When you heard about cloud kitchen business model what was the first thing came to your mind? Well there is nothing which we do on cloud here, Cloud is a name inspired by cloud computing technology which essentially means reducing the upfront capital investment cost and get on with your business idea.
Cloud Kitchens are basically a delivery-oriented kitchens, you order food via phone, app or page and they deliver it to your address. Cloud kitchens does not have space to sit and have food. The major push in this business came from two sides one from customers who many a times don’t intend to go in a restaurant and have food, in fact they feel its is easier to order food from favourite restaurant and have food at their comfort.
Second is from Restaurant owners who felt huge capital investment can be avoided setting up a delivery oriented kitchen in a remote area.
cloud kitchen offers an alternate regular restaurants to start your dream kitchen, no huge investment in upmarket space: you can open the kitchen anywhere in or outside the city or from your home itself, all you need to care is of order’s & last mile delivery and off course quality of food. Cloud Kitchens sometimes called ghost kitchen because they are not visible to anybody.
Online Offers, Quality of food, Packaging, last mile delivery and customer feedback are real parameters in which a cloud kitchen is measured. Now a days it’s much easier to open a kitchen and start delivering, all you need is Zomato, DoorDash or Swiggy everything else can be taken care slowly as you grow.
Cloud kitchens have been growing for last 10+ years & according to Redseer, the number of cloud kitchens in India is expected to grow at a rate of 50-60% YoY. It is expected to become a $3Bn business in India by 2024.
Some of the well-known names in cloud kitchen business are:
- Rebel Foods is the largest cloud kitchen restaurant company, with over 3000+ restaurants serving across 30+ cities via online food delivery. Rebel Foods is a less than a decade-old startup, commonly known for its larger brands – Faasos, Behrouz Biryani, Oven story Pizza and Mandarin Oak etc.
- Poncho Hospitality Private Limited, founded in 2012, doing business as Box8. Its known brands are BOX8, MOJO Pizza and Mealful Wraps.
- Freshmenu, founded in 2014, is an online food delivery platform that allows users to discover and order packaged meals.
- Ola Foods which has also launched three new brands — Bowlsome, Paratha Experiment, and Meal Kits, and expanded its selection under top-selling brand called “Khichdi Experiment”.
- In October 2019, Ola started to scale up private brands, starting with Khichdi Experiment, after shutting down its food delivery marketplace Foodpanda.
- Sky Gate Hospitality Pvt. Ltd, founded in 2015, runs Biryani by Kilo (BBK), a premium biryani brand chain. The company primarily operates under the cloud-kitchen model with a few dine-in restaurants at select locations.
There are some opportunities before cloud kitchens:
- Millennials are drawing the market now a days with more and more extra money in their pocket they place more orders.
- Congested road with traffic jams add up to these business, people prefer having meal at their ease
- OTT platform, gaming and Binge watching are adding to more people ordering food online
- Cloud Kitchens are Economically more profitable because of savings on huge real estate and decoration. Imagine if you were to start your own restaurant business you would need to plan for space in a up market area, invest in good interiors, keep staff to maintain dining area along with your extra kitchen staff, this would cost you a bomb. In upper market places restaurants struggle to keep cost low and soon closed out.
- They can go more than one brand coming out of their single kitchen
- Cloud kitchen’s has potential to crack into highly fragmented market in India, Where only 3-4 names operates more than 500 branches in India, more and more people can come forward
- Pandemic has propelled the growth in this market.
- Investment in food delivery apps where apps charge anywhere between 25-30% commission, sometimes not viable
- You got to earn a name & fame for yourself, food delivery apps charge heavy for marketing.
- if you have not taken food delivery app service then you need to Invest in last mile delivery which may eat up your margins
- Kitchens often struggle with peak hour delivery which may result in customer attrition.
- Customer loyalty is big big concern in this segment, which is why kitchen owners have to be on alert always.
- It’s human-centric business so manpower is real issue here, almost 50-60% attrition rate is recorded in traditional hotels whereas in kitchens the data is not available though it would be touching 40-50% annually.
Let’s understand what is the model cloud kitchen business has?
The operating model includes expenses and profits incurred per meal delivered to customers. The profit is made when no of meals delivered are optimised or you kitchen goes multi-brand.
There are basically three parts to this business:
- Core Kitchen which includes: Food Products, Inventory Management, Supply Chain Management
- Cloud: Product Planning, Digital Platform (includes website, food delivery app & social pages), Price, Marketing, CRM, Feedback, Data and Analytics
- Backend: Capital Planning, Investors, Growth Plans, Finance, HR and Quality & Hygine.
If you seriously look at this model, Backend and Cloud are something can be arranged or hired but kitchen & idea associated with it lies with the entrepreneur and which is why it is comparatively easy to open a cloud kitchen in today’s scenario.
As per Zomato’s report in 2019, Biriyani was the hottest food item that was delivered across India more than any other dish why? Simply because biriyani has longer time to perish, quick to prepare and easy to pack. You just need to invest in packaging items rest of the operations are same.
Thanks for your time, please share your feedback. Also, do watch this video for clear understanding on the topic.
Do read another article as to how would you make it profitable using technologies