commissions during launch phases, which can improve your margins.

Step 7: Pricing for Real Profit

Let us do a quick calculation. Suppose you sell a biryani for ₹150.

• Raw material: ₹80

• Packaging: ₹10

• Commission (20%): ₹30

• GST on commission: ₹5–6

That leaves you with only ₹24–25 in profit. And that is before rent, staff salaries, and electricity. This is why pricing must always be based on contribution margin, not just food cost.

Step 8: Building a Memorable Brand

Since you do not have a restaurant front, your brand exists in two places. First, how you look on the app. Second, how the food feels when customers open the box.

Invest in good food photography so your dishes stand out. Do not cut corners on packaging. It should keep curries intact and fried food crisp. A simple thank-you card or QR code for feedback can turn a one-time customer into a loyal one.

The unboxing experience is your equivalent of restaurant ambience. Make it count.

Step 9: Tracking Numbers That Matter

Cloud kitchens are a numbers game, and the ones that survive are the ones that monitor their performance like a hawk. From day one, you need to keep an eye on a few critical metrics instead of just looking at overall sales.

• Order acceptance and dispatch time:Delivery platforms track how quickly you accept and prepare an order. A kitchen that accepts in 2 minutes and dispatches in 20 will always rank higher than one that delays. Faster dispatch also reduces cancellations and improves customer satisfaction.

• Average customer rating: This is your lifeline. A drop from 4.4 to 4.1 may not look big, but it can push you down in search results and cut your organic orders by half. Even one point higher can mean hundreds of extra orders a month without spending on discounts or ads.

• Repeat customer percentage: First-time orders come from discounts or curiosity, but repeat customers show you are building a real brand. A healthy repeat rate for cloud kitchens is around 25 to 30 percent. Anything higher means your food and packaging are creating loyalty.

• Contribution margin per order:Many founders only track sales, but sales mean nothing if your contribution margin is negative. Keep calculating how much profit you actually keep after deducting packaging, raw materials, and aggregator commissions.

If you get these numbers right, everything else falls into place. You will know when to scale, when to add new dishes, and when to adjust pricing. In a business where margins are thin and competition is high, these metrics are your survival kit.

Also Read: Rapido launches food delivery app 'Ownly' in Bengaluru, challenges Swiggy and Zomato with zero-commission model

The Biggest Roadblocks You Will Face

Running a cloud kitchen sounds exciting, but there are a few roadblocks that can derail even the most passionate founders if they are not prepared for them. These are the four you must watch out for:

1. High aggregator commission
Swiggy and Zomato bring you orders, but they take a big cut — usually between 15 and 30 percent plus GST on the commission. If you do not design your menu and pricing to absorb this cost, you will struggle to break even. Many kitchens fall into the trap of chasing volume without realizing that most of their profits are being eaten away by commissions.

2. Packaging challenges
Your food is not eaten in your kitchen, it is eaten after a 30 to 40 minute journey. If the container leaks, rice dries out, or fried food turns soggy, your ratings will drop no matter how good the recipe is. Good packaging is expensive, but bad packaging costs you far more in customer trust and repeat business.

3. Licensing and compliance delays
Without the right licenses, you cannot list on delivery apps. Approvals for FSSAI, trade licenses, and fire safety often take longer than expected, especially in big cities. If you do not start this process early, you could end up with a ready kitchen sitting idle for weeks while you wait for paperwork.

4. Customer reviews and ratings
Unlike a restaurant where service and ambience can help, in a cloud kitchen your rating is entirely about food quality, packaging, and delivery time. A handful of negative reviews about hygiene or delays can sink your ranking on the apps, cutting your visibility overnight. Building credibility takes months, but one bad week can undo it.

These challenges are not deal-breakers, but they are the reality of the business. If you plan for them from day one, you will already be ahead of half the players in the market.

Cloud kitchens are not an easy-money hack. They are real businesses that need planning, cost control, and relentless focus on customer experience. But they are also one of the most exciting opportunities in India’s food space today. 

If you set yourself up with the right licenses, price carefully, and deliver consistently, you can build a profitable brand without ever running a dining room. 

Author’s Note: All numbers, costs, and timelines are estimates based on industry data and public sources. Actual expenses, licenses, and commissions may vary by city, vendor, or business model. Use this as a reference, not a definitive financial or legal plan.