In the booming online food ordering sector, new business opportunities are opening up for restaurants to grow their business. One of these trends is the cloud kitchen model. The age of smartphones has enabled us to order food using our phones and have it delivered right to our doorstep. The concept of a cloud kitchen has been embraced by many restaurants and enabled them to increase their profits by collaborating with food aggregators like Swiggy and Zomato. The cloud kitchen concept is a recent fad ruling the food industry.
What is Cloud Kitchen?
Cloud Kitchens (also known as dark kitchens, ghost kitchens, or virtual kitchens) are fully-equipped kitchens that don’t have a dine-in facility. They are takeaway-only restaurants that accept online food ordering only.
Cloud Kitchens curtail most of the expenses incurred in dine-in restaurants. They create a better opportunity for restaurateurs to experiment with this new model with minimal cost and scale as it grows. They also foretell the upcoming challenges and risks involved in running the business plan.
Faasos, HolaChef, FreshMenu, RedBox, and some of the famous Indian cloud kitchens that had online food ordering services alone with no storefront have now enabled takeaway services due to the increase in orders. Due to the easy experimentation, low investment, ability to manage multiple brands under a single roof, and space consumption, the Cloud kitchen concept is becoming a hot trend in the food industry.
How does Cloud Kitchen work?
The concept of a Cloud kitchen is effortless. Most Cloud Kitchens use POS software integrated with third-party food aggregators to take orders and process them. Customers place orders through the website or mobile application of the food aggregator. Once they place orders, the POS system notifies order details and routes them to the respective kitchen without manual printing of kitchen order tickets. The POS system updates the food preparation status to the food aggregator application. This status is notified to the customer via food aggregators, and nearby delivery agents are assigned. These delivery agents then deliver the food to customers. The feedback from customers received through the food aggregator applications is used to identify the areas of improvement.
Some successful cloud kitchens include,
The Baker’s Dozen is a dine-in and takeaway bakery that started their business with 4 bakers and with their exclusive handmade sourdough, they have enhanced their business by multiple folds that they are baking nearly 10,000 loaves of bread a day. This Mumbai-based cloud kitchen started serving their best bread all over India.
Deliveroo is an online food ordering portal that has introduced its virtual kitchens into play by naming as them ‘Deliveroo’s editions’ to focus on delivering the best food to customers on time without any compromise.
Amadora Gourmet ice cream has initiated its PAN India delivery wanting everyone to experience its unique ice cream flavours. With their wide range of over 250 flavours of ice cream, they have established their taste and brand among the public.
In India, Redbox introduced small kiosks in multiple parts of Chennai, aiming to run as takeaway-and-delivery-only kitchens. With its crisp menu and faster delivery, Redbox became a successful cloud kitchen. Recently, Swiggy and Zomato have started their cloud kitchens to inflate their business.
Who uses cloud kitchens?
Restaurants that offer delivery or takeout: Traditional restaurants with delivery or takeout use cloud kitchens to expand their operations without bearing the overhead costs of a physical restaurant space.
Cloud kitchens are often used by catering businesses to prepare and package their food.
The use of cloud kitchens can be a potential option for food truck owners who have partnered with online food delivery platforms and will accept only delivery and takeout orders.
Online food businesses
For food businesses that are primarily operated through websites or social media platforms, cloud kitchens can be a useful tool for preparing and packaging their products for shipping or local delivery.
For food businesses of all sizes and shapes, cloud kitchens are a cost-saving and efficiency-enhancing solution.
Benefits of a Cloud Kitchen
Cloud kitchens have become increasingly popular due to several benefits, including:
Reduction in overhead costs
For cloud kitchens, there are no physical storefronts or expenses associated with maintenance, rent, or utilities required. So this allows cloud kitchens to offer competitive prices and increase profitability.
Cloud kitchen offer flexibility in terms of location, menu, and operating hours. As a result, chefs and entrepreneurs may experiment with different cuisines and concepts without the constraints of a traditional restaurant.
The design of cloud kitchens is aimed at optimizing efficiency and streamlining operations. By focusing on delivery-only services, cloud kitchens can prioritize food preparation and packaging, resulting in faster order fulfillment.
Cloud kitchens can reduce food waste by anticipating demand and preparing only what is needed. This reduces costs and supports sustainability efforts at the same time.
As a result, cloud kitchens are becoming increasingly popular and promising in the food industry, offering a variety of benefits to entrepreneurs, chefs, and consumers.
The 7 Cloud Kitchen Business Models
The business model of the cloud kitchen is different for each delivery-only restaurant. Here are the seven most commonly used cloud kitchen business models:
Independent Cloud Kitchen
It is a standalone cloud kitchen that creates its own brand, menu, and marketing strategy. To maximize efficiency, independent cloud kitchens may manage multiple brands from a single location.
Aggregator Cloud Kitchen
It partners with existing restaurants and food brands to offer delivery-only services. The existing restaurant provides the infrastructure, technology, and marketing support needed to run a successful cloud kitchen operation.
Shared Space Cloud Kitchen
Shared space cloud kitchens are shared kitchen facilities that provide food entrepreneurs with access to fully equipped commercial kitchens. This model allows multiple businesses to share the cost of equipment and overhead expenses.
Franchise Cloud Kitchen
Franchise cloud kitchens operate under an established brand name and business model. They offer entrepreneurs the opportunity to operate their own cloud kitchen using a proven business model and established brand.
In-House Cloud Kitchen
In-house cloud kitchens are owned and operated by a single restaurant brand. Restaurants use them to expand delivery services and support existing operations.
Multi-Brand Cloud Kitchen
Multi-brand cloud kitchens operate several restaurant brands from the same kitchen. This model allows entrepreneurs to operate multiple brands with lower overhead costs.
Kitchen Pod Cloud Kitchen
A pod cloud kitchen is a small, modular kitchen unit that can be placed wherever you need it. They are flexible and low-cost, enabling entrepreneurs to set up delivery-only operations in high-demand locations.
Each business model offers unique advantages and disadvantages, and the choice of model will depend on the entrepreneur’s goals, budget, and market conditions.
Why invest in cloud kitchens?
Considering the current scenario, renting a space for a restaurant in any metro city is a huge crux. A minimum of 1200 sq. ft is essential to run a low-budget restaurant. It has to accommodate the kitchen equipment, tables, chairs, billing counters, etc. But you can accommodate a cloud kitchen within a space of 500-600 sq. ft., for which the rental amount will be around 30k – 50k. With low investment, cloud kitchen business models help restaurateurs gain more profits.
Not just that, a cloud kitchen can easily change the type of food they prepare by hiring the right chef & updating the menu online which is a very less investment compared to a classic restaurant where they have to change everything right from the theme of the restaurant to the marketing strategy. Cloud Kitchen equipment list includes the basic kitchen equipment needed for cooking and a POS system that helps in integrating the menu and orders with food aggregators. The POS Software has integrated Customer Relationship Management that helps maintain a loyal and trustworthy customer relationship by sending customized notifications and updates.
Cloud Kitchens have an ‘N’ number of opportunities because all it needs is kitchen space and demand to feed its customers. With minimum risks involved, cloud kitchens are one of the safest bids to invest in the food industry.
Should an existing restaurant owner invest in cloud kitchens?
In case your restaurant is already running smoothly, investing in cloud kitchens would increase your overall exposure and profits. Easy experimentation is the unique selling point of cloud kitchens. Investing in multi-brand cloud kitchens can help you gain more profit and visibility.
The factors to consider when opening a cloud kitchen
At any given time, a cloud kitchen would require less investment compared to the classic dine-in restaurant. You can even handle multiple brands under a single kitchen using the Multi-brand cloud kitchen concept. For example, Rebel Foods is a cloud kitchen brand that manages multi-brand cloud kitchens like Faasos, Behrouz Biriyani, Oven Story, etc. This multi-brand cloud kitchen model proves successful as the profit of each brand goes into the same pocket. To open a cloud kitchen business, you will have to consider the following,
Depending upon the size of your kitchen, anywhere between 600 to 1200 square feet would be optimal for your kitchen to run. Setting up a kitchen in a prime area would be easier for food aggregators to reach out to you. With the population being higher in metro cities, it is easier for your kitchen to gain more popularity.
Investing in durable cloud kitchen equipment makes cooking easier. The equipment would cost you the majority of your budget. If you want to spend lesser here, investing in used equipment would be a good alternative.
There should not be any compromise in hiring the best staff since the best chefs & efficient employees are the pillars behind the kitchen.
Cloud Kitchen POS Software is essential for hassle-free handling of orders, sales, and inventory. It is a one-stop source for all cloud kitchen essentials and notifies you of the business insights to expand your business.
Other expenses include 20-30% per order that the online food ordering portals charge, Restaurant licenses & permits, and food packing costs.
Note: The costs mentioned above are approximate values. You can cut down the cost at various places such as rent, equipment, etc.
How does Gofrugal help Cloud Kitchen Business Owners?
Gofrugal helps Cloud Kitchen owners by providing robust Cloud Kitchen Software that offers easy integration with third-party aggregator portals and hassle-free order management. Cloud Kitchen POS Software helps act as a single solution to all your cloud kitchen requirements. Gofrugal’s ServeEasy has an integrated Customer Relation Management that assists you in boosting your sales and buying more customers.
As Cloud kitchens do not have a storefront, there are chances that the kitchen might not reach the expected visibility. Want to know the quick fix to increase your visibility? Click here to know more about how Restaurant marketing comes to your rescue.
What are your thoughts on Cloud kitchen? Do you think it’s future-ready? Share your views below.