The pandemic years was a turning point for the Food and beverage industry worldwide. The recurring lockdown brought irreversible damage to many eateries, forcing many restaurant brands to shut down. Just like many industries it was a tough time for the restaurant industry as well as a good number of food businesses closed, unable to cope with the loss of revenue, many have managed to scrape through by relying on the delivery services from the business. Lets today learn about the different types of Cloud kitchen and their pros and cons.
As the dining and takeaway revenue streams saw a massive decline, there was an equivalent boom in the delivery business. Through their digital platform, food aggregators like Swiggy and Zomato have managed to give these struggling eateries access to a new market that never existed for them. Pandemic threw open an opportunity to the Cloud Kitchen business model, a relatively new breed of business.
Virtual Restaurants or Cloud kitchens are food businesses that survive only on delivery business; they do not have brick and mortar dining space.
The lockdowns have created an environment conducive to the Cloud kitchen’s growth. The Cloud kitchen business model has its own advantages, making it a popular option among food entrepreneurs.
Some Advantages of Operating Cloud Kitchen Models
Minimal Operational Cost
Cloud kitchen or dark kitchen model is an asset-light business, and the main reason is the lack of a dining area; this cuts down the real estate requirement, sometimes upto 50%.
Usually, cloud kitchens are not located on the busy high street or places with high footfall, which tend to be expensive real estate. A discreet place with low rent would also be conducive for operating a cloud kitchen; hence the business can save on the real estate.
Since cloud kitchens operate differently from a dine-in restaurant, there is no need to employ the dining staff, which again cuts down the cost.
Along with no dining space, there is no pressure on the business to maintain and renovate the dining area or create an ambience that brings down the cost of operating a cloud business. Conversely, the cloud business has to part with the aggregator commission, which becomes a resource drain on the restaurant business.
Ease of Operating Business
Traditional dining areas take much effort and resources to operate. A Dine-in restaurant has to spend a lot of time and energy strategising it’s dining areas, creating an ambience, training the dining staff, and maintaining the dining area, making the dining business very energy draining.
A well trained FOH staff face higher attrition rates due to various reason adding to the complications. The cloud kitchen business becomes easy to operate by removing the FOH division.
The cloud kitchen has to train the staff to prepare delicious food and maintain hygiene and safety standards. However, the Chief kitchen chef has to devise ways to make all the dishes prepared delivery friendly.
Ability to Experiment
The dining area of a traditional restaurant becomes part of the business’s brand. A restaurant needs to dedicate time and strategy to develop its branding, including decor, lighting, colour scheme, etc.
In case a traditional restaurant fails to achieve its expected revenue target relaunching the business becomes difficult due to the expenses involved.
With Cloud kitchen, it becomes much easier to experiment with multiple concepts and cuisines as everything can be operated from the same room under different brands.
Depending on the feedback and the profitability of the menu items, a Cloud kitchen can dump or scale up the product, which receives good feedback.
Change in Consumer Trends:
Pandemic has caused a drastic change in consumer patterns. Many people are no more comfortable dining in restaurants and prefer to order food through delivery.
Due to this trend, food aggregators have made windfall gains and have made deep cuts in the discounts they usually give.
Cloud kitchens also have flourished due to this changing trend. However, as a word of caution, one has to wait and watch if this trend is here to stay or will it change.
Dining out other than an outing is also a means to socialise with people, especially with friends and family and will never go out of fashion. A ghost kitchen model needs to be wary of how opening up the economy will impact the food delivery.
Having known about the advantage of the Cloud kitchen and if you intend to start your cloud kitchen, let us know further about the different types of cloud kitchens:
Different types of Cloud Kitchens:
Standalone Cloud Kitchen
Standalones are one of the most basic and popular models of the Cloud Kitchen. A standalone Cloud kitchen receives orders from food aggregators like Swiggy and Zomato, prepares the food and packs the delivery to be picked up by the aggregators. This model of Cloud kitchen only promotes one brand of cuisine.
Because of ease of operation, standalones are among the most popular cloud kitchen models entrepreneurs prefer.
Multi-brand Kitchen Models
Food entrepreneurs who have time and energy to operate more than one brand can opt for a Multi-brand Cloud business model.
As cloud business entrepreneurs don’t have to deal with the perils of running the dining business, enthusiastic entrepreneurs can create multiple brands under one roof.
Other than operating multiple brands, the business operation model remains the same as a standalone cloud kitchen.
The advantage of multiple brand Cloud kitchens is their ability to test the market for various food genres. Rebel foods are one of the examples of multi-brand cloud kitchen examples in India.
Faasos, Behrouz Biryani, Oven Story, Mandarin Oak, Lunch Box etc., are some of the diverse brand’s Rebel food successfully operates. Rebel food has launched products based on the demand for cuisine type based on the area’s demography.
Exclusive Tie-up Models
Certain food aggregators offer to tie up with cloud kitchens exclusively. In this way, the food aggregator promotes the cloud kitchen as an exclusive product and tries to market it to enhance its brand image.
In return, the Cloud business gets enlisted on the top of the searches and hence gets more visibility and reach.
The disadvantage of this model is that businesses become too much dependent on the food aggregator. It’s never a sane idea to put all your eggs in the same basket.
If the aggregator decides to hike its commission one day, the business will not have many options but to give in.
Hub and Spoke Models
A hub and spoke model of the cloud kitchen works on the concept of one centralised kitchen that premakes all the menu item and then delivers it across the different retail units. The menu item is given a final touch and delivered to the clients. E.g. Pizza crust made in the central kitchen will be forwarded to the retail store, where it is baked along with the cheese and another topping to make the pizza.
Usually, the central kitchen is located in a low rented distant location; the retail units are typically found in the main areas to cover the last-mile delivery. This business model is expensive as maintaining a central kitchen and numerous retail units is a costly affair. The retail team also needs additional training to support such a business model.
Outsourcing Cloud Kitchen Models
Outsourced cloud kitchen purchases processed menu ingredients and puts a finishing touch and produce the end product. For e.g., apple pie is bought from a wholesale business and then sprinkled with topping and delivered to the customer. These wholesale businesses can be home-based cloud kitchens or exclusive models. As main food items can be procured easily, outsourcing business models are easy to operate.
Shared Cloud Kitchen Models
A new breed of entrepreneurs is running a business by renting space to other cloud kitchen businesses. In this business model, the kitchen space is rented out to multiple third-party brands that act like a coworking space and an incubator for other cloud kitchens.
The entrepreneur acts as a landlord rather than a business owner. In a shared kitchen, the business owner is expected to provide utility services and supplies that make operating a cloud kitchen easier.
The services extended by the shared cloud kitchen space may include maintaining the property by offering pest control, security, equipment maintenance. Other additional service like dishwasher and laundry service, chemicals, paper towels, and other supplies needed for the day to day operation of a Cloud kitchen may also be provided.
Ghost kitchens are the only food business model that has bucked the trend and seen exponential growth. Many dining spaces are struggling to stay in business as they get hit by frequent lockdowns, vaccine mandates, and client hesitancy to eat out the cloud business model is a beacon of hope. However, one never knows if this trend will stay as the pandemic subsides; hence entrepreneurs should invest only after considering all the business aspects before investing in a kitchen.