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India’s future F&B fare: Dawn of the cloud kitchen revolution
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Tuesday, 23 February, 2021, 16 : 00 PM [IST]
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Ameeth Jadhav & Chef Amit Chaudhary
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The foodservice business traditionally has been working on a high-risk model of fixed costs including rent, employee salaries, opex, etc., and requires a continuous flow of cash day-in-day-out through the channel of consumers to be viable as a business. For these front-of-the-house typical sit-down restaurants, the daily bread was walk-in customers, and the butter came in from at-home/work delivered food. The infrastructure from creating an order to delivering it was pretty old-school and could only service a smaller area in the vicinity of the food outlet. The food again was prepared in age-old kitchen equipment which often lacked many standards when it came to safety and food security. Moreover, the usual marketing channel was word-of-mouth to make or break any food outlet’s business.
With technology stepping in to retrofit into most of these aspects, food service businesses started to slowly learn how things could be more experiential through various factors like ‘smart’ interiors for apt ambience, maintaining high standards of hygiene in the food and service, installing new age kitchen equipment to reduce the hassle on the back-end kitchen staff and also to provide consistently flavoured and textured food year on year. The world didn’t stop at this. Understanding what the patrons needed was another big hurdle. What started about a decade ago when everything started getting increasingly available on the internet and people in the world over could access/ assess it at their fingertips through their phone, major businesses across industries shifted online creating the dot-com culture to boom. Globalisation was at its peak. The foodservice business however remained farfetched and lacked a bridge to fill in this gap of connecting with the customers in real-time.
This mushroomed the thought of foodservice aggregator as a business model by start-ups within India and also abroad. Offering an e-marketplace of eateries, real-time updates about order acceptance, food delivery person’s details, to tracking id of the person, etc., all these features donned by the FSAs took people by a storm popularizing the fact that the food of their choice can also reach them with just a few clicks on their phone.
The rise of Cloud Kitchens as a concept
The onset of this trend soon turned into being a culture wherein dine-in food consumption was on the rise and almost matching that of walk-in customers. This fact stemmed the idea within several young entrepreneurs to deduce how a delivery-only kitchen model would thrive while also working on a low-risk model and nominal investments. That is how the cloud kitchen/ dark kitchen/ delivery only kitchen model was birthed.
A cloud kitchen is a concept of delivery-only restaurant with no physical space, no dine-in space, or takeaway counter. It is a restaurant kitchen that accepts delivery only orders without a traditional restaurant or dining-in facility. Just an operational kitchen for the preparation of food that functions as a production unit. No fancy infrastructure, no floating staff, no tables, no furnishings, nothing at all. Customers can place their orders online through the online food aggregator apps or the restaurant app, hence, the name cloud kitchen.
Advantages and disadvantages of a Cloud Kitchen
The advantages linked to this model are several. First and foremost being – small remote real-estate space requirement that brings down the operational costs to bare minimum which is not the case in a traditional sit-down restaurant setup. Low operational costs with front-of-the-house staff and logistics costs driven out completely. One production space could be used as a common home to many brands serving varied cuisines. Furthermore, a digitally present brand could be expand to newer geographies more simply than a brick and mortar eatery brand. All these factors integrally lead the venture to be a high-profit one with ROI being a quicker path.
While an entrepreneur is easily lured to opening a cloud kitchen, there are an equal set of hurdles that one has to keep in mind to avert any kind of uncalculated risks leading to premature closure, failure of the brand, etc. Given the dependence of being only present virtually as a brand, customer education and popularising within the masses is a cumbersome process and a lot time-consuming. One must know the art of using various social media channels and FSA in-app promotion to connect with prospective consumers. Also, FSAs have their share of the pie by charging the restaurants between 15 per cent and 35 per cent as commission, which in the long run can be worrisome for the cloud kitchen brand. Lastly, being at the mercy of FSAs can have its own implications like having no-consumer data to help the cloud kitchen to better understand their consumers’ wants and to make changes accordingly. This impacts sales in the longer run, as there would be minimal customer retention.
What future holds for Cloud Kitchens
With increased internet penetration and the age of millennials with disposable income demanding digital, mobile-friendly solutions, the trend of virtual restaurants (delivery-only brands) has lately garnered attention. Cloud Kitchens have evolved the traditional restaurant industry, just like meatless burgers have. And, this is more likely to grow with the next generation, who has grown-up with the internet and smartphones, entering the marketplace, advances in kitchen automation, drone delivery. So, many restaurants are now moving towards cloud kitchen operations. Tech platforms like Uengage are helping these restaurants, making it much easier for their customers to order, pay online and get the food delivered to their homes at the click of a few buttons.
Since the cloud kitchen business still has a huge untapped potential, this might be the best time for one to invest in a cloud kitchen business model. With minimum risks involved, it is one of the safest bids, if one is planning to invest in the foodservice industry. And, even if one is already running a profitable restaurant, investing in a cloud kitchen would require lesser investment compared to the classic dine-in restaurant and would add more profits at a lower cost.
According to research, 81 per cent of people in India order food online. There are 317 cloud kitchens in India which run over 2000 internet restaurant in 35 cities. This shows the increasing potential that cloud kitchen as a model holds for expansion.
(The authors belong to Mumbai Food Works Hospitality LLP)
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