If there is any growth area in this industry for 2020, it would be food (and drinks) delivery. According to a Euromonitor webinar, ghost kitchens could become a $1 trillion market by 2030. It is safe to say that cloud kitchen/dark kitchen/ ghost kitchen is here to stay, and would only evolve multiple folds from here.
Table of Contents
What is cloud kitchen?
Cloud kitchens are not central kitchens.
Cloud kitchens are built for the production and delivery of ready meals to customers, where the orders come from mobile ordering without any dine-in capacity. This model focus only on food preparation. Think of it as a delivery-only restaurants
Primary source of revenue: Online delivery websites and delivery platforms
Central kitchens are built for the production of semi-ready meals to existing stores, with an existing kitchen and dine-in capacity.
Primary source of revenue: dine-ins
What makes cloud kitchen successful?
Location, location, location
The major contributing factor to the low cost of Cloud Kitchen is the real estate cost. Launching a restaurant requires visibility, high foot-fall, parking capacity, aesthetic fit-out for dine-in space. Cloud kitchen involves none of these. However, your cloud kitchen should be where there is high volume for your offerings.
Cost to built
Capex-wise, a cloud kitchen is at least 40 to 30 per cent lower than opening a full-fledged restaurant. Besides, cloud kitchen works because business owners save immensely on dining area fit-out and front of house resources. You may save even more if you can source for second-hand shelf racks, kitchen utensils, stainless steel countertops. However, it would be worth the initial investment to procure new kitchen equipment for:
- Exhaust hood
- Gas-based cooking range or electric range?
- Combi or convection oven?
- Commercial freezers and walk-in refrigerators
- Commercial fryer
- Wash stations
- Fire, safety, or sanitation types of equipment – be sure that your fire suppression systems adhere to the local fire safety standards
- Operational: POS and Kitchen Display System(KDS) to streamline the different parts of a cloud kitchen
Depending on the type of food offered, the cost of setting up will vary. Another investment that you need to allocate additional time and money is the packaging. Packaging plays a crucial role in giving an excellent first impression and build brand affinity as it serves as your major (and only) point of contact. Your packaging speaks volume in providing a great customer experience.
Staffing for Cloud Kitchen
A cloud kitchen can be from a build-up of 500 sq ft onwards. A lean team of four to five employees will have your cloud kitchen up and running. Two to three chefs, a housekeeper and a staff, to manage orders.
Biggest challenge
It is extremely crucial to develop an independent, visible digital presence. Competition for attention can be intense with thousands over merchants on aggregator delivery platforms, which acts as your “storefront”. The savings on the aesthetic fit-out and front of house cost will serve as your digital marketing and ad spent instead:
- How much of ad spends are you willing to invest to stay visible?
- How are you going to build brand loyalty?
- How can you gain the customer’s trust in hygiene and safety measures taken?
- How can you deliver an experience in a box?
Types of Cloud Kitchen Business models
Independent Cloud Kitchens
How it works: One kitchen, one brand, one cuisine
Online orders only, partnering with delivery platforms or self-reliance.
Kitchen only, no dine-in area
Delivery directly to customers
Multi-brands Cloud Kitchens
The more elaborate type. Multiple cuisines within the same cloud kitchen, operated by the same company. By using the same equipment, this model keeps the operational costs at a minimal. This model can encourage repeat orders from existing customers.
How it works: One kitchen, multiple brands, diverse cuisines (it can vary from Pizza, Chinese, Indian, etc. within one cloud kitchen)
Online orders only, partnering with delivery platforms or self-reliance. The plus side? Multiple listings on delivery platforms give better visibility, reaching out to a broader target audience.
Kitchen only, no dine-in area
Delivery directly to customers
Co-working Cloud kitchens
Think of co-working spaces, but for the F&B industry. Any brands can rent out a kitchen unit within a timeframe. This model is ideal for restaurants and newcomers to test run new concepts. The co-working cloud kitchen will provide all equipment and utilities.
How it works: One large kitchen infrastructure, multiple brands, multiple cuisines
Online orders only, partnering with delivery platforms or self-reliance
Kitchen only, no dine-in area at the co-working premises. However, restaurants might have their existing storefronts.
A mix of aggregator dependency and self-reliance for deliveries
Aggregator Managed Cloud Kitchens
Similar to co-working cloud kitchens but managed by online delivery platforms such as Grab.
The aggregator will co-partner with their top restaurants for delivery-only from cloud kitchens.
Major players, such as Grab will provide merchants with end-to-end business solutions, marketing support, maximise visibility and growth through analytics, advertising and financial services.
How it works: One extensive kitchen infrastructure, multiple restaurant partners
Orders from aggregator’s delivery platform
Kitchen only, no dine-in area
Delivery and fulfilment, by aggregator’s fleet
Virtual Restaurants
Utilizing existing kitchen infrastructure, this model operates from an existing restaurant. The brand and concept is entirely different from the restaurant and caters only for delivery. This model is an excellent way for the existing brand to test run a new idea with minimal risk.
How it works: One kitchen, multiple brands, multiple cuisines
Orders from aggregator’s delivery platform and self-reliance
Kitchen only, no dine-in area
A mix of aggregator dependency and self-reliance for deliveries
Are cloud kitchens replacing restaurants?
Delivery service is every restaurant’s go-to business model during the pandemic and increasingly positioned as an independent model in its own right, rather than an add-on. It is an industry-wide trend, with new technology and innovation making dining safe. The demand for delivery will only increase. Although in time, dine-in sentiments will be restored, cloud kitchen will exist alongside restaurant kitchens, catering to customers needs, just like Netflix and cinemas.
Which restaurants, exactly, should go into cloud kitchens
While saving a significant amount on cost, business owners can concentrate on meeting delivery needs to their target markets. As good as it sounds, the key question to ask: “Why are you building a cloud kitchen in the first place?”
There are a few factors to consider. If you are an established brand with storefronts and have already built up a brand affinity with your customer and there is an increasing demand for delivery; it makes sense to build cloud kitchen to meet delivery demands. This is so that your existing storefronts will not be overloaded.
If your brand is built solely from the cloud kitchen, you need a unique and sound concept, with much effort required to guide your customers through your concept online. The F&B industry is still very much a service industry in the long run. Good quality food alone does not assure returning customers these days. Your online presence needs to be consistent, relevant and visible. In the end, it is still the way how your brand makes customers feel.
