The guide to understanding hire kitchens, and why they are crucial to the future of the food industry.
Our Definition: Shared Kitchens
A shared commercial kitchen, also known as a hire kitchen or a food incubator (depending on the model), is a fully equipped commercial kitchen facility that is rented out to multiple food business owners. These kitchens make unattainable commercial equipment accessible to food entrepreneurs such as catering companies, food truck operators, product manufacturers, chefs and other culinary lovers who may not have access to a commercial kitchen of their own.
The key reason these spaces exist is because the costs associated with investing in equipment, space and materials in the food industry is the number one reason food businesses fail... let's talk about that.
The Greatest Risk of Food Business Failure: Sunk Cost Fallacy
People start a food business thinking their idea is great and unique. They purchase commercial equipment or worse - renting a space of their own from the beginning - which often leads to additional investments in accessories and other 'nice to haves', and, before they know it, food entrepreneurs fall into the sunk cost fallacy trap; they get in too deep financially to quit rather than working out whether there is actual demand for their product or idea first.
With greater investments come, well, more investments, like acquiring more cool room space to fit more product, which involves more compliance and regulation, which leads to more investments in trades like plumbing, electricity, and other storage requirements. Not to mention that all building improvements and commercial equipment depreciates over time.
Moreover, the ongoing burden of property leases, utility expenses, waste expenses, pest control, equipment and building maintenance, consumables, cleaning and staffing can further strain limited budgets. Unfortunately, for many small business owners, they jump into all this without the complete picture of what these initial and ongoing investments actually are. For those who are already financially or socially vulnerable, the consequences can be potentially severe. It amplifies the risk of business failure, creates further social isolation, and places people into more financial stress. It's heartbreaking.
About Not-for-Profit Shared Kitchens
This reality underscores the importance of a not-for-profit shared kitchen, where entrepreneurs working-class backgrounds can access such facilities without the overwhelming costs associated with building and maintaining their own commercial spaces. By keeping costs down through shared kitchen models, entrepreneurs can test their ideas, channel their financial resources into refining their craft and sales, thus expanding their businesses, and contributing to a vibrant and diverse culinary landscape.
How Do Shared Commercial Kitchens Work?
There are many different models of shared commercial kitchens across the world. Shared kitchens can operate on a membership or rental basis, or both. Some kitchens are designed to be primarily focused based on food production for food products, such as The Food Factory in New Zealand. Some kitchens focus more on supporting food preparation for caterers, food trucks and market stalls, as well as event space and workshop space, like La Cocina in San Francisco or ourselves (FoodLab), and others still operate more like dark kitchens, or cloud kitchens, focusing more on delivery and ready-made meals for the masses, like COHO in Canada.
Entrepreneurs can rent space in the kitchen for a set period, typically by the hour or on a rolling monthly basis. These kitchens are equipped with professional-grade appliances, storage space, and all the necessary amenities required for food preparation and production. Business owners also have options for monthly or overnight storage rental, including dry-store, cool room and freezer hire, and even options for coworking office space to operate the backend of running the business.
Many not-for-profit kitchens include more than just the kitchen space, however. This is the difference between merely a shared kitchen space, and a food incubator. Food Incubators include a holistic approach that helps train and nurture businesses in the kitchen by providing a pointed curriculum, mentorship and support services (such as branding and financial support), community-building initiatives, and access to local markets and other sales opportunities to drive early growth and revenue. Our model at FoodLab is an example of this.
Advantages of Using a Shared Commercial Kitchen
1. Cost Savings
As discussed, one of the primary advantages of a shared kitchen is the upfront and ongoing cost savings. Many entrepreneurs find that the long term savings made by keeping operations at a shared kitchen, at least at whilst in the critical growth and testing stage, means that funds are freed up for more important aspects of the business, including marketing, sales, and staff to scale up.
2. Professional Equipment
Entrepreneurs gain access to high-quality, commercial-grade kitchen equipment that they might not be able to afford on their own. The added benefit with this is that some not-for-profit shared kitchens, like FoodLab's, also include staff that can help teach program entrepreneurs how to use the right professional equipment for their purposes, because many entrepreneurs may not fully understand the potential and applications of commercial equipment. For example, did you know that some Combi ovens can proof bread or dehydrate fruit and vegetables? Cool, huh!
3. Compliance with Regulations
In many government areas in Australia, operating a home-based kitchen is not permitted. Shared kitchens, however, are designed to meet stringent health and safety standards, including building code adherance, equipment maintenance, pest control and other regulations to keep food safe, which kitchen users do not need to think about when renting. This helps provide entrepreneurs peace of mind, ensuring that they are operating from kitchens that comply with local regulations and codes.
However, this does not get entrepreneurs off the hook - there are still things that all kitchen users will need to do in order to use shared commercial kitchens. Things like:
having a valid Food Safety Supervisor Certificate (in NSW, or the regional equivalent for you)
maintaining appropriate public liability insurance and other relevant insurance. We recommend getting professional advice from an insurance broker
training all staff members or volunteers in safe food handling practices and other important ongoing trainings (including fire safety, storage and stock control)
maintaining valid business registration records
These are all critical expectations for food business owners. Remember, you are in the business of food safety and are responsible for the lives of the wonderful humans you feed.
4. Flexibility
Entrepreneurs have the flexibility to use the kitchen space as needed, without the long-term commitment or lock-in contracts, which is a particularly important factor for small food businesses who need to refine their processes and production, adapt to growth and say yes to important new opportunities (like an unexpected catering gig for 250 people!), and deal with the seasonality of the industry as demand changes throughout the year.
Limitations of Using a Shared Kitchen and How to Plan for Success
Whilst a shared commercial kitchen is a fantastic solution for small and growing food businesses, it may not be perfect for every business. A shared commercial kitchen is a shared, finite space, great for only a certain number of users at a time, and kitchen users may sometimes have unrealistic expectations about the availability of a kitchen and equipment during peak hours.
Remember, your goal as a business owner should be to firstly utilise an affordable shared kitchen to validate your business concept. Then, after you have reached certain financial milestones (you grow your customer base and reach consistency and security in your sales strategy), you are able to make your own equipment investments and eventually ‘out-grow’ a shared commercial kitchen to find a space of your own. At FoodLab, that is the aim of our shared kitchen – our goal is to help ‘graduate’ our entrepreneurs out of the kitchen, so that soon, they will no longer need it. However, be warned that doing this the opposite way around can be financially devastating.
In addition, some kitchens may not be intentional about developing a safe, supportive, and community-based culture, which can make the experience either uninspiring or unfulfilling for the users involved.
When a shared kitchen lacks a deliberate focus on cultivating a safe, supportive, and community-based culture, the collaborative spirit that makes such spaces thrive can be compromised. The absence of a strong community foundation may hinder effective communication, collaboration, and the exchange of ideas among kitchen users, which can be an incredible and unexpected by-product of using a shared kitchen.
Therefore, the success of a shared kitchen not only hinges on its physical infrastructure but equally on its commitment to nurturing a positive and inclusive culture that enhances the overall entrepreneurial experience.
The Key Takeaway
So, what have we learned today?
As the cost of living, ingredients, and well, everything rises, and the food industry becomes more competitive and cut-throat as large corporate business continue to saturate the market. Shared kitchens will play an ever-increasing role in our local food system to encourage vibrant, diverse and unique food businesses and entrepreneurship that forms the backbone of any community.
What is crucial is that food businesses consider a thoughtful approach to using these spaces, utilising shared kitchens for the purposes of validation to save time and money in the long run. It takes the risk out of failure, which means that we entrepreneurs can invest a little more time in trying to make our city more delicious and diverse, which no one will argue with. Everyone knows this is the industry of love and hospitality, so let's try to keep it that way!
Interested in using our shared kitchen? We are a not-for-profit kitchen incubator that provides refugees, migrants, First Nations or female-operated food entrepreneurs with affordable kitchen space, education and sales opportunities. Check out our program for eligible participants here, or rent our kitchen out as a commercial user.
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