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Written By Disha Mal
Cloud kitchen aka ghost/virtual is a delivery-only restaurant that has no physical space for dine-in. It relies entirely on online orders placed through online food aggregators or an online ordering enabled website or mobile app. One restaurant can operate with multiple brands, or even virtual restaurants, all under single roof.
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Imagine a large warehouse with diverse mini-food stations each with its own orders coming in direct from customers. The difference here is that there no real walk-in customer.
Rajesh Sawhney, founder and CEO, InnerChef, says, “The food delivery space is crowded and exhausted. Cloud kitchen is the next big bet providing scope for growth and innovation”.
For the young players of the industry kicking in this saturated mud could be like catch 22, but Cloud kitchen concept is not only acting as savior but attracting new eyes of millennial entrepreneurs who now, only need to take care of the kitchen space and maintain standardisation of food without worrying too much about look and the investors to this direction, providing significantly higher margins and space to blaze new trials such as innovative recipes premeditated around special diets.
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“We focus more on taste and nutrition. Our menus consist of freshly-made salads, healthy snacks, and beverages. We also have items based on dietary needs like keto, paleo, vegan and gluten-free,” says Sunjay Ghai, founder, and CEO, Hello Green.
Well as good as it sounds, one thing that you must not forget is that Every cloud has a silver lining. So first let us figure out it’s functioning.
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1: Costumers place their orders .
2: You receive the orders in your kitchen.
3: Your chef cooks the food.
4: Your team hygiene pack the food.
5: Delivery boys/riders come to your place to pick up the order.
Now let’s dig deeper into the pros and cons of cloud kitchens and look at the practical considerations that you need to know before setting your own Digi-kitchen.
Cloud kitchens require less investment to open since you no longer need a prime location with high footfall, which reduces the real-estate cost. … You can open a cloud kitchen at one-third of the investment required to open a traditional dine-in restaurant.
Although most of the virtual kitchens are located in and slightly out of town for easier access for suppliers, cheaper rent. And most importantly, proximity to large residential areas that aren’t served so well by the more centrally located restaurants. You don’t really need to think much about being at any prime locations.
You need less space because you don’t have to suit dine-in guests. You don’t need serving or front-end staff at all, and with the efficiency of a data-driven approach to create the menu and organize the kitchen, when you optimize for delivery-only, you need fewer back-end staff too. That also means you can save on location, ingredients, equipment, computer systems, utilities, the list continues.
Online food aggregators offer restaurants to market their brand on their platform on a per-click basis. Once a restaurant joins an online food aggregator’s platform as a paid member, it definitely improves its visibility as the restaurant’s listing appears at the top of the list of featured dining options. These online food platforms have a specific section on the top for sponsored marketing. A restaurant only has to pay these aggregators when a customer clicks on its listing.
Many restaurateurs invest an ample portion of their advertising budget to market their brand on food aggregator platforms. Since online ordering in India is on the rise. The market has an 8% share of the total food industry in India. Promoting your cloud kitchen’s brands on online food aggregators is a must.
The Global Online Food Delivery Services says “Market accounted for $23, 539.40 million in 2018 and is expected to reach $99,725.97 million by 2027 growing at a CAGR of 17.4% during the forecast period. Some of the key factors propelling market growth are the increasing use of smartphones, changing consumer lifestyles, and the growth of the food and beverages industry.
By payment method, the online segment is expected to grow at a significant market share during the forecast period because of the increasing awareness regarding digital money. On the basis of geography, Asia Pacific is anticipated to hold considerable market share during the forecast period due to the changing food habits of the youth and growth of e-commerce in developing nations”.
The positive point of having a cloud kitchen business is that you can expand your kitchen outlet in different areas of the city. Mostly one kitchen serves delivery around a 2 or 3 miles radius area. In the future, you could easily open an outlet at a different location where you think you will get a good market. Maybe, an area less served by restaurants.
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One step further, if you think you cannot manage all our kitchen operations at different places you can invest in a bigger outlet which serves as the main kitchen. From there you can deliver semi-cooked food to various small outlets to cook it properly and deliver to the end-user. Hence turning into a cloud kitchen franchise.
A dark kitchen is too easy to be started by anyone and everyone. Even with the least investment cost, if not captured early this might be a crowded race to enter. It is difficult for individuals to enter the market as the existing mega food aggregators are not generally the competitions you would love to take head-on. But as it says early birds get the worm.
Building trust and loyalty are essential to the growth and sustenance of any brand. Cloud kitchens will need to think divergent, adopt innovative strategies in order to attract a stable and dedicated customer base. Since it’s an online-only venture with limited customer interaction, cloud kitchens might find it difficult to create an emotional connection with the customers. Hence, brand positioning might be difficult. Reaching out to customers & seeking that all too important trust and loyalty from them will definitely be a huge challenge. Particularly with the older generation because Millenials being a bit impatient and techno-friendly, will still be easier to approach.
A cloud kitchen is absolutely dependent on technology. As there are advances in the fields of technology and artificial intelligence, productivity and convenience will increase for both businesses and customers. But no matter how advanced technology becomes, tech errors can’t be fully avoided. Any such interruption will cause difficulties even in basic operations of a cloud kitchen like taking orders and accepting payments. It’s a high-cost investment in setting up your own delivery system. And 3rd party apps take a high commission (18-27 %) per order.
It might be safe to say that the future of the food and tech industry is Cloud kitchen. Of course, restaurants will retain their positions in the dining experience. But virtual kitchens will be the first preference where convenience and mobility will be needed. After all, this is the age of technology, isn’t it?
What are your thoughts on this topic? How would you like to invest then?