Virtual brands from one kitchen: the real numbers

A virtual brand makes you money if what it earns after commission and its own new costs is positive. Rent, the cook you already employ and your kitchen equipment are not new costs: you pay them either way. So the decision to open one comes from the incremental contribution, and splitting the shared costs is something you do afterwards to see whether each brand could stand on its own.

What a virtual brand is

It is a menu that exists only on delivery, with its own name and look, cooked in your existing kitchen. A burger place that opens a wings shop on the app. A pizza kitchen that sells pasta bowls under another name. Customers see two shops; you have one kitchen, one supplier order and one team.

What makes it attractive is that it reuses what you already pay for:

• Spare kitchen capacity. If the grill is idle half the evening, the rent runs anyway.
• Shared ingredients. The chicken, fryer oil, sauces, slaw and buns you already buy can serve the new menu. Stock turns faster and less of it goes off.
• Equipment and staff. The same fryer, the same line, a cook who already knows your mise en place.

If you run two brands for different customers, in store as well, the guide on running more than one brand from one kitchen covers the wider case. This guide stays with delivery.

New costs and shared costs

Split everything into two lists before you do any sums.

New costs (only exist because of the virtual brand):

• The loaded cost of each item on the new menu, with its packaging.
• The app's commission on every order. Check your contract; this guide uses 30% as an example.
• Extra staff hours, if the brand needs a shift you did not have before.
• Photos, logo, branded bags. If it is a one-off payment, spread it over the months you plan to recover it in.
• Extra electricity and gas.
• Paid promotions on the app, if you use them. The guide on paying for app promotions shows how to tell whether they pay back.

Shared costs (you pay them with or without the virtual brand):

• Rent.
• Wages you already pay.
• The fixed part of electricity, gas, water and internet.
• Kitchen equipment.

Decide on incremental contribution

The question for opening the brand is: how much does the whole business's profit change?

incremental contribution = orders × (average order − loaded cost − commission) − new fixed costs per month

If the result is positive and the kitchen can handle the orders, the brand adds money. Shared costs do not enter this sum, because they do not change.

Worked example: a burger kitchen adds a wings brand

You run a delivery-led burger kitchen in the evenings. You want to open a wings brand on the app, using the same fryer, chicken supplier and sauces.

What you have now, per month:

• Shared costs: rent $3,200 + the cook you already employ $2,200 + base utilities $600 = $6,000
• Burgers: 2,400 orders × $6.00 contribution after commission = $14,400
• Current profit: 14,400 − 6,000 = $8,400

The wings brand, per month:

• Orders: 600. Average order: $24.00. Loaded cost per order: $9.50.
• Commission (say 30%): 24.00 × 0.30 = $7.20
• You keep per order: 24.00 − 9.50 − 7.20 = $7.30
• Brand contribution: 600 × 7.30 = $4,380

New costs per month:

• Extra cook, 3 hours a night for 30 nights at $16 an hour: $1,440
• Photos and design: $900 once, spread over 12 months = $75
• Extra utilities: $200
• Total: $1,715

Incremental contribution: 4,380 − 1,715 = $2,665 a month

Check against the total: 14,400 + 4,380 − 1,715 − 6,000 = $11,065. Before, you made $8,400. The difference is $2,665.

To find how many orders the brand needs just to cover its own new costs: 1,715 ÷ 7.30 = 234.9, so 235 orders a month, about 8 a night. The break-even tool does this per month and per day.

When orders move instead of growing

Both brands sell in the same hours to the same neighbourhoods. Say 1 in 5 wings orders comes from a customer who would otherwise have ordered burgers from you. That is 120 burger orders you lose, at $6.00 each: $720. The real incremental contribution drops to 2,665 − 720 = $1,945. Still positive, but more than a quarter smaller than the first sum suggested. Watch whether burger orders dip in the months after launch.

Splitting the shared costs

Incremental contribution tells you whether to open. If you also want to know whether each brand could carry itself, or which one earns more, you have to split the $6,000 of shared costs. There are several bases; pick one and stick with it. The guide on how to allocate overhead walks through the options.

Burger sales here are 2,400 orders at an average of $18.00. The split changes how much each brand "makes" on paper, but the total is the same: $11,065. So do not close a brand just because it was handed a big share of the rent. Close it and the whole rent lands on the other one.

When brands share the same hours and the same line, as here, orders or sales are sensible bases. When they use the kitchen at different times of day, kitchen hours often fit better.

What can go wrong

• The kitchen cannot keep up. If both brands peak at once, tickets pile up and delivery times suffer on both. Measure how many orders an hour leave well before you open another shop.
• Exclusive ingredients. Every item using something the other menu does not carries its own waste. Build the menu from what you already buy; the guide on delivery menu design shows how.
• More shops, more admin. Each shop has its own menu, photos, hours and reviews. Someone has to look after them.

If you cook from a delivery-only site, the guide on dark kitchen economics adds rent and orders per day, and the cost model for delivery-first food businesses brings it all together.

Do it with the calculator

Load each item on the new menu into the food cost calculator with its packaging and the app commission; with what each order leaves and your new monthly costs, you can run the incremental contribution sum above.