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What are cloud Kitchens?

Updated: Sep 28, 2021

The food sector has always been undergoing different technical improvements as a result of escalating competitiveness and ever-growing technology. Cloud Kitchen is one such innovation that has lately made its way into the culinary sector and taken the world of restaurants by storm. According to reports, the Cloud kitchen concept is growing at the fastest CAGR (Compound Annual Growth Rate) among the other kitchen concepts.

We've outlined how a cloud kitchen works, its business strategy, advantages, limitations, and other aspects to consider in light of the potential of the delivery-only category.

A cloud kitchen is a delivery-only restaurant idea with no physical premises, no dine-in area, and no takeout counter. It's a restaurant kitchen that only accepts delivery orders and doesn't have a regular restaurant or eating area. Simply a working kitchen that serves as a manufacturing unit for food preparation.

There was no expensive infrastructure, waiters, tables, or furniture. No fancy infrastructure, no waiters, no tables, no furniture, nothing at all. Customers can place their orders online through the online food aggregator apps or the restaurant app, hence, the name cloud kitchen.

Ghost kitchens, gloomy kitchens, and virtual kitchens are all terms used to describe these types of kitchens.

Cloud kitchens have become a popular investment alternative for both established and new restaurateurs looking to start a culinary business throughout the years. Some of the notable cloud kitchen chains operating in this area include Faasos by Rebel Foods, Biryani By Kilo, and Freshmenu. To meet increased meal delivery requests, established restaurant brands are now building cloud kitchen locations instead of opening a dine-in location.

The primary enablers in this market, online food aggregators, have also dabbled in the cloud kitchen business. Swiggy, a food ordering and delivery service, has launched Swiggy Access, a shared cloud cooking area that allows new and established businesses to run delivery-only operations from.

Let's look at why the entire food and beverage industry has jumped on the cloud kitchen bandwagon.

What Are the Different Business Models for Cloud Kitchens?

The same operating method applies to all cloud kitchens: an order is accepted, food is made, and food is delivered to the customer's doorstep. However, there is a distinction in how their operations are carried out. These delivery-only restaurants have a variety of business approaches.

Standalone Cloud Kitchens

These are self-contained kitchens where a single brand owns or hires a single kitchen site but does not provide dining. These restaurants usually specialise in a single cuisine and use a variety of food aggregators or delivery services.

Multi-brand Cloud kitchen

This business model allows numerous brands under one parent company to share a single kitchen, lowering operational costs. Every brand/restaurant specialises in different cuisine and caters to diverse customer needs while sharing a vast kitchen space.

Multi-brand Cloud kitchen

This business model allows numerous brands under one parent company to share a single kitchen, lowering operational costs. Every brand/restaurant specialises in different cuisine and caters to diverse customer needs while sharing a vast kitchen space.

Commissary (Aggregator) Kitchen

Taking advantage of the booming internet delivery market, numerous delivery aggregators have launched their own cloud cooking models, renting out empty kitchen space and basic infrastructure to restaurants. On a shared basis, restaurants can use these fully stacked or shell kitchens, depending on their needs. So, in a nutshell, a large kitchen may accommodate a number of small kitchens.

Outsourced Cloud Kitchen

As the name implies, this model allows a restaurant to outsource nearly all - if not all - of its processes, with the exception of the finishing touches. Before the food is sent out for delivery, the chef gives it one more polish. All other operations, including food preparation and customer service, are outsourced.

A co-cooking cloud kitchen

This type of kitchen is a huge kitchen infrastructure that multiple restaurant companies can rent and use to conduct their operations. These culinary spaces are strategically positioned and have unique kitchen units for each brand, all of which are equipped with the required equipment and utilities.

Cloud Kitchen's Benefits

Compared to typical restaurants, cloud kitchens provide the following advantages.

Low Operational Costs

A cloud kitchen eliminates many of the operating costs that traditional restaurants face. Cloud kitchens supposedly incur reduced expenses and have an advantage over brick and mortar restaurants in terms of infrastructure, overheads, logistics, and so on.

A cloud kitchen can be built to be a very lean operation, with fewer employees and infrastructure, allowing for a low-risk endeavour. When compared to a brick-and-mortar restaurant, the initial investment necessary to start a cloud kitchen is far lower.

When compared to a regular dine-in restaurant, it takes one-third of the time and resources to open a cloud kitchen because you don't need a restaurant in a prime location or hire staff to serve guests.

High-Profit Venture

A cloud kitchen can be started with fewer employees, less cooking equipment, less furniture, and no décor. As a result, it allows restaurant owners to experiment, reduce overheads, and fast reach operating breakeven, making it a successful endeavour.

Easy Expansion

Because the business is confined to a kitchen, the total Capex cost is far lower than that of a full-fledged restaurant. Restaurants may use cloud kitchens' scale to test new geographies and consumer acceptance without having to invest in infrastructure.

Cloud Kitchen's Disadvantages

Cloud kitchens, on the other hand, have some drawbacks.

Building a Brand

Because cloud kitchens are an online-only business with limited consumer engagement, it may be difficult to establish a brand at first. Cloud kitchens compete entirely in a congested online economy because they have no physical presence. Customers are less likely to become repeat customers, and they will be unable to bond with a parrot.

Customer Access Through Third-Party Food Aggregators

Unless a restaurant has its own delivery app, clients are accessed through third-party food aggregators such as Zomato and Swiggy. Restaurants pay a commission of 15 percent to 35 percent to these aggregators. Due to the high amount of orders generated by these services, the restaurant should be unconcerned about the commission. However, he is concerned about the long-term impact of hefty commissions on his firm.

Cloud Kitchen's Business Development

The trend of virtual restaurants (delivery-only brands) has recently gained prominence, thanks to rising internet penetration and the age of millennials with discretionary income expecting digital, mobile-friendly solutions. Cloud Kitchens, like meatless burgers, have revolutionised the restaurant industry. And, with the next generation, who has grown up with the internet and cellphones, entering the marketplace, developments in kitchen automation, and drone delivery, this is more likely to grow.

This could be the greatest time for you to invest in a cloud kitchen business model because the cloud kitchen industry still has a lot of untapped potential. If you're looking to invest in the food sector, it's one of the safest bets you can make. Even if your restaurant is profitable, investing in a cloud kitchen would need less capital than a traditional dine-in restaurant and would result in more profits at a cheaper cost.

Espangle is here to guide you in your journey towards setting up a successful and feasible cloud kitchen operation. Hire our services today and concentrate on what you do best: providing tasty meals to hungry clients!

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