Is Cloud Kitchen a New Future of Food Industry?

Cloud kitchen, a newly disrupted concept has sneaked in the food industry from the back door. The way investors are supporting cloud kitchen startups is something to study. Reports suggest that the Cloud kitchen concept is marching ahead at the highest CAGR among the other segment in the restaurant industry. 

So, What is a Cloud kitchen or Dark kitchen? What makes these kitchens a hot trend among the start-ups? Is there any risk for restaurant owners in the future with the rise of this concept? These are some obvious questions you might be wondering!

We will shed some light on this hot topic and dig deeper through whys and hows of it to get a clear picture.

What is the Cloud kitchen?

Cloud kitchen is a phenomenon in which a small food outlet or group of food brands share kitchen space under one roof. But there are no options for dine-in. You just can take away your food order or you get it delivered by ordering through apps like UberEats or kitchen’s app. So in a broader sense, it is a delivery-only restaurant.  

Ghost Kitchen, Dark Kitchen, and Virtual Kitchen are some other names of Cloud Kitchen.

What Makes Cloud Kitchen Popular Food Startup idea?

As I stated earlier, these kitchens are a delivery-only kitchen, hence you don’t need to spend on big infrastructure cost. Instead, you can focus on your food quality and providing faster delivery to your customers. 

Let’s figure out how exactly it works?

Step 1: The Orders come in from the customers 

Step 2: Kitchen receives the order details

Step 3: The Meal is cooked

Step 4: The Cooked food gets packed properly

Step 5: The Parcel is delivered to the customer by delivery boys. 

You see, there is no involvement of any waiter or sitting arrangement. Only chefs working on different food and a person packing the food. 

You may wonder what makes the cloud kitchen a lucrative concept for the business?

• Lower Infrastructure Cost

Since you are having only a small outlet for cooking the meal and no need for tables and other facilities, you save the overhead expense considerably. There is an only one-time investment on the kitchen utensils and other kitchen-related items. 

• Scalable in Future

One of the positive aspects of having your own cloud kitchen business is that you can expand your kitchen outlet in different areas of your city. Mostly one kitchen serves delivery around a 2 or 3 miles radius area. In the future, you could open a new outlet at a different location where you think you will get good traction. 

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 end-user. 

• Low Overhead Cost

Your profit margin is the main purpose of opening a cloud kitchen. You don’t need to pay for fancy doors and entrance, the client faced staff, and parking area. 

Cloud kitchens have their share of a disadvantage as well. However, compared to its advantages, the negatives aspects can be ignored. Some of the cons of cloud kitchen are;

• High Competition (Because easy to enter in the business)
• Dependence on Food Aggregators (Unless you have your app)
• Masked Customer Information (You won’t know your customers)
• Direct competition with Food Aggregators (UberEats, Zomato, Postmates)

Case Study: Fassos

Working in: 15 cities & 200+ Locations

Customers: 40 lakhs

Multiple successful cloud kitchens are operating throughout the world. And the concept is getting popularity like never before. 

Fassos( Also known as Rebel Foods) was started in 2011 by two young entrepreneurs of India and they have established Fassos in one of the top cloud kitchen companies in the world. According to Crunchbase, Fassos till now has garnered a total amount of $276.1 m in investment and expanding its empire globally. 

Fassos Business Model 

Fassos has adopted a cloud kitchen model that houses four recognized brands namely, Kettle & eggs, Behrouz, and Oven story. However, before that, the company was running on the multi-brand marketplace but then it added these popular brands. 

Fassos has its mobile application and delivery personnel. Additionally, it has also registered its business on local aggregator food delivery apps like UberEasts, Zomato & Swiggy. So the user has multiple ways to order from Fassos.  

Customers can order their food orders like Indian meal boxes, Chinese, South Indian, Rice & biriani combos, Variety of wraps, and dessert from mobile app or website. 

How can you start a Cloud kitchen?

Do you have your restaurant? If yes, then investing in a virtual kitchen will enhance your overall exposure and add more profit with less investment.

Cloud kitchen will always require less investment compared to any dine-in restaurant. Here’s what you need to get started. 

Kitchen Space

It depends on how many cuisines you are going to serve your customers. If you are thinking of something big and have chefs that are experienced in multiple cuisines, you should buy a kitchen space between 800 to 1200 square feet. 

Now if you want to open your kitchen space in a prime spot, then you will have to be ready for more investment than in non-prime spots. You know your city better. So, do a survey before deciding your area of serving. 

Kitchen equipment

Now, your major chunk of investment is going to go in kitchen equipment. Depending on the cuisines you are providing, you have to have required kitchen equipment. Refrigerator, Oven, Chimney, and Utensils are some of the common things you need.  

Kitchen staff

Since your kitchen will be recognized with your unique food, you should not compromise on the person behind making that food. You should hire a proficient chef for your kitchen. You can extend the chef staff as you increase your offerings. (Do your mom cook the best food? Why not make her the Cook? That way you will save some cost.) 

You will need one person for packing the food and one person for handling the billing of the food order. 

Licensing & PoS

You will need compliance with the local food & beverage industry compliance before hopping onto the business. Moreover, You will need PoS software and PoS system for billing inventory requirements. That way you can manage your order and staff better. Cloud-based PoS systems are a trend nowadays. 

Do you need an app for your Ghost kitchen startup?

I know your first question would be How much does it cost to make an app? But the cost of app development depends on multiple factors. 

For now, just remember it can cost to between $2k to $40k. if you don’t want to build your app then you can register your kitchen’s name in the local food delivery apps like UberEats and Postmates. They will charge you a pre-decided commission on a particular order. 

If you do have your own app and delivery boys, all the benefits go to your account. You will have more control over your food related operations.

Business models for cloud kitchen 

There is not only one business model in the cloud kitchen, there are multiple models and every model has different revenue generation methods. Let’s find out existing business models.

Conclusion

Undoubtedly, the future in the f& B industry is Cloud kitchen. Of course, restaurants will have their share of dining experience but virtual kitchens will be first preference where convenience and mobility will be needed. 

What are your thoughts on this concept? Would you like to invest in such an idea?