Rise of the Cloud Kitchens and Food Technology Sector

Technological advancement has been skyrocketing for a long time and now and it doesn’t seem to halt at any point. This advancement has also taken over the food industry with a modern concept called the Cloud Kitchen. It is gaining fast popularity and has amassed a large audience within a short time period. Known by many other names like ghost kitchens, virtual kitchens, dark kitchens, and satellite kitchens, these cloud kitchens are expected to see a 17.25% rise in CAGR by 2030.

We need to have a proper understanding of cloud kitchens before we dive into its benefits and income it brings in. Cloud kitchens are mainly delivery-only kitchens where orders are placed online; having no dine-in area. A small food outlet or a chain of food brands that can prepare the food as per order and deliver it to the consumers’ houses. There are a lot of restaurants and food brands that are adopting this new concept to keep up with the large orders instead of a dine-in facility. Consumers nowadays prefer eating at home than traveling to a diner or a restaurant. Therefore, industries are modifying their business models to suit the current trends. Managing a functioning dine-in restaurant involves more cost compared to a cloud kitchen.

The first major advantage is not having to invest in heavy real estate. To set up a restaurant, the location has to be well known and popular. But such areas are mostly very expensive and require a lot of investment. Proper parking areas with valet, great ambiance setup, waiters and receptionists, etc. are needed for a restaurant; whereas, for a delivery-only cloud kitchen, the location should be decent and hygienic. Therefore, the real estate cost is reduced significantly.

Easy expansion is possible since less amount is invested in real estate. With opening up a number of branches and food chains, variety can be introduced in the outlets based on the type of food that has a high demand in the locale. An example is Faasos, which is a cloud kitchen that runs more than 160 kitchens running successfully in different regions. If reasonable prices are introduced into the menu then the profits will improve for sure.

There are different business models for cloud kitchens:

The independent model – With a 500 to 600 square ft. size, this model has a restaurant with no space or store supporting a kitchen with a single store.

The rebel model – This model is adopted by Faasos and involves the introduction of multiple cuisines and give larger preference to the most popular cuisine. A single shared kitchen is available for the preparation of food cuisines.

FreshMenu business model is a mix between a takeaway and a cloud kitchen. This has its own advantages with giving the customers a personalized experience at how the food is being prepared in these kitchens.

Swiggy Model – This cloud kitchen model is a shell having the infrastructure needed for a kitchen. The equipment and arrangement are of the bare minimum. This space is utilized by restaurant businesses which also make use of the delivery crew owned by Swiggy in order to deliver the meals to the customers who have placed an order via the Swiggy app.

Zomato business model – This model is more similar to the FreshMenu model where there are both options of delivery only and takeaway. The orders are placed via the Zomato app which is noted by the restaurant and the remaining services are taken care of by Zomato.

Kitopi Model – A relatively new idea in the cloud kitchen business where all services can be outsourced. The prepped food comes from a centralized restaurant and when ordered the dish is provided final touches by the chef in the delivery outlet and then delivered to the customer.

This idea of a cloud kitchen is great for people who are interested in experimenting and exploring different options rather than sticking to one particular cuisine. This also increases the chances of expansion of business based on the different food preferences.

Before starting a cloud kitchen there are some criteria to be taken care of:

The proper location needs to be selected – An area with easy accessibility that doesn’t occupy a large space can be sufficient for the cloud kitchen

Well-trained staff – Since it is a cloud kitchen, there is no need for a waiting staff but chefs, delivery personnel, and helpers are needed for a smooth flow in the work process. A cloud kitchen will require at most 2 or 3 chefs who can prepare different cuisines based on the type of kitchen you want to set up.

Setting up your inventory – It is an essential task because without proper equipment and ingredients the kitchen cannot work effectively. Using a POS (Point of Sales) system can benefit the owner to maintain records of the stock and inventory and keep a check on the requirements.  Keeping track of the inventory can be useful as the Purchase orders can be raised for each brand, in a multi-brand facility and manage to stock up.

Good rapport with suppliers – depending on the model of the cloud kitchen, make contact with different suppliers, and ensure the quality of the ingredients supplied are of high grade.

Marketing – This is crucial since the cloud kitchen does not have visibility compared to a regular restaurant. Therefore, social media advertisements, regular updates on the social media pages, announce offers and discount coupons, flyers, pamphlets, e-mail adverts, etc. This is the only base for starters until a loyal consumer base is built. After the business starts to grow, higher levels of advertisements like TV ads, banners, etc. can be done. The most famous online food delivery platforms are Uber eats, Zomato, Food Panda, and Swiggy. So, if you are planning to set up a new food brand make sure to collaborate with popular delivery and online ordering apps like the above to get your name familiarised locally. After that, the quality of your food will cater to the needs of your company.

Swiggy in particular is willing to bet on the growth of cloud kitchens. Being a shell model, it has set up more than a million sq ft. of land space in 14 cities within India to help their partners expand to various locations through their delivery services. Gaining a proper understanding of the neighborhood in which the cloud kitchen is to be set up is crucial to pump out food based on the majority that flourishes there.

And since the pandemic has put a massive restriction on all our outdoor lives, we are forced to resort to either home-cooked meals or dine-in meals. With this scenario likely to be extended for a few more months, the business of a cloud kitchen can see a booming rise. The cloud kitchens must ensure that proper protective gear is provided to their staff to prevent the spread of the disease. With the current scenario, investment in maintaining the cleanliness of the surroundings and the personnel involved will be helpful for the business even after the lockdown eases so that customers gain confidence and trust with your food brand.

People are already trying to keep up with their fast-paced lives and are mostly getting accustomed to having food prepared for them. So, this platform enables them to carry on with their work while their food is just a click away.